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Must Read: UBS' Andy Lees On Why The US Economy Is, All Else Equal, Doomed

Tyler Durden's picture


"With all the mess going on at the moment, I thought it was worth while stepping back a little and trying to look at the bigger picture." So begins Andy Lees' latest must read letter to clients whch explains succinctly virtually the entire story of where we were, how we got to where are now, how the current trajectory is unsustainable, why due to decades of capital misallocation anything that the Fed does now is essentially irrelevant, why our untenable debt pile does nothing but perpetuate an unsustainable ponzi scheme which will result in an unseen explosion in the true cost of capital: gold, and why the bond market will eventually, and inevitably, force an epic repricing in the cost of non-gold capital absent the arrival of the deux ex machina of real, actionable innovation that the Fed, and all global central planners, keep hoping for. Because the longer we keep plugging away with that worthless substitute, financial innovation, which is anything but, the greater the final collapse. Andy's conclusion: "Until the debt is cleared and capital starts to be properly allocated, economic growth per unit of additional debt will continue to sour. Until we get some real breakthrough technology, requiring large amounts of capital to both innovate and then roll out, we have no chance of supporting the economy." Too bad than that this absolutely spot on observation reflects precisely the opposite of what the Fed is pursuing. Which is why, all else equal, and it will be unless the Fed is finally eliminated from existence, America, and the entire western way of life, is doomed... But don't take our word for it. Here is Andy.

Why are we here: simple - years of central planning resulting in the greatest experiment in capital misallocation in history.

We are in this mess because of excessive leverage and excessive consumption, financed by excessively cheap real capital – (not just Bernanke & Greenspan but further back to the end of the gold standard, and in fact even before that as it was this misallocation of capital that forced us off the gold standard in the first place). If capital had been allocated productively, then by definition debt would fall as a percentage of GDP. Total debt may rise, but efficient allocation of capital would always mean the economy would grow faster than the debt as it means you are making a positive rather than negative real return on that capital.


Whichever way you look at it, capital has been massively misallocated for years.

Corporate profits... or massive debt-funded ponzi scheme?

How can that be when corporates report massive profits? The profits are based on paying their workers a salary that meant they could only buy the goods they made by borrowing; in other words, a massive unsustainable ponzi scheme that could only ever end up with default.  Without the household debt accumulation, there would be no market to sell their products to, and without paying the workers sufficient, the debt would always have to default.


This required a massive increase in financial innovation to keep the illusion of corporate profitability alive – (household debt was a way of delaying putting the true costs through the corporate P&L account and recognising the costs). Financial sector innovation is itself another form of capital misallocation, taxing people away from real innovation – (to keep the illusion alive, an ever greater percentage of economic output had to be allocated to this illusion machine) - helping add to the resource constraint we are in today.

If financial innovation, which we have so much of is not needed, what is the right kind? And why is it so sorely missing.

A lot of what are described as efficiency gains have been just the removal of levels of safety and the removal of innovation in the system. Innovation and ongoing operations are always and inevitably in conflict, with the most readily apparent conflict between short and long term priorities. A second handicap to innovation is the way efficiency is achieved by breaking down things into small repeatable tasks. This specialisation and repeatability is a company’s greatest strength, but it is also its greatest weakness. Innovation is neither repeatable nor predictable. It is non-routine and uncertain. (Book: The Other Side of Innovation).

The culprit: none other than the great moderation, and, now, ZIRP4EVA:

Low real interest rates support excessive consumption, taking money away from innovation and balance sheets. When the US started suffering from its peak oil in 1970, rather than innovation it turned to globalisation to tax the broader global resource balance sheet, just as Britain and Europe had done 100 years earlier through colonialism, and recently accelerated that with the WTO. Globalisation has always been about accessing resources.

Which bring us to topic #1 here, and everywhere else where economics is involved: cash flows.

This has been a factor mobilisation story on unprecedented proportions, but appears to have reached its conclusion as resource constraint has meant the “cash flow” to grease the wheels has started to become more expensive and constrained. Profit without productivity can only carry on for a finite period; we are now clearly consuming down our balance sheet or putting it through the P&L account.


So we are left with a massive amount of debt, a massive amount of capital and labour that is unprofitable in the world we face, and a balance sheet of insufficient resources to keep the illusion alive. The only thing that will get us out of this in the long run is innovation which will expand the balance sheet, expand the pie and create the jobs that people want.


How do we get rid of the debt? Are we in a debt trap whereby any interest rate hike will kill the recovery? Clearly it is going to be incredibly difficult, but low real rates are the cause of the problem, not the solution. I don’t personally see a  zero rate trap, but we need to allocate capital far more productively than we are doing.

The cost of money itself is hugely important. How negative were real rates? When people talk of borrowing from the future, surely the same logic applies to the cost of capital. If we have had low or negative rates that supported excessive consumption, we now need to have high real rates to direct capital back to innovation and gradually repair the balance sheet. The real cost of capital has to go up. No matter how much fighting the Fed and Treasury do, the real cost of capital will rise. The bond markets have to be allowed to clear some of the debt and thereby remove some of this misallocation of capital.

It's not "debt trap", it is "Fed trap"

Does that mean we are trapped in a position whereby the Fed cannot raise rates? Quite frankly it doesn’t really matter what the Fed does; real rates have to go up, are going up and will go up. The more the Fed and the government misallocate capital, the more the real cost of capital will have to rise higher to compensate. The only thing that will get real rates down is either a massive new discovery of incredibly cheap fossil fuels or the innovation that delivers cheap fusion. Otherwise it is a case of the cost of capital rising and causing demand destruction. 


Getting the central banks monetary policy inline with the real cost of capital in the market must be the first step to rectifying the misallocation of capital. One obvious thing would be for economists to stop ignoring CPI of food and energy as irrelevant as it is the fastest growing part of the economy. By ignoring it, they are turning what should be a smooth and relatively painless transfer of capital into an occasional out-of control collapse and transfer. Getting both a proper monetary and fiscal policy framework in place, based off genuine data rather than smoke and mirrors and fiddles must be the first priority. 

Which brings us to where we are now: a massive, unsustainable ponzi scheme:

Whilst politicians and investors acknowledge that excessive leverage created the asset and debt bubble, they do everything they can to prevent a rational deleveraging or efficient allocation of capital. For the moment the best measure of the cost of capital is gold. For years gold fell as fiat money was printed and this unsustainable ponzi scheme established, however as that ponzi scheme now unravels, gold must go up. The scale of both the ponzi scheme collapse and gold appreciation will be huge.


The problem is total credit market debt is still increasing. 


As Fitch recently highlighted, Chinese on & off balance sheet debt has expanded by nearly 40% GDP in each of the last 3 years. In other words, the misallocation of capital is continuing making the ultimate problem that much worse. China is now getting almost no growth per unit of additional debt. 


With each additional unit of debt, we are digging ourselves a deeper hole to get ourselves out of. Surely it is better to at least slow the digging? If we can allocate capital productively at the margin – (we know where we need to start making real returns) – then once we can start making a positive return on that marginal debt, then it becomes easier to support the residual debt we have.

If Andy is right, the framework of the next great class class conflict is set: it will be between the productive private economy and the "unproductive economy." Yes: Marxist tensions are about to make a repeat appearance:

Private sector annuity rates will be tumbling and yet the unproductive public sector are still being given great pensions. We are taxing the productive private economy to give to the unproductive economy. This has to end. The idea of a European fiscal union fills me with dread as that would be locking this unproductive transfer into stone. Rather than keep kicking the can down the road, lets own up to our excesses and start putting the economy back on track. Don’t reward the rioters in London with yet another handout; force them to pay for the damage they have caused and the police time they have consumed.

Is Greenspan to blame for this dead end? Yes... but only so far. One can just as readily blame the traditional duel between short and long-termism, or what is known better as "it will be the other administration's/generation's issue." In other words, Washington is just as guilty as Wall Street, and that infamous private bank.

Why have we misallocated capital for so long? We can blame it on democracy, but bigger than democracy is the culture that forces politicians to favour the immediate status quo over the longer term good of the country. That culture then presumably comes down to poor understanding which comes back to low levels of education. We need to address these route courses.

His conclusion:

The real cost of capital has to rise. That will happen through default in one way or another. Debt has to be cleared. Multiple contraction is inevitable.


