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Saturday, May 16, 2015

A historic privilege

In his landmark economics textbook, Paul Samuelson pointed out that domestic debt did not matter in the aggregate, with one notable exception.  He wrote: "The interest on an internal debt is paid by Americans to Americans; there is no direct loss of goods and services. When interest on the debt is paid out of taxation, there is no direct loss of disposable income; Paul receives what Peter loses, and sometimes – but only sometimes – Paul and Peter are one and the same person.... In the future, some of our grandchildren will be giving up goods and services to other grandchildren. That is the nub of the matter. The only way we can impose a direct burden on the future nation as a whole is by incurring an external debt or by passing along less capital equipment to posterity."

Setting aside whether it matters or not who owes what to whom, the recent report on external debt owed would therefore appear to be not entirely irrelevant in this regard.
The Treasury Department says overseas ownership of U.S. debt rose 2.1 percent in March to $6.18 trillion. That is below January's record of $6.22 trillion. China added $37.3 billion of Treasury debt, bringing its stockpile to $1.26 trillion. That's ahead of Japan, which added just $2.5 billion, lifting its total to $1.23 trillion.

In February, Japan became the leading owner of U.S. debt for the first time since August 2008. China overtook Japan that year as the Great Recession, higher government spending and a steep drop in tax revenue pushed up U.S. government borrowing.
As of the end of 2014, US government debt outstanding stood at $13 trillion. That means that with $6.18 trillion of it owed externally, 47.5 percent of the US public debt is of the sort that, even in Keynesian/Samuelsonian terms, imposes a direct burden on the future nation as a whole. And when you consider that the future USA - one can hardly call it a "nation" at this point - will be less white, less intelligent, and less productive on average, it should be readily apparent that the economy has absolutely no chance of growing itself out of the external debt owed regardless of which economic school of thought you belong.

What we are witnessing is nothing less than the gradual demise of the biggest, wealthiest economy in world history. It is truly a privilege and an education to behold. It is rather like being able to witness the death of the last Tyrannosaurus Rex. Regardless of how the fallout from the event may affect us personally, we have seen and experienced something that very few men have ever known.

I still remember living in Japan at the height of the Heisei Boom; I flew out of Narita less than five months before the consumption tax and the first round of monetary tightening marked the peak of that Golden Age and brought it to an end. In nearly three decades since, Japan has never again approached those heights of ease and luxury. Now we are looking at much the same thing, albeit on a considerably larger scale. But rather than mourn the recent past, we should appreciate it for the rare moment in history it was.

The Hobbesian Law was never abolished, it was merely held in abeyance for a time.

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58 Comments:

OpenID eidolon1109 May 16, 2015 5:10 AM  

"...you and I are going to spend our sunset years telling our children, and our children's children, what it once was like in America when men were free [and rich]."

Blogger VD May 16, 2015 5:17 AM  

That's one advantage of my father having lost everything. He went from a company making the inflation-adjusted equivalent of $100 million per year to nothing. I already have an inkling of what it will be like for everyone. My family's fall from wealth and ease presages what most American families are in the process of experiencing as the middle class shrinks and disappears.

It's a bit of a shock for a year or two, but then you adjust and the previous period appears to have been nothing more than an idyllic dream.

Anonymous grey enlightenment May 16, 2015 5:32 AM  


What we are witnessing is nothing less than the gradual demise of the biggest, wealthiest economy in world history. It is truly a privilege and an education to behold. It is rather like being able to witness the death of the last Tyrannosaurus Rex. Regardless of how the fallout from the event may affect us personally, we have seen and experienced something that very few men have ever known.


Sorry, Vox, but the evidence of such a decline doesn't bear itself out. The S&P 500 made another high this week. One can argue that maybe this is due to QE, but profits & earnings are also rising in lockstep with stock prices, suggesting that fundamentals, not QE, is mostly responsible. America may be facing moral decay, but it hasn't hurt its economy, global influence, military might, profits & earnings, ..stuff like that. Look at how the biggest, most influential companies in the world ,Apple, Google Facebook,..etc, are all in America. Same for institutions of higher learning, and so on. Or real estate, such as New York, Aspen, Southern California, or Bay Area. Compared to the rest of the world, America reigns supreme terms of its currency, stock market, inflation-adjusted GDP growth, consumer spending, free market capitalism, etc. The debt may seem unsustainable, but it actually is because these countries who are buying it have no alternative and they keep rolling it over. It's not like China wants to redeem its holdings, because that would make things worse for them. The dollar is among the safest, most stable place for foreigners to park their surpluses, and I don't see that changing. The system may seem perilously unstable, but it works. The bigger things get, the more effort goes into making them work.

