I Hate When That Happens...

You know how it is, you're going along with the lies that are told every day about "recovery" and "economic conditions are kinda "OK" and "we're doing all right" and then the mainstream media and "economists" like Goldman's Alec Phillips step on their ***** and tell the truth by accident.

Economists at Goldman Sachs Group Inc., IHS Inc. (IHS) and BNP Paribas SA said they expect the Treasury to husband the tax money it collects to make sure it can meet interest and principal payments on the nation’s debt. Other obligations, from salaries of government workers to payments to defense contractors, would face the ax. The result: $175 billion less in government spending during November alone, said Goldman’s Alec Phillips in Washington.

“The cutting would be so huge it would put the U.S. back into recession,” said Jim O’Neill, former chairman of Goldman Sachs Asset Management who is now a Bloomberg View columnist.

And incidentally, that figure is monstrous scare-mongering -- or an admission that Treasury has been cooking the books for the last several...... years?

The deficit in FY13 through August was $755.345 billion. That's 11 of the 12 months (the September number is not available due to the "shutdown") so we'll do a simple ratio -- $824 billion.

Divided by 12 months that's $69 billion a month that the government could not spend, or approximately one half of Alec Phillips' number.

But let's not kid ourselves -- $70 billion a month, or ~$825 billion over a year's time, is more than enough to be declared a formal recession.

This, my friends, means that government deficit spending is all that is keeping that formal declaration of "recession" away.

Let's remember something very simple about anything scarce -- the more of it there is the less-scarce it becomes and the less-valuable each unit of it is.

In fact, it's exactly true in each and every instance that the destruction of value per-unit is exactly numerically determined by the number of additional units that "magically" appear.

If there are 1,000 dollars in existence and 1,000 bushels of edible food, and nothing else, then the free clearing rate (since everyone wants to eat) will be 1 dollar for a bushel of food.

If you now print up 1,000 more dollars there are now 2 dollars for each bushel -- and like magic the clearing price will double.

The problem with what the government has been doing is that the clearing price of all goods and services in the economy has risen in direct proportion to the number of dollars that the government has spent but does not have. Your salary, however, has not gone up in proportion nor will it because you have accepted the premise of being able to spend what you didn't first earn, either individually or collectively via government demand.

In other words your personal production in your household is, say, 50,000 units of currency ("dollars") but you demand to spend more than that.

The Federal Government's fiscal 2013 budget was $3,680 billion and of that $825 billion didn't exist -- that is, 22%.

If you made $50,000 last year (you were the "median" family income, more or less) you spent $61,209, or over $11,000 more than you made.

When you do this as a person, or a family, you eventually go bankrupt. You can do it for a year or two, perhaps, but eventually lenders will stop allowing it because the accumulation of debt reaches a level that is impossible to pay back. If you have assets (say, for example, a paid-off house) you will eventually wind up with no house. If you have no assets the day comes sooner than later when creditors will no longer extend you credit as there is no possible way to pay them.

When you're a nation instead of a person it works differently. Since a nation can emit new credit any time it wants the impact of this decision is different. Instead of being simply told "no" the additional 22% of spending comes directly out of the buying power of the people because each dollar that they have is worth less than it was before the deficit spending took place, simply because there are more of them.

Provided that the nation in question emits fewer excess currency units than the gains in productivity nobody starves; the government simply steals the benefit of the technological improvement that you created.

Instead of your effort in working smarter -- getting more done with less input -- going to you, making your life easier and allowing you spend more time contemplating beautiful sunsets with a drink in your hand it is instead stolen from you and given to someone that the government chooses.

This, by the way, is where the lie comes from that a "3%" structural deficit is "sustainable" as the long-run gain in productivity over the last 50 years or so has been approximately 3% annually. The problem with such "sustainability" is two-fold: It presumes that trees grow to the sky, in other words that this gain will continue forevermore into the future, and secondly that the government has the right to steal all of the fruits of the improvement in living standards that you, not they, create.