Financial sector innovation has to be squeezed by engineering and scientific innovation. Until the debt is cleared and capital starts to be properly allocated, economic growth per unit of additional debt will continue to sour.


Energy is the cash flow in this story. Until we get some real breakthrough technology, requiring large amounts of capital to both innovate and then roll out, we have no chance of supporting the economy.

Nothing can be added to this.


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Tue, 08/09/2011 - 17:34 | 1544099 inkarri9
inkarri9's picture

The minutes from the FOMC release say something along the lines of "inflation moderating later this year".  Let's assume for a minute that Ben & Co. know that QE caused food and energy to rise....would anyone else assume that maybe they don't want to QE anymore?  Just a thought that came to mind.

Tue, 08/09/2011 - 17:51 | 1544174 Highrev
Highrev's picture

Posted this yesterday or the day before.

Looks like someone didn't see it. ;-O

And there's more out there for the objective journalist who wants to find it.

And no I'm not Obama in disguise.

Tue, 08/09/2011 - 18:38 | 1544364 Fukushima Sam
Fukushima Sam's picture

That is a crappy article.

To begin with, the guy uses charts from the Department of Commerce and seems to think the data is unmanipulated.

Second, he makes the case that wage increases keep up with inflation, while failing to acknowledge that wage increases lag real inflation by years, which amounts to a hidden tax on the wage earners.

I'll stop there...

Tue, 08/09/2011 - 18:54 | 1544435 max2205
max2205's picture

Circa 2008.....rinse

Tue, 08/09/2011 - 20:43 | 1544759 spiral_eyes
Tue, 08/09/2011 - 22:04 | 1544967 Harlequin001
Harlequin001's picture

This seems an awfully long winded way of explaining that the problem is the value of the money.

Under a gold standard where banks can't print they must borrow to raise capital. If you borrow at 3% you must lend higher for a margin which means you must lend longer to get the return. If you've loaned the money for 25 years you can't return it to investors at call which the banks claim to do, otherwise they are exposed to the risk of a bust due to liquidity and the resulting forced sale of those same mortgages at a loss; a classic bank run.

They must keep sufficient on hand (say 10%) to pay withdrawals or they bust due to liquidity and yes, bank deposits viewed in this light are of similar risk to a venture capital investment. The problem is liquidity.

Under a fiat system the banks don't need to keep any reserves to pay withdrawals because they can borrow it. Now for every $10 they take in deposits they can loan $90, which is fine for home owners until the check is presented for payment to a bank that has only $10 in deposits with which to pay it. The problem is solvency. Enter TARP, because that's all that TARP was, the bailout of insolvent banks.

It gets better because the bailed out bank with now $90 in deposits can loan $810 in new mortgages and loans and the cycle repeats, but this time much, much bigger until the inevitable bust.

This system is going to bust, no doubt about that and the only safe haven is gold.

It will be taxed to oblivion before this is over...

Tue, 08/09/2011 - 22:52 | 1545063 trav7777
trav7777's picture

The OP totally misses the point.

The reason real rates are so low is because there is just nothing to do that yields a higher rate.  Credit is a supply and demand product like any other.  If there is NO demand at 5%, the lenders cannot expect to lend at that rate.  The rate is dictated by the aggregate economicality of a particular currency regime.

This is how Japan has been at ZIRP for 20 years; there's nothing left really to do in Japan that yields more than that.  There's simply no demand for credit there at 1%

Wed, 08/10/2011 - 00:14 | 1545198 Harlequin001
Harlequin001's picture

Trav, I disagree old stick, the reason rates are so low is that central banks will print sufficient new money to keep them there. I want to lend my money at 7% and the Fed says 'screw you, it's an election year and I want to lend lower to stimulate the economy and lend at 0-0.25%' and they'll print as much as they need to do it. The travesty is that the 'markets' will allow them to get away with it. A gold standard won't.

That's why in my view the idea that CB's set rates is illusory, temporary and wrong. Ultimately the markets will decide by demanding higher rates for risk.

'If there is NO demand at 5%, the lenders cannot expect to lend at that rate.' Correct but I would say that when incomes don't rise as was the case with the currency pegs then you can only either reduce rates artificially, which they did or lower prices, which they do through derivatives. Either way as people borrow more they reach their repayment limit from static wages and stop borrowing; at that point it doesn't matter what rates are, people won't or can't borrow any more. I could borrow in Japan and buy wheat, corn or gold but if you imply that the quality of Japanese credit is not worth buying and so demand for it is low then I would agree in part with that...

Wed, 08/10/2011 - 01:19 | 1545260 Snidley Whipsnae
Snidley Whipsnae's picture

"It will be taxed to oblivion before this is over..."

Before people will allow a taxation to oblivion they will turn to smuggling and black markets to avoid confiscatory taxation.

So the government will have helped create a new class of criminals that were simply trying to protect their wealth.

Opression of this sort leads down theslippery slope toward revolution.

Wed, 08/10/2011 - 01:46 | 1545275 Harlequin001
Harlequin001's picture

'Opression of this sort leads down theslippery slope toward revolution' - and execution.

History dictates that life is a constant battle between individuals and governments that want to take what's mine and give it to someone else for whatever reason...

Despite our lack of action to date we are all terrorists at heart. Government demands it...


Tue, 08/09/2011 - 19:00 | 1544462 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Whenever I see an article or start listening to an interview wherein government data is sited,  I quit reading or log off because what is to follow is either based on ignorance or propaganda.   --Tuco

Wed, 08/10/2011 - 01:52 | 1545280 TruthInSunshine
TruthInSunshine's picture

The New York Times rag has two front page articles tonight, where their 'journalists' or 'editorialists' openly endorse more aggressive moves on the part of the Fed to encourage risk taking by investors (i.e. not saving, but gambling savings in a very uncertain atmosphere) and to encourage high rates of inflation -

- which the New York Times openly acknowledges:

"A more aggressive strategy would be letting inflation rise above the Fed’s comfort level of 2 percent or so to, say, 4 percent. That could help the economy by easing the repayment of debt. "

Half-Measures From the Fed -

Here's the other gem of genius (/sarc/):

Its Forecast Dim, Fed Vows to Keep Rates Near Zero

"The Federal Reserve’s hope is that a showman’s gesture will spur investment and risk-taking."


I hope the New York Times fails, and is bought out of bankruptcy by Mad Magazine, and renamed the Full Retard Times. 

Didn't anyone ever tell them to "never go full retard?"

Tue, 08/09/2011 - 19:20 | 1544536 Robot Traders Mom
Robot Traders Mom's picture

@Fukushima & Tuco-I completely agree that government data is laughable at best. That being said, he implies that the puppet masters (the FED) have created a gigantic ponzi scheme and it is game over. The more people like Lees at UBS, Rosenburg when he was at Morgan/Merrill, etc, that come out and expose the bullshit we are living in, the better.

If one of you wrote an article about how shitty the economy is and said the unemployment rate is close to 10%, I wouldn't call it a "crappy article" just because you are using the fictional government number, if I agreed with the body of work.

Again, we need more people on our side. Especially those with a platform.

Think about it.

Tue, 08/09/2011 - 20:36 | 1544746 topcallingtroll
topcallingtroll's picture

I dont think we need "sides"

We just need to figure this shit out and frontrun it. Wherever it goes.

Tue, 08/09/2011 - 21:34 | 1544896 Spirit Of Truth
Spirit Of Truth's picture

This sort of blunt truth is undecipherable in the West even if plainly stated.

Wed, 08/10/2011 - 01:24 | 1545263 bigkahuna
bigkahuna's picture

300 up - 500 down - 600 up


If you can front run that then you deserve the returns lol!

Wed, 08/10/2011 - 00:10 | 1545194 macholatte
macholatte's picture

I wouldn't call it a "crappy article" just because you are using the fictional government number, if I agreed with the body of work.

If one is going to use those kinds of numbers, where do you get them if not from the guv'ment? If not using guv'ment numbers, don't you run the risk of your thesis getting derailed over an argument of the validity of the numbers?  Damned if you do and damned if you don't.

Everybody KNOWS something is wrong and not working properly. The whole planet began to come apart 3 days ago. The more people of influence who begin to speak up, the better. We can debate the numbers, we can question their conclusions, but the evidence is there for everyone to see.