Anonymous grey enlightenment May 16, 2015 5:34 AM  

That's one advantage of my father having lost everything. He went from a company making the inflation-adjusted equivalent of $100 million per year to nothing. I already have an inkling of what it will be like for everyone. My family's fall from wealth and ease presages what most American families are in the process of experiencing as the middle class shrinks and disappears.

It's a bit of a shock for a year or two, but then you adjust and the previous period appears to have been nothing more than an idyllic dream.


sorry about that loss. I do believe the hollowing out of the middle is real, as America splits between a rarefied high-IQ elite and everyone else.

Blogger RL (#0052) May 16, 2015 5:36 AM  

The next question that comes to my mind then is this: if the U.S. where to break up (as in Victoria) and default on its debt, how would this negatively impact our trading partners? I am unaware of any decline and fall of the USA novel that deals with issue. Someone will be left holding worthless debt for a government that no longer exists.

Blogger Salt May 16, 2015 5:40 AM  

@ grey enlightenment
1) "America may be facing moral decay, but it hasn't hurt its economy,"

2) "I do believe the hollowing out of the middle is real, as America splits between a rarefied high-IQ elite and everyone else."

Do you not see any problem between those two statements?

Anonymous grey enlightenment May 16, 2015 5:50 AM  

The statements may seem contradictory, but the economy as measured by the actual data (real GDP growth, profits & earnings, etc..) doesn't show decline. How people feel about the economy or are impacted an the personal level is often much different than the broader picture. Many people still think we're in a recession, and this is not surprising since the media tends to focus on the negative and it's true that inflation adjusted wages have stagnated for large portions of the population, but the recession ended a long time ago.

Blogger Salt May 16, 2015 6:02 AM  

I'm only going to address this one point -

it's true that inflation adjusted wages have stagnated for large portions of the population

How can you say such in support of your position, given the non-participation rate being what it is? For them, wages haven't stagnated, they've collapsed. That, for a large portion working, wages have stagnated is not symptomatic of an economy healing. You say the recession ended a long time ago. That's easy to show as even I can juggle the books and polish a turd, on paper.

Blogger VD May 16, 2015 6:05 AM  

The statements may seem contradictory, but the economy as measured by the actual data (real GDP growth, profits & earnings, etc..) doesn't show decline.

The "actual data" is about as trustworthy as saying that the economy as measured in unicorn farts doesn't show decline. Go have a good hard look at how the "actual data" is produced. It's all being propped up by the massive increase in government debt which is partially filling in for the absence of private sector debt.

Anonymous DT May 16, 2015 6:27 AM  

Sorry, Vox, but the evidence of such a decline doesn't bear itself out.

Record number of Americans on food stamps.

Population employment participation rate not seen since Carter (when most women were still stay at home moms!)

Never before seen unemployment rates among young adults.

Never before seen debt loads, defaults, and poor credit ratings among young adults.

Painful inflation despite number fudging by FedGov.

Yeah...it's the best of times.

The S&P 500 made another high this week.

On borrowed and printed money. If I max out enough credit cards and buy enough Monopoly sets I can declare myself a millionaire.

Blogger Eric May 16, 2015 6:38 AM  

Record number of Americans on food stamps.

Because they made food stamps much easier to get. Comparing today to ten years ago isn't an apples to apples comparison.

The real problem isn't that more people need food stamps, because the numbers don't bear it out. The real problem is people who don't need handouts are nonetheless working the system at the expense of their neighbors. That's a generational shift in attitude - my father would have turned down charity unless his family was literally starving. It was a point of pride. But no longer.

Anonymous grey enlightenment May 16, 2015 6:52 AM  

How can you say such in support of your position, given the non-participation rate being what it is? For them, wages haven't stagnated, they've collapsed. That, for a large portion working, wages have stagnated is not symptomatic of an economy healing. You say the recession ended a long time ago. That's easy to show as even I can juggle the books and polish a turd, on paper.

I guess my point is that the economy and America may be strong (as measured by the data) even if not everyone can participate fully in the recovery. You look at the role IQ plays in our increasingly competitive economy, and people of lesser intellectual means may be falling behind, but that doesn't prove the whole economy is weak. That is called the fallacy of composition - to make an inference about a bigger system from one of the smaller parts.

The "actual data" is about as trustworthy as saying that the economy as measured in unicorn farts doesn't show decline. Go have a good hard look at how the "actual data" is produced.

Consumer spending keep rising. Even if the govt. data may seem dubious, how would you explain the strength of major multi-national companies like Apple, Google , Disney, Facebook..and so on? The inability to disprove that govt. data is fallacious does not prove that it is. There are differing measures of unemployment

On borrowed and printed money. If I max out enough credit cards and buy enough Monopoly sets I can declare myself a millionaire.