Back in the real world, that is the United States, however, that $825 billion is in fact about 5% of the total economy and according to the BLS, if you believe them, labor productivity went up at a 2.3% annual rate as of this last quarter.

In other words you got screwed out of about 2.7% of your buying power over the last 12 months in constant terms -- but in point of fact you should have gotten the entire 5%, not just 2.7%, because it was not the government that improved productivity -- you did.

2.7% doesn't sound all that awful, but in fact it is because this is a compound (that is, exponential) function. Assuming that financial******of 2.7% is maintained for just ten years (say, from 2003 to today) you have been screwed out of 30%, or awfully close to one third, of everything you made in 2003 -- even though numerically it appears you have more money.

That is, you are 30% less well-off today than you were in 2003 in real terms; it requires 1.3 hours of labor to earn the same "things" now as it did in 2003.

Worse, over 30 years -- the common man's working life -- this same destruction of purchasing power means that in real terms it takes 2.2 hours to earn the same "things" as it took one hour when you began working 30 years previous!

This, and only this, is why the government must stop this crap and balance the budget now.

There will not "be" a recession if the budget is balance there is already a recession and has been for the last three decades that has been numerically hidden from you via these games. It is for this reason that handouts such as food stamps, disability payments and similar games are played to hide the catastrophic impact that this crap has imposed on many in our society.

But the impact on your pocketbook and ability to enjoy life cannot be hidden by tampering with the money and credit system, and it hasn't been. Your cost of living has gone up and your net buying power has gone down -- by as much as 30% just over the last decade.

Many people from 2003-2007 tried to evade this reality by pretending to be a government. The "refinance and HELOC" craze was exactly that -- people trying to do what government does, and spend $61,000 when you only make $50,000. The consequence of that was mass foreclosures and bankruptcies and yet the very same BS is run on a daily basis when the bobble-heads talk about the "return" of refinancing mortgages, taking out student loans and similar!

Arithmetic is not political and does not care if you're left, right, Democrat, Republican or Martian. It just is, and while you can play games for a good long while when you're a government the fact of the matter is that spreading the damage to other people just makes it take longer before they starve and are evicted from their homes (and might choose to revolt rather than starve) as opposed to the acts of a singular person who gets in over their head and loses their house, ultimately being forced to declare bankruptcy.

The lunacy on both the left and right must stop or the percentage of people so-destroyed will reach a critical mass and lead directly to economic collapse.

I don't know about anyone else, but I have an overwhelming urge to withdraw from society, hole up in at small farm and try to stay to myself and my family.

I now thoroughly understand how in the 2nd Century AD, so many Romans withdrew to the countryside and up into the hills, where they stayed on their farms, vineyards, and estates. Corruption was so widespread they could not emotionally deal with it.

I don't know about anyone else, but I have an overwhelming urge to withdraw from society, hole up in at small farm and try to stay to myself and my family.

Even if you do that you have to be involved locally otherwise the communists raise your property taxes under your nose. There is no way to completely disengage from the leftists.

I don't know about anyone else, but I have an overwhelming urge to withdraw from society, hole up in at small farm and try to stay to myself and my family. I now thoroughly understand how in the 2nd Century AD, so many Romans withdrew to the countryside and up into the hills, where they stayed on their farms, vineyards, and estates. Corruption was so widespread they could not emotionally deal with it. You just described me. I've been making the Rome analogy for decades, but it went on steroids during the Bush II years. And I did what you said. I bought a small farm in central KY two weeks before the 2008 election, AND I EXPECTED MCCAIN TO WIN.

I moved there from my home of 45 years, Seattle, in 2011. I bought the 19 acres next door this year.

We've already added buildings, a garden and chickens since those photos were taken and will be adding a lot more.

It scared the crap out of me when I did it. It was a big change for someone in IT for the last 30 years with a good six figure job. But it was preceded by a lot of prayer and we thank God every day for making this possible, not least for giving us the courage to do it. We have our own garden of eden here and a place for all of our kids and grandkids to "bug out" to. The funny thing is that, in hindsight, it wasn't that hard.

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