But I was thinking of a way To multiply by ten, And always, in the answer, get The question back again.
Lewis Carroll

About astrology and palmistry: they are good because they make people vivid and full of possibilities. They are communism at its best. Everybody has a birthday and almost everybody has a palm.
Kurt Vonnegut


Wed, 08/10/2011 - 00:44 | 1545229 Fukushima Sam
Fukushima Sam's picture

Actually, the crappy article I was talking about was linked in the post I replied to.  I thought Andy Lee was spot on.

Tue, 08/09/2011 - 20:09 | 1544678 narnia
narnia's picture

the author focuses on a symptom, not the cause.

we have a centrally managed system that dictates well over 50% of the products & services originated in the economy.  these intellectual politicians have circumvented the will of the people (the market) and arbitrarily decided we need tons of bombs to fight people in Asia & Africa, free pharmaceutical industry defined health care to everyone who votes no matter how bad their personal health decisions, retirement income indexed to inflation to everyone who votes no matter how much they contributed to the system, handouts to bail out every bad decision that involves pensions or heavy contributing banking interests, specially directed expenditures to every industry that calls its constituencies to vote or cuts a big enough check, over $12,000 per year per child dispensed to an education complex with a massive drop out rate & no real education, a crazy war on drugs which requires tons of prisons, commits a portion of our population to perpetual welfare or incarceration, and on and on.

debt is a symptom.  the taxation required to pay for all of this stuff is the cause. it's a hurdle that can no longer be cleared.

Tue, 08/09/2011 - 20:38 | 1544749 topcallingtroll
topcallingtroll's picture are kinda making central planning sound like a bad thing.

Tue, 08/09/2011 - 21:48 | 1544933 Harlequin001
Harlequin001's picture

The State, and by that I mean all States need to be constrained to maintaining law and order and defense. All this welfare needs to go because we can't afford it.

Tue, 08/09/2011 - 22:10 | 1544986 Seer
Seer's picture

"All this welfare needs to go because we can't afford it."

And what of our "defense?" (seem to recall something about "no standing armies")

Tue, 08/09/2011 - 22:24 | 1545007 Harlequin001
Harlequin001's picture

Not sure what you mean about 'no standing armies'?

Wed, 08/10/2011 - 07:18 | 1545510 Silver Dreamer
Silver Dreamer's picture

A peaceful nation does not need a standing army, and standing armies are the greatest threat against the people.  Our founders did not want standing armies.  Our federal government has done a good job of hiding that fact from our past, but the Virginia Bill of Rights is an easy reminder.  Article 13:

That a well regulated militia, composed of the body of the people, trained to arms, is the proper, natural, and safe defence of a free state; that standing armies, in time of peace, should be avoided, as dangerous to liberty; and that, in all cases, the military should be under strict subordination to, and governed by, the civil power.

We the people are supposed to be the defensive army.  It's called the militia, and it is still current law.  Most people on this board are members whether they realized it or not:

All government welfare is theft, and it needs to stop.  I could not agree more there, but then I'd include VA, food stamps, and all of the rest.  There would be no exceptions.

Wed, 08/10/2011 - 08:12 | 1545630 Harlequin001
Harlequin001's picture

Silver Dreamer, whilst I agree with your sentiment the simple reality is that no militia can withstand a well equipped standing army. No government can raise and justify the expense of expensive weapons systems (and wooden battleships were once the height of technology) without one which means that the militia is only ever defensive and can only maintain the status quo at best or lose, wear down the invaders through time and expense (possibly) and possibly overthrow before being beaten and invaded again. Just look at Afghanistan.

The only place I know with a well armed militia is Switzerland but I don't believe for one minute that the militia is the reason why it has not been invaded. That I believe is more to do with holding everyone else's money...

A peaceful nation has no defence against an aggressor with a standing army. As much as we might not like it another country with a standing army does, and whilst i don't object to paying for it I do object when it is stationed on foreign soil. That's not what its should be for. The simple reality is that countries need standing armies that should hone their skills in peacetime not only in battle skills but in providing that emergency assistance such as road building and other such infrastructure rebuilding as needed in emergencies. Army medics should be available to support civil services etc. An army on foreign soil is an abuse of political power.

Wed, 08/10/2011 - 08:25 | 1545645 Silver Dreamer
Silver Dreamer's picture

If we were not using our federal forces to maintain a fascist empire, we wouldn't need a standing army however.  The militia would be better suited to perform those local functions you mentioned.  I'm against all federal welfare to include federal to state government welfare due to disasters.

Wed, 08/10/2011 - 09:56 | 1546018 Harlequin001
Harlequin001's picture

A militia by definition is already employed in other normal day to day activities of earning a living to be available for disaster assistance.

What, to you then, is the function of government if it is not the defence of the realm?

Wed, 08/10/2011 - 01:27 | 1545265 Snidley Whipsnae
Snidley Whipsnae's picture

Perhaps the troubles we now face are embeded in democracy itself?

"A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy."  Elmer T. Peterson (often misattributed to Alexis de Tocqueville)


Tue, 08/09/2011 - 18:47 | 1544406 Lobbelt
Lobbelt's picture

All I read is: "the free market barely managed to maintain productivity in the period leading up to now, which had moderate money printing. So surely it will be able to do the same with a massive amount of money printing and enduring capital misallocation" 

Maybe you should've read the blogpost first before posting the same article again. 

Wed, 08/10/2011 - 09:05 | 1545754 Alea Iactaest
Alea Iactaest's picture

Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works. — John Stuart Mill

Tue, 08/09/2011 - 20:55 | 1544796 lunaticfringe
lunaticfringe's picture

A couple of missing ingedients there Obama. One of them is the tax bite. Taxes as a proportion of income have risen dramatically. Taxes on virtually everything. My true tax bite, takes every dollar I make, thru June each year. If my wages increase 300 percent but the tax bote increases 400%- how much have I made? These type of koom-by-ya articles always neglect key ingredoents like the horrific tax bite, the horrific insurance bite across the board, and things that have risen like helath care costs well beyond that of standard CPI.

I paid 75 dollars for a crown in 1979. In 2009, I paid 1100. Get it? I shoulda got a gold one. I could sell it.

Tue, 08/09/2011 - 21:23 | 1544870 cacho
cacho's picture

you spend less on food because no one in America works to make that food and its imported, if all the food were to be manufactured in the states as the early years you pointed out, you would be spending far more than 80% on housing, food and clothing. Because the US printed money that the rest of the world tought it had real value is why your salary goes further today than 60 years ago...

Tue, 08/09/2011 - 21:44 | 1544920 gammab0y
gammab0y's picture

Convenient that the list of products included appliances, et al.  that have become dramatically cheaper to produce thanks to robotics.

How about a list with housing, higher education, and other more significant costs than a toaster.  I don't think the comparison would look so rosy.

Tue, 08/09/2011 - 21:45 | 1544925 Dick Fitz
Dick Fitz's picture


Tim@SeekingAlpha is missing the most important issue in his analysis- the US, by virtue of its reserve currency status, has been able to export the gross majority of its inflation to China/Japan/Everywhere else due to the "risk less" nature of the dollar. That day is ending. Once the dollar is no longer needed to settle oil payments, and the risk of US debt is recognized, that exported inflation will roar back with a mighty vengeance. Less than half of the US debt is held internally, and in many developing countries the US dollar is used as a means of transaction. Once that debt is dumped, the pressure on the US will undoubtedly increase dramatically.

Just my humble analysis.

Tue, 08/09/2011 - 18:04 | 1544228 Fish Gone Bad
Fish Gone Bad's picture

I am absolutely at a loss at why anyone actually thinks this administration (or any other) actually wants any innovation.  There have been quite a few really good ideas that came out over the last few years and ZERO came of them.  Anyone remember T Boone Pickens idea to build massive wind farms across the US with all the needed cabling?  That would employ millions of Americans.  How about Purdue's yeast that makes ethanol from cellulose (wood fiber).  The entire automotive industry could run on all the alcohol that that microbe could produce. 

America does not want innovation.  It wants the status quo.

Tue, 08/09/2011 - 18:16 | 1544270 Kat
Kat's picture

Yeah, what could be better than going further into debt to subsidize unprofitable windfarms while T Boone lines his pockets and people are employed to destroy wealth.  Swell idea.

How about just getting the regulators and the tax collectors out of people's effing way?  There are tons of people who have lots of great ideas that the government prevents from coming to fruition by pouring sand in the gears of anyone stupid enough to be productive.  Risk requires reward and the politicians' sole purpose in life is to rob people of it so they can line their own pockets and the pockets of rent seeking cronies like T Boone.

America wants innovation, Gone Bad. But, innovation requires leaving people be and not threatening them with Dudd-Frank, Obamacare, EPA, SEC, etc. etc. The politicians want the status quo because it's easier to consolidate and monetize their power.  Politics is just a futures market in stolen goods and the politicians love the goods they steal from you.

Tue, 08/09/2011 - 18:54 | 1544437 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Well said.  Early in the last century in rural Oklahoma on occasion tax collectors "revenuers" would come around and then simply disappear.  Apparently, when it came to government careers some of their employees "chose poorly".


Wed, 08/10/2011 - 00:12 | 1545200 CompassionateFascist
CompassionateFascist's picture

More recently a revenuer was found hung somewhere in Appalachia; alas, it was apparently a suicide.

Tue, 08/09/2011 - 19:20 | 1544533 Fukushima Sam
Fukushima Sam's picture

Like the article says, we really need an energy innovation.  Maybe we could make something up and pretend like it makes cheap energy, similar to the pretend and extend we do these days with the economy!

Oh wait, we already did this with nuclear fission...

Tue, 08/09/2011 - 22:06 | 1544972 Harlequin001
Harlequin001's picture

alternatively is you killed half the people you wouldn't need that much energy...

Just sayin'...

Wed, 08/10/2011 - 07:48 | 1545582 Kat
Kat's picture

Fukushima,  We always need more innovation in everything.  Singling out energy is silly.

What if the innovation is not in energy but in a product that results in lower demand for hydrocarbons?  That would be just as good. 

That's why I don't support governments diverting risk capital away from the millions of investors searching out and seeking to profit from a new killer app and into whatever one top-down program the politically motivated monkeys in government decide should be the next killer app. 

Even if government can overcome the knowledge problem (it can't), the money doled out by government is doled out not to the best risk but by political fiat.

Tue, 08/09/2011 - 20:21 | 1544708 aerojet
aerojet's picture

You forgot the fucking TSA!  I hate those dipshits so damn much!  I was in the Cincinnati airport yesterday--about ten travelers and 50 fucking TSA blue shirts standing around with their dicks in their hands.  And those lousy fucking naked body scanners.  They represent everything that is wrong with the USA right now--too many useless government workers, too many companies getting huge deals for unnecessary and over-complicated equipment that is only sold to the government via no-bid contracts. 

Tue, 08/09/2011 - 22:01 | 1544959 Poor Grogman
Poor Grogman's picture

Exactly, and because they are Soooo popular in USA they will soon be appearing in Australia!

Obviously to prevent the terrorists (Convicts???) from escaping LOL :)

You cant make this shit up...


Tue, 08/09/2011 - 22:15 | 1544992 Seer
Seer's picture

If you believe this then you have to explain all the innovations in the "defense" sector (which is target to the "defense" sector).  NOTE: TPTB love this shit because it keeps THEM in power! (see, it's not all that hard to figure out the CORE drivers in all of this!)

Wanting or not wanting innovation has NOTHING to do with it!  ALL that matters is keeping TPTB in power, that's ALL!  If they can do so via "innovation" then that's what they will do.

Tue, 08/09/2011 - 18:22 | 1544291 Badabing
Badabing's picture

QE Stealth?


So what’s to stop TPTB from slipping in QE in on the sly? You must admit, the markets today are reacting just like we’ve seen with the bailout, TARP, QE and all the black hole fiat dumping the past history of this end game has taught us. Gold gets hammered $55 in seconds on the NY close, the Dow surges at the close to +429, Nasdaq +113, S&P +53.07! While the sheep herders at the MSM spins the notion that it’s because ZERO% interest will last years more? I don’t believe it for a NY second! The rules change at any  cost. What do you think? Is it possible that the tax payers get fucked without even knowing it?   

Tue, 08/09/2011 - 18:49 | 1544411 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

"Is it possible that the tax payers get fucked without even knowing it?


Yes, it's called inflation and 95% of American have no clue!     Tuco  

Tue, 08/09/2011 - 20:29 | 1544725 bigdumbnugly
bigdumbnugly's picture

the economic date rape drug.

Tue, 08/09/2011 - 19:13 | 1544495 andybev01
andybev01's picture

The TBTF-PTB could be on live HDTV, cavorting around naked on a mink-lined stage on the backs of white lions, tossing bricks of gold and bags of cash back and forth to each other screaming to the audience in plain english excactly how they plan on eating your children , and the viewing public would click away to see what else looked interesting.







Tue, 08/09/2011 - 20:18 | 1544704 Yes_Questions
Yes_Questions's picture





New acronym?


"TPTB are because TAPDNC"


Tue, 08/09/2011 - 21:39 | 1544903 Bolweevil
Bolweevil's picture

I disagree, somewhat. A certain blogger whose name I won't mention took it upon himself to enlighten the masses with straight dope, that wasn't dumbed-down because he thought they could not only take it they might enjoy it. His blog has become wildly popular amongst those in the know. Perhaps you could rephrase your nearly accurate acronym with a "most" or "a majority" since we're tossing generalizations about?

Tue, 08/09/2011 - 23:40 | 1545148 rambo1028
rambo1028's picture

Exactly! So many of them absolutely do not believe, not only that the system is failing, but they don't even believe that it is possible for it to fail. HELLO!!! it's right in front of your face!! How long can or will they keep their heads buried in the sand? I seriously think they aren't going to give a shit until they are being herded into the trucks headed for the camps. And even then, they won't protest. They will just be confused...

Wed, 08/10/2011 - 01:37 | 1545272 Snidley Whipsnae
Snidley Whipsnae's picture

First the gov will let people go hungry and cold for a few days... Then the promise of 'lots of food and a warm place to live if you board this truck bound for the camps' will work well...

The Rise and Fall of the Third Reich

Tue, 08/09/2011 - 23:45 | 1545159 SheHunter
SheHunter's picture

Don't be so certain all are clicking away  Andy-B.  Quite a few Wisconsin-ites are awake this eve and cheering the underdog Dems as they try and regain a voice.

Wed, 08/10/2011 - 00:19 | 1545209 CompassionateFascist
CompassionateFascist's picture

You stupid, lying, corrupt fuckhead. Wisc. "public employees" are the lower echelon of the dictatorship of the bureaucracy, being paid with  $$ stolen from productive people via taxes and debt. They get vote for the Democraps., ie, more of the same in a cycle that eventually eats away the entire free market and replaces it with state socialism. Some time before then, tho, we go to the gun. Bullets, not bought-and-paid-for ballots,  RedScum.

Wed, 08/10/2011 - 06:29 | 1545465 smore
smore's picture

You obviously missed this in the article, She-Hunter:


"We are taxing the productive private economy to give to the unproductive economy. This has to end."





Tue, 08/09/2011 - 19:11 | 1544499 Havana White
Havana White's picture

Yep.  QE as Fed policy "endorsement."  Because changing "extended" to "2013" does not a rally make.  The announcement was greeted by a 200 pt Dow drop.  It suddenly turned up, on a dime.  Suspicious..

Meanwhile, this tweaking of economic reports, only to revise them when they're old news, is eventually going to lead to having to do instant revision estimates, if this bullshit continues.  You've gotta ask why nearly all of these revisions are in the same direction -- worse than originally reported.

Down, after the dust resettles.

Wed, 08/10/2011 - 01:44 | 1545276 Snidley Whipsnae
Snidley Whipsnae's picture

Havana... Didn't you watch the instant revision of the Feds comments today? Fed said no QE, equities began a sell off, Goldman Sucks revised the Feds comments to 'QE 3 now' and markets rallied ~400 points.

So what the Fed said was dumped in favor of what GS said... and the stampede of the fools into equities was on...

So the Fed avoided more scrutiny by the ratings agencies as GS called QE3 for them. The had their cake and ate it too...

What a bloody mess

Tue, 08/09/2011 - 22:00 | 1544958 Pain Train
Pain Train's picture

Slightly off topic, but do yourself a favor and watch Ratigan here. I promise it'll be worth 8 mins of your time:

Tue, 08/09/2011 - 22:56 | 1545071 owensdrillin
owensdrillin's picture

Hard to believe that someone from MSNBC could say bad things about the beloved leader, I'm pretty sure Dylan will be looking for a job tomorrow.

Tue, 08/09/2011 - 17:35 | 1544103 ratso
ratso's picture

All that to say buy gold blah blah ..

Tue, 08/09/2011 - 17:37 | 1544109 ratso
ratso's picture

Oh yeah, I forgot.  The article is crap.

Tue, 08/09/2011 - 18:03 | 1544223 High Plains Drifter
High Plains Drifter's picture

I agree. what good does it do any of us to read such rubbish?

Tue, 08/09/2011 - 18:13 | 1544258 Dick Fitz
Dick Fitz's picture

Wow, I wish there was a junk-1000 for HPD and ratso. The fact that you can't comprehend the simple yet profound truth of this article just shows how your reasoning skills have degenerated due to gubmint skoolin.

Tue, 08/09/2011 - 18:25 | 1544301 High Plains Drifter
High Plains Drifter's picture

a thousand junks. wow, you are so kind . i guess they can call you dick for short but not for long, ..........

Tue, 08/09/2011 - 18:15 | 1544265 lawrence1
lawrence1's picture

Nothing, but I seriously doubt, considering many of your other comments, that you are capable of understanding it.

Wed, 08/10/2011 - 06:35 | 1545468 smore
smore's picture

HPD, if you can't understand the articles here, please just take your gun and go to a site where the material suits your reading level.

Tue, 08/09/2011 - 18:38 | 1544365 sgt_doom
sgt_doom's picture

Exactly, my dear ratso, exactly!

The crap writer claims "..We are in this mess because of excessive leverage and excessive consumption,..."

Exxxxcuuuuse me, dood crap article writer, but excessive leverage directly and primarily profited the banksters and those securities dealers and their skanky whores.

They sold from $900 TRILLION to $1.2 QUADRILLION dollars worth of credit derivatives --- which they claimed were worth something on Monday, but turned out to be worthless by Friday!!!

So why haven't they returned all those billions and trillions of dollars of ill-gotten gains???


And that's why the banksters want austerity throughout Europe and the USA, and that's why healthcare costs so damn much in the USA (as of 2007, 90 dedicated healthcare hedge funds were speculating on the entirety of the US healthcare sector, and from 2001 to 2009 there were billions in private equity leveraged buyouts --- from structured finance deals with the banksters based upon leveraged securitized credit derivatives. 

According to a recent Commodity Futures Trading Commission study, 95% --- THAT'S 95 FRIGGING PERCENT --- of commodity trades are speculation.  So much for all that hedging bulls**t --- the ISDA claims that credit default swaps don't figure in because of all the bonds out there --- but it only takes a limited number of naked swaps targeting specific trading to dramatically alter everything!

Do you copy???

Tue, 08/09/2011 - 19:23 | 1544544 andybev01
andybev01's picture

I head the number as 4 quadrillion.

I guess a quadrillion just isn't what it used to be.

Wed, 08/10/2011 - 01:48 | 1545279 Snidley Whipsnae
Snidley Whipsnae's picture

The whole damn planet probably don't have 4 quadrillion grains of dirt in it...

Tue, 08/09/2011 - 17:36 | 1544106 anarkst
anarkst's picture

"Nothing can be added to this."


Tue, 08/09/2011 - 17:42 | 1544136 wisefool
wisefool's picture


Energy is the cash flow in this story. Until we get some real breakthrough technology, requiring large amounts of capital to both innovate and then roll out, we have no chance of supporting the economy.

Some of the most brilliant people in the world work for General Electric, tax avoidance division.

Go Immelt, help us discover the wonders of Planet O!

Tue, 08/09/2011 - 18:45 | 1544395 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

No one works in the GE tax avoidance division.  They don't have to since GE is part of the corporate fascits state that has hijacked our government!    They don't bend the rules.  They make them!


Tue, 08/09/2011 - 18:48 | 1544410 mind_imminst
mind_imminst's picture

Nice sarcasm, lol. The author does bring up a good point though, about innovation and progress. Even though the macro environment is terrible, there are still companies innovating out there. Worker productivity continues to rise. GDP per energy unit keeps getting better every year. These things are happening in spite of the terrible business environment in the U.S. right now. The debt and ponzi scheme has gotten waaaaaaaay ahead of technological progress and efficiency gains IMO, but don't forget that progress continues. I think that puts a floor on how low asset prices can go.

Wed, 08/10/2011 - 06:42 | 1545476 smore
smore's picture

The sad thing is that no "breakthrough technology" is needed, it's right in front of our faces: ethanol. No, not corn ethanol, ethanol.  I'll post this again:


The following is a review of David Blume's book Alcohol Can Be a Gas; all figures and statistics come directly from Mr. Blume's book.   David Blume, an organic farmer and leader of the alcohol revolution, provides evidence that ethanol alcohol is a viable and renewable fuel source that can help to remove dependence on foreign oil and bring jobs back to America.     Imagine the US as an independent self-sufficient nation with a production economy once again!   Many people have concerns about food shortages because crops are grown for fuel instead of food. One of the greatest misconceptions about alcohol is that it will use up land that could be used to grow food.  This belief is based on the use of corn to produce ethanol, which is very inefficient.  According to Blume, there are other crops that can produce 3 times as much ethanol and those crops need not be grown on prime cropland, but can be grown on farmland that is not as level and has more shallow soil.  Most of this farmland is arid and mesquite trees could passively grow there.  Blume says, "mesquite harvested seedpods would generate 33 billion gallons of alcohol, without irrigation, fertilization or annual planting.  That is another 21% of our annual gasoline needs from only 7.45% of our farmland."

Lowlands, swamps and wetlands can be used to cultivate high yielding plants like cattails, whicn are considered a weed.  Blume says that cattails can be used inexpensively to treat sewage and that the "yields of starch and cellulose from cattails can easily top 10,000 gallons per acre.  If all the sewage in the US were sent to constructed marshes, the 3141 counties would need only 6360 acres each to fulfill all of our foreseeable transportation fuel needs, both gasoline and diesel, at 200 billion gallons per year.  This equals 1.4% of our agricultural land".  No irrigation or chemical fertilizers would be needed.  Additionally, they provide a profitable way to clean up rivers, streams and oceans by detoxifying chemicals and removing heavy metals like mercury which is evaporated out through the leaves.

  Blume says that cellulose can be used as a fuel source and that the US has 30 million acres of lawn (this is about 40% of the total acreage used for corn), and it isn't counted as cropland or farmland.  Grass clippings alone could generate over 11 billion gallons of fuel per year.  This doesn't even include green waste from landscaping that could be added to the cellulose totals in each county.   Ethanol can also be extracted from the ocean while cleaning it!  Dead zones are areas near coastlines with decreased concentrations of sea life due to elevated levels of nitrogen, usually caused by chemical fertilizer and industrial waste.  The nitrogen causes a population boom in microscopic algae and then it decomposes.  During algae decomposition, the oxygen in the water is consumed and kills off the concentrated sea life.  There is almost 8000 square miles of dead zone in the Gulf of Mexico and dead zones also exist along the Oregon, Washington, California and and Eastern Sea coasts.  Kelp is made up of brown algae; in China and Norway this kelp is dried to produce fertilizer.  Blume recommends that the US adopt this strategy to eliminate the need for polluting chemical and petroleum fertilizers.  He further advocates fermenting the kelp first to make alcohol and then fermenting the leftover mash a second time for methane.  The California coast alone could yield almost 90 billion gallons of fuel.  The remaining 2/3 of the energy as methane would provide all the alcohol plant process energy plus a huge surplus of gas/electricity for business and residential use. Combined with the other dead zones, all transportation fuel as well as the majority of natural gas could be replaced without using a square foot of farmland.   Blume says that the top four US crops are rice, wheat, corn and potatoes which are 75% starch and he suggests that malnutrition is a protein deficiency as opposed to a caloric deficiency.  He advocates increasing protein production by cultivating oyster mushrooms that can be grown using just 25% of the grain straw that is annually burned off of fields as the fungi can efficiently extract the protein from the straw.  Blume writes, "So if we really wanted to feed everyone, even without using a single animal as a food source, it would not be difficult".   The US uses 87% of its corn crop as animal feed; when alcohol is made from the corn, which removes the starch, the protein, fat, some of the cellulose, vitamins and minerals along with the yeast from fermentation remains.  The remaining substance is called distiller's dried grains with solubles (DDGS) and is about one third of the volume of the original corn after the starch is removed.  DDGS is a far superior animal feed that eliminates huge health problems in cattle because they cannot digest the starch in corn.  Of course Blume, as an organic farmer, shuns GMO products.   Blume tells a fascinating story about his organic farm with less than 2 acres of uneven land in San Francisco that produced enough food to feed as many as 450 people.  He converted the organic content of the soil from 2% to 22% and the adobe clay soil was transformed from 1 inch of topsoil to 16 inches of topsoil.  His little patch of land produced over 100,000 pounds of food per acre.     Blume's book covers how to convert your car to run on alcohol.  If you have a flex fuel car, you're good to go.  You can also purchase a conversion kit from his website for $400 to $700 (depending on the size of your engine).  The kits are made in the US and allow you to burn straight gasoline, E85 or 100% ethanol.  Alcohol fuel conversion kits have been used successfully in Brazil on over 50,000 cars over the last 20 years with no reports of of engine damage resulting from the kits or running on ethanol.   Small 2 stroke engine problems are preventable by using a lubricant and the proper grade of alcohol.    Rockefeller foisted 'prohibition' on the US in order to create a fuel monopoly with gasoline; Ford's Model T originally ran on alcohol that people could grow and distill themselves.     America is abundant and is still full of opportunity!  We must think for ourselves and stop allowing big corporations tell us that the only source of energy is from that which they derive a profit.  If we work with nature, we could feed and fuel the world in addition to massively reducing pollution.   David Blume's book, Alcohol Can Be A Gas, may be purchased from his website which contains a wealth of information. 
Tue, 08/09/2011 - 18:15 | 1544264 Dick Fitz
Dick Fitz's picture

You're right- it lays out, in simple terms, the problem and solution to our current fiscal cancer.

Tue, 08/09/2011 - 18:26 | 1544305 High Plains Drifter
High Plains Drifter's picture

sure it does pal. just keep telling yourself that. 

Tue, 08/09/2011 - 17:38 | 1544112 Critical Path
Critical Path's picture

Was just watching Sir James Goldsmiths interview with Charlie Rose regarding the efficiency we call labor arbitrage... er GATT.

Glad to see someone had it right almost 2 decades ago...

How about we undo this bullshit.

Tue, 08/09/2011 - 18:39 | 1544371 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Yes, too bad Sir Golsmith is no longer with us.


Tue, 08/09/2011 - 17:39 | 1544121 Irish66
Irish66's picture

The tide is finally turning.  Some peoplel are actually trying to tell the truth.

Tue, 08/09/2011 - 18:06 | 1544238 High Plains Drifter
High Plains Drifter's picture

ok, tell me what truth did he tell me, so that i may know the truth..........

Tue, 08/09/2011 - 17:39 | 1544125 anynonmous
anynonmous's picture

Just got back from the eye doc so the reading is limited for a couple more housr


WTF happened I see a cliff dive followed by Mt Everest


Tue, 08/09/2011 - 18:38 | 1544366 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

The free market at work...cough, cough.



Tue, 08/09/2011 - 17:40 | 1544128 PaperBugsBurn
PaperBugsBurn's picture






Tue, 08/09/2011 - 17:41 | 1544129 Bam_Man
Bam_Man's picture

Why have we misallocated capital for so long?

Because we could, that's why.

Truly an "Exorbitant Privilege", bitchezzzz!

Tue, 08/09/2011 - 17:51 | 1544175 economessed
economessed's picture

That, and we designed our entire educational system around the concept of extracting value from the economy rather than adding value to it.

Tue, 08/09/2011 - 21:46 | 1544928 Bob
Bob's picture

Certainly true for the white collar class, at least. 

Tue, 08/09/2011 - 17:41 | 1544133 Kat
Kat's picture

Why innovate when the Wrecking Ball in Chief has made it clear he will fight to the death to confiscate your wealth if you're successful?  Either he'll use the IRS or the Fed to wrench it from you. 

Don't take risks and don't bother being productive (unless you're working on your subsistence garden).

Tue, 08/09/2011 - 17:46 | 1544152 cossack55
cossack55's picture

Go Galt on their ass, baby.

Tue, 08/09/2011 - 18:24 | 1544295 Kat
Kat's picture

Ya know....funny you should mention that because I was talking to a buddy of mine who is telling me that's exactly what a lot of people are doing.  They're still physically at work, but they put in a minimal effort and take no risks.  They know they won't be paid if it works out and if they lose ont he bet, they'll get fired.  That's a trader's life at a Too Big to Fail these days.

Everybody else is just not expanding into new busineses because they just can't figure out what the cost of the plethora of new idiot regulations will be. 

More people have "gone galt" than one would imagine.

Tue, 08/09/2011 - 18:32 | 1544336 High Plains Drifter
High Plains Drifter's picture

heck when i was younger, i used to do that all the time. what is so special about that. it is something you learn how to do. it is called personal survival.  their job is to get as much out of you as they possibly can. your job is to try and do the least amount of work you possibly can and then make it look like you have been working. no big deal. that is real life here in the slave galleys of amerika.  be happy in your work............

Tue, 08/09/2011 - 18:44 | 1544393 Kat
Kat's picture

That difference in attitude probably explains why I'm so much more successful than you are.

Tue, 08/09/2011 - 20:49 | 1544779 High Plains Drifter
High Plains Drifter's picture

oh come on now.  look its simple. can you fall asleep at your desk and make it look like you are reading?  can you tell when your boss is coming by the way his shoes impact the floor? gads man. wake up.....

Tue, 08/09/2011 - 21:26 | 1544876 TwelfthVulture
TwelfthVulture's picture

People who go Galt are their own bosses, they would never work for someone else.  Or, to put it another way, the fact that you work for someone else means you are not John Galt.

Tue, 08/09/2011 - 21:04 | 1544780 High Plains Drifter
High Plains Drifter's picture


Tue, 08/09/2011 - 19:18 | 1544529 Havana White
Havana White's picture

Have some more GOP Kool-Aid, Kat.  Mmm, regulations gotta go, gulp, gulp, gulp.

Tue, 08/09/2011 - 20:06 | 1544672 karzai_luver
karzai_luver's picture

whahaaaaaaaaaaaaaa whaaaaaaaaaaaaaaa whhaaaaaaaaaaaaaaaaaaa


You fukin pussy, why don't you and a dozen of your TBTF trader scum leap from the highest ledge or just gas yourself if no high point is available.


I will luv it when they hang you fukin kiddies right along with blankfuck and DIMon.


O happy day.


Tue, 08/09/2011 - 20:13 | 1544693 Kat
Kat's picture

So, basically, you're just advertising that you're a bloodthirsty moron.  Good to know.

Tue, 08/09/2011 - 20:09 | 1544682 Seer
Seer's picture

"Everybody else is just not expanding into new busineses because they just can't figure out what the cost of the plethora of new idiot regulations will be."

This is WAY overblown (fits the story of "anyone can get rich, so please don't beat up on the rich").  Innovators will innovate, you cannot stop them.  What is being hampered is R&D at BIG corporations, or so they want us to believe- folks here are wanting to establish new loopholes and tax breaks, THAT's why things are/have been stalling out.  These folks have little in the way of innovation, requiring a LOT of sales of crap in order to keep the innovation of new crap in the pipelines.

Small farmers know that regulations are to benefit the big Ag entities and suppress small-scale production that would eat into the profits of the big guys.

Most future innovation will mostly have to do with delivery of goods (in the face of declining energy).

The days of plentiful technological innovations is pretty much gone (patent applications could probably demonstrate this), not so much because of regulations (though they do have impact- sometimes good for the big guys), but because the law of diminishing returns (how the hell to you top most of the stuff that's already out there).  Energy and natural raw materials are key, and as these decline (cheap/easy to extract/exploit) innovation will as well.

Again, I'm not buying it that new innovations can't make it because of "regulations."  Those that have the power to innovate also own the halls of Congress.  Perhaps the reason is, as the article notes, that there's been massive misallocation of and draw on the future?  And, you can lead a horse to water... everyone's hopelessly in debt, innovation is meaningless when you cannot afford it (such is the way for over 4 billion people on this planet, and such has always been the case).

The reversal of economies of scale is upon us.  Nothing else can stem this reversal.

Tue, 08/09/2011 - 17:42 | 1544137 cossack55
cossack55's picture

"unless the Fed is finally eliminated from existance." 

Tear down the buildings, crush the stone and concrete to dust, burn the wood, cover the footprint with 6" of salt,  seize all assets of all Fed employees, convict all Fed employees of terrorism, imprison them and their families three generations removed for life. 

Thats how you freakin' do it.  Anything short of above actions and you will see the beast rise from the ashes in a single generation.

Tue, 08/09/2011 - 17:44 | 1544146 cossack55
cossack55's picture

Lest I forget, then go after the CFR, ICG, Monsanto and Brookings among others. Same treatment.

Tue, 08/09/2011 - 18:09 | 1544244 JW n FL
JW n FL's picture

The FED!

The Lobby!

The Lobby Whores!

The Owners of the FED!

Anyone who supported these scumbags!

as well the immigration crowd who allowed America to be truned into a FAILED experiment of multi-culturalism!

anyone who doesnt like it can GET THE FUCK OUT TOO!

Tue, 08/09/2011 - 18:26 | 1544306 Kat
Kat's picture

Aren't you late for a KKK meeting?

Tue, 08/09/2011 - 20:09 | 1544677 karzai_luver
karzai_luver's picture

Nah, but you are overdue there bucky.


Live it up for ya never know.


Tue, 08/09/2011 - 21:50 | 1544940 disabledvet
disabledvet's picture
i knew they could dance. but sing "eenie, meenie, minei moe?" didn't see that one coming...

Wed, 08/10/2011 - 13:39 | 1547288 JW n FL
JW n FL's picture

do you understand that the United States Government is paid more money from Israel than ALL of the BIG Brand Name Banks Combined?


Why does that make me so hill billy?


why doesnt that make our Government Guilty of Treason?


why does their behavior make me anything?


just becuase you dont like the truth! do NOT take it out on the person going against the grain and sharing it with you!

Wed, 08/10/2011 - 13:41 | 1547297 JW n FL
JW n FL's picture

Israel has 5% un-employment!


why are American Tax Dollars being shipped there by the truck load?


becuase of the Lobby Dollars that our Treasonous Government Collects!


Once again! I am NOT to Blame for what someone else does!


I am only sharing the Truth! do with it as you will!

Tue, 08/09/2011 - 18:34 | 1544343 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Now Monsanto, there is a corporation domiciled in the bowels of hell!


Wed, 08/10/2011 - 01:09 | 1545250 Cathartes Aura
Cathartes Aura's picture

Monsanto & GE both had "rides" promoting their SCIENCE of the FUTURE in Disneyland's Tomorrowland.

now THERE's a triumvirate of Pure American Evil, social engineering at its finest. . . Walt Disney & Ray "McDonald's Kroc were contemporaries as well.

and, here we are, the FUTURE, eh.

Tue, 08/09/2011 - 20:41 | 1544753 Seer
Seer's picture

Add Chamber of Commerce to that list (local edition of the International Chamber of Commerce).

Tue, 08/09/2011 - 18:25 | 1544302 Manthong
Manthong's picture

"I think that this situation absolutely requires a really futile and stupid gesture be done on somebody's part. "

Tue, 08/09/2011 - 18:33 | 1544338 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Andrew Jackson could not have said it better!  This is the third time around for a Central Bank here in the U. S.    Tuco

Tue, 08/09/2011 - 19:19 | 1544534 Poor Grogman
Poor Grogman's picture

Personally I would rather see the FED building used as a museum dedicated to the multiple historic failures of the various FIAT money's.

There could also be an educational center with a Keynesian Mathematical simulator so that students could recreate their own virtual debt based economy and watch it implode in accelerated time as the debt based money system worked it's awful magic.

The only thing that would be more fitting is if there was a brass statue of Ron Paul out the front.



Tue, 08/09/2011 - 20:10 | 1544685 karzai_luver
karzai_luver's picture

a big smokin hole will do fine.


half life around 10,000 years or so.


Tue, 08/09/2011 - 19:40 | 1544562 andybev01
andybev01's picture

" Anything short of above actions and you will see the beast rise from the ashes in a single generation."

The 'beast' is now indestructible. It lives in cyber-space, accessible to anyone with the the right password.

But this has always been the case, money and credit and gold (sorry kids) and diamonds, they're value is make beleive.

We decided a long time ago that 'things' had to have a value assigned to them for commerce, because honestly, who has 2 pigs on them to make change for a holstein?

The values were decided primarily on scarcity or physical properties that they had, but then the world became connected and the things that were once scarce became commonplace, and the folks who had the most stuff decided that they wanted more stuff, so that they could parade around saying "Ooo, look at all of the stuff I own."

The jig was up when we agreed that pretty pieces of paper had value.

To find out the real value of those pieces of paper, try bartering them for food and water with a tribe that still places value on real stuff, like food and water.

They will laugh right in your face.



Tue, 08/09/2011 - 17:46 | 1544140 SparkySC
SparkySC's picture

Eliminate the FED Now!!!!!!!!

Don't wait. These banker buffoons have taken the World especially the USA hostage to their 'Plan'. 

And it is a planned attack.




Everyone needs to get the FED Clean Up kit.


1. Shovel

2. Bag of lime

Tue, 08/09/2011 - 18:31 | 1544330 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture


Tue, 08/09/2011 - 18:58 | 1544452 disabledvet
disabledvet's picture

The Fed just elimimated itself. What? U want a formal statement? Here...i'm writing it on a...napkin...and it is: "we're done. Goodbye."

Tue, 08/09/2011 - 17:44 | 1544143 fonestar
fonestar's picture

and this is just the stock market shedding some extra pork around the waist!  Can't wait for the bond market implosion!  WHOPPEEEE!

Keep stackin 'em hi!

Tue, 08/09/2011 - 17:48 | 1544158 Mark_BC
Mark_BC's picture

There is no magic technological or energy innovation on the horizon. Economic principles, both Keynesian and Austrian, violate the laws of thermodynamics and this, in large part, is why things are collapsing (throw in all the ensuing corruption as a symptom, not a cause, it is merely gasoline poured on the fire). No innovation can violate the laws of physics. Innovators work their "magic" by understanding and USING the laws of physics, not violating them. Economic growth will stop, and permanently. Prepare for it.

Tue, 08/09/2011 - 17:55 | 1544194 reader2010
reader2010's picture

You need to substantiate that to the Chinese.

Tue, 08/09/2011 - 18:09 | 1544233 scratch_and_sniff
scratch_and_sniff's picture

Man it's screwballs like you that put those little nagging doubts in my mind about owning gold, spurting those gems such as "Economic growth will stop, and permanently", man i feel sorry for your family, i feel sorry for you, millions of years of human evolution and innovation and here's you calling the top of all tops. Who the fuck do you think you are buddy? Is this what you push down peoples throats when you get a chance to speak every now and then? Don’t invite me round for tea and biscuits. Jesus, you're really praying for the world to stop because you got gold, OMG! What a bitter old twat you’ve become.

Tue, 08/09/2011 - 18:20 | 1544283 Mark_BC
Mark_BC's picture

"Who the fuck do you think you are buddy?" Well I'm one of those rare people who's actually spent a good portion of a career studying and working in the real world that actually provides goods and services to our economies, ie ecology and engineering. Therefore, I do not need to rely on imaginary thought experiments to reassure me that violating the laws of thermodynamics is possibe; because I know for a fact that it isn't.

I think we may have a slight difference in definition of terms here. When I say "economic growth", I mean the total amount of goods and services "produced" by the economy. If you think of economic growth as being more about technological innovation then I'm all with you, but the fact remains that we will not be producing any more goods and services in any meaningful way, beyond what we do right now, and that will essentially be for a very long time, certainly long after the current monetary system has been completely replaced.

Tue, 08/09/2011 - 18:30 | 1544327 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Yes, and anything that could possibly be invented has already been invented:)


Tue, 08/09/2011 - 21:41 | 1544911 Calmyourself
Calmyourself's picture

Thanks, guy above in effect said that and I laughed, thanks for posting what I was thinking..  Yes, we are in trouble this huge nasty Ponzi has to unravel there will be civil unrest in a probably major way.  Hopefully it will clear some deadwood from the forest floor ( ponzi perpetrators) cough, cough..  Then we move on, we have the resources and the smarts if we can get real change, life will go on.  It just won't be very pretty for a while..

Tue, 08/09/2011 - 18:37 | 1544361 scratch_and_sniff
scratch_and_sniff's picture

I'm sorry, it's getting late here, and i feel my soul being sucked into a vortex, forgive me for not firing up my mangled synapses to partake in a round of "will something come out of nothing, or not?" (of course it will, that’s where its always came from, that’s where it lives - necessity raps its door every now and then and asks it to come out and play). Sorry to do this, but I need to get to bed, if you feel its important to reply to my gibberish I will read it tomorrow. Nite john boy…

Tue, 08/09/2011 - 20:52 | 1544788 Seer
Seer's picture

Just acknowledging that yours is in fact gibberish (without any logic or substance, and in clear defiance of the laws of physics).  Hope your dreams were filled with lots of skittles and unicorns (hopium induced of course).

Wed, 08/10/2011 - 08:51 | 1545717 scratch_and_sniff
scratch_and_sniff's picture

Guess i'm all soul.

Tue, 08/09/2011 - 19:17 | 1544526 Mark_BC
Mark_BC's picture

tuco and sniff, what you are proposing is more commonly called a "perpetual motion machine". They were disproven centuries ago. This, fundamentally, is the #1 reason that current economics is totally screwed up, because Austrians, Keynsians, mainstreams, they ALL refuse to pull their disciplines up into the 19th century and admit that perpetual motion machines exist only in economics textbooks. Yes, there are lots of innovations forthcoming (my favourite is electric cars) that will revolutionize the world. However, NONE of them will violate the laws of thermodynamics, I can guarantee that 100%.

Tue, 08/09/2011 - 20:59 | 1544803 Seer
Seer's picture

You're off on two counts:

1) Austrian economics isn't necessarily outisde of physics: followers, however, tend to believe that innovative wonders will always spill out, something that I don't bet on, but at least it doesn't outright promote unbridled growth as does Keneysian economics;

2) Electric cars/vehicles are NOT any sort of yet-to-be-discovered innovation that will magically save us (your blatant bleeting over these things is tiring, distracts from your otherwise appearance of understanding things)- AT MOST they are just transportation, a function that most of have available to us from birth- our feet; MOBILITY/transportation isn't a problem, we've got MORE than we need; further, transportation is the key control point for TPTB.

Wed, 08/10/2011 - 07:14 | 1545505 smore
smore's picture

Mark_BC, consider the energy falling on the earth from the sun every day.  Having spent so long in your ecological studies, you will no doubt know that this is vastly more than the energy used by humans. Now consider that a change in technology could increase the proportion of that energy which we can utilize from the current <1% to say, 5%.  Result, growth.  In short, despite your bleating about thermodynamics, your head is far, far, up your ass.

Tue, 08/09/2011 - 18:20 | 1544285 Mark_BC
Mark_BC's picture

BTW owning gold is good.

Tue, 08/09/2011 - 19:02 | 1544470 disabledvet
disabledvet's picture

"Joe. That's who i'm is. And u are......Scratch and Sniff! HELLO Scratch and Sniff! Do u scratch and sniff too?"

Tue, 08/09/2011 - 18:30 | 1544326 Dick Fitz
Dick Fitz's picture


I've spent a lifetime pondering entropy, and the effect intelligent application of reason to its endgame. The ONLY force in the universe capable of contravening the laws of entropy is reason. From a tiny input of caloric action, a man can create systems and algorithms that enhance the lives of every subsequent intelligent creature on the planet for generations to come. Look at how the ancient Greek philosophers, or Arabian mathematicians, or the middle age Chinese and Italian inventors, changed the course of the world. Building upon this, the inevitable (unless we nuke our system) result will be the singularity followed by the conversion of all matter in the universe to computational competence. Entropy will be defeated.

The only reason I believe in God is my belief that He created us to overcome entropy.

Tue, 08/09/2011 - 18:41 | 1544376 scratch_and_sniff
scratch_and_sniff's picture

Umm, i think that too now and again...that maybe he's lazy and he put us here to do his thinking, then he will come back when we have cracked it all for him. Then i think, nah.

Tue, 08/09/2011 - 21:28 | 1544880 Ident 7777 economy
Ident 7777 economy's picture




Bears repeating: "maybe he's lazy and he put us here to do his thinking, then he will come back when we have cracked it all for him.".





Tue, 08/09/2011 - 19:11 | 1544501 I Feel Free
I Feel Free's picture

The law of entropy (i.e., the 2nd law of thermodynamics) is never "contravened". That's why its a law. Intelligent action simply diverts energy flows so that entropy is reduced locally, while increasing the overall entropy of the universe. This is entirely consistent with the laws of thermodynamics. Entropy will never be "defeated". It is a law of nature. However, we may, through intelligent action, make use the laws of nature to create a world that is more supportive of the health and welfare of its inhabitants.

Tue, 08/09/2011 - 21:29 | 1544882 Ident 7777 economy
Ident 7777 economy's picture


(For not getting it)

Tue, 08/09/2011 - 22:02 | 1544962 sdmjake
sdmjake's picture

+1 for getting it. Our society has grabbed hold of the 1st law of thermodynamics and decided that since it "cannot be created or destroyed " that there is no reason to learn/heed the second law. Energy is always transformed from a useable to unusable state (though not destroyed). Bunch of fossil fools....

Tue, 08/09/2011 - 22:25 | 1545010 Seer
Seer's picture

"Energy is always transformed from a useable to unusable state (though not destroyed)."

I guess that's the (human) self-centered description.: the universe DOES use it (well, it's not like it's a product, it's just a piece of the whole puzzle that's shape-shifted).  I'd argue that it's just plain "transformed" and leave it at that: we don't have the energy or ability to transform it again.

Wed, 08/10/2011 - 07:19 | 1545513 smore
smore's picture

Tell that to Maxwell's Demon, bitch!

Tue, 08/09/2011 - 21:07 | 1544824 Seer
Seer's picture

You extoll the virtues of reason and then go about crushing reason!  WTF?

Entropy is balance, that's all.  If you're such a god-follower then I'd think that you should get what the Garden of Eden was really about.  Nothing in balance about humans, NOTHING (since that time).

As far as the past goes... do you know why humans traveled?  It was because they decimated their lands, requiring them to seek out new lands to suck dry.  THIS is the human story...  But now there is no New Frontier, most every remote pocket of the earth has been explored, poked for some resource or another.  And meanwhile human population has climbed past 6.5 billion.

You either believe in reason or you don't.  And if you don't get that the infinite cannot happen using finite input then you are in NO way demonstrating reason (well, perhaps POOR reason).

Tue, 08/09/2011 - 21:30 | 1544887 Ident 7777 economy
Ident 7777 economy's picture

Didn't get it either ...

Tue, 08/09/2011 - 22:27 | 1545014 Seer
Seer's picture

You didn't get it?  Could you be a bit less cryptic? (or, would that open YOU up to getting your ass kicked?)

Tue, 08/09/2011 - 19:06 | 1544482 cossack55
cossack55's picture

Embrace entropy.

BTW, Complexity (chaos) Theory suggests that all inovations only occur in the smaller, isolated pockets of humanity. The larger and more complex a segment of society becomes, the more it stagnates and stifles innovation.

Tue, 08/09/2011 - 19:13 | 1544508 scratch_and_sniff
scratch_and_sniff's picture

yeah, entropy is a republican...

Tue, 08/09/2011 - 20:15 | 1544696 karzai_luver
karzai_luver's picture

close .......but socialist is what you were after.


Tue, 08/09/2011 - 21:09 | 1544827 Seer
Seer's picture

Thank you!  Pretty much the angle that I was trying to convey earlier vis a vis innovation.  And now, then, is THE fundamental equation:


Tue, 08/09/2011 - 17:48 | 1544160 Mec-sick-o
Mec-sick-o's picture

Money is a human invention.

So virtual, that most of it only exists as a dipole in a magnet platter or electronic bits in a computer.

It evolves in ways that those changes actually benefit the ones that can change the rules, no wonder.

Money will continue its evolution.  Either ponzi, debt, gold, ETF, carbon credits... someone still has to sweat the hard jobs.

"Mother" Earth will certainly bite us in the ass.  We are consuming at a faster pace than what nature can replenish.

Enjoy while you can.

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