But the fed ended QE a year ago and began the taper two years ago, but the S&P 500 has surged 20% since then. If Wall St. felt that QE and printing were purely responsible for the rise in stock prices, this would not have happened.

Profits & earnings of the S&P 500 have risen in lockstep with stock prices.. image

Blogger VD May 16, 2015 6:55 AM  

I guess my point is that the economy and America may be strong (as measured by the data) even if not everyone can participate fully in the recovery. You look at the role IQ plays in our increasingly competitive economy, and people of lesser intellectual means may be falling behind, but that doesn't prove the whole economy is weak.

No, because what proves the economy is weak is the measure being utilized. You're not paying attention, you're just babbling about things you don't understand. The various measures are up because the government is borrowing nearly 30 percent of the debt and distributing the borrowed money to corporations which are then "profiting" from it.

This is not how a healthy and sustainable economy operates.

Blogger VD May 16, 2015 6:56 AM  

The inability to disprove that govt. data is fallacious does not prove that it is.

What the hell are you talking about? The data has been repeatedly prove to be false.

Anonymous PhillipGeorge©2015 May 16, 2015 7:00 AM  

Epoch changing times indeed. But it may not be gradual. When RMS Titanic went down, it all started very gently. Passengers reported a slight shudder, a distant grinding sound. Then everything was fine. People on deck played with some chunks of ice for a while.

Things began, and having begun, accelerated. Only a little while later it was all over, two thirds dead, and a World War around the very next corner. The West, the glory days were over, The Victorian/ Edwardian Age or Man, Philadelphia Age, West Zenith - gone.

As Rabbi Cahn points out America began as 'dedicated to God', that was consistent with Thomas Hobbes vision - for a while.

Blogger Mr.MantraMan May 16, 2015 7:13 AM  

USA is not a nation that I agree, and probably means that given our entitlement mentality that future bond holders that come to collect will be killed. Post Holocaust era will end with a whimper once the USA cannot thug it up for the IMF, unless a new force comes in to save the day for the oligarchs.

Anonymous DT May 16, 2015 7:18 AM  

Because they made food stamps much easier to get. Comparing today to ten years ago isn't an apples to apples comparison.

In terms of people on food stamps, rule changes account for 3.4m out of a total increase of 18.5m from 2009-2014. The changes made qualifying easier, and increased the amount spent per person. But they are not the primary reason for such dramatic growth.

Anonymous DT May 16, 2015 7:30 AM  

Consumer spending keep rising.

Uh...what?

But the fed ended QE a year ago

Subtract government deficit spending...at all levels...from the GDP.

Anonymous Geoff May 16, 2015 7:59 AM  

Given that the U.S. Govt debt is denominated entirely in U.S. Dollars, the party could continue for a while.

Blogger JartStar May 16, 2015 8:00 AM  

One can only hope our crash is similar to Japan's.

Blogger Salt May 16, 2015 8:38 AM  

One can only hope our crash is similar to Japan's.

I rather doubt the hope side even if the crash itself is similar. The Japanese people don't have that violent streak Americans do and, with a non-participation rate such as we have, I cannot see it as anything but fantastically ugly.

Anonymous NorthernHamlet May 16, 2015 8:43 AM  

But rather than mourn the recent past, we should appreciate it for the rare moment in history it was.

Act as if what has happened was inevitable. You can't influence it now.

There is a feeling, a sense of smallness and even humility in appreciation, as my role recedes from any control beyond what I can presently touch: my coffee, a coin in my hand, the man across from me. Soon too, these will be ineffective.

Blogger YIH May 16, 2015 9:13 AM  

eidolon1109:
"...you and I are going to spend our sunset years telling our children, and our children's children, what it once was like in America when men were free [and rich]."
A term I first saw about 30 years ago sums it up well: Brazilification.
Both definitions in Urban Dictionary apply:
1. "The widening gulf between the rich and the poor and the accompanying disappearance of the middle classes"
2. "Brazilification" is the process whereby a nation gradually becomes an extremely multi-racial/multi-ethnic society like Brazil, similar to what is occurring in 21st Century America.
Look at Brazil, the World Cup that they barely pulled off has turned into a bunch of soccer stadiums that cost plenty to build and are now going to waste. The ''Brazilian miracle'' of the past few years has blown up in their face due to China hitting the wall hard.
Brazil was hoping to show itself in the best light last year, and it barely managed to do so.
Guess what happens next year? Quite likely the reality of Brazil will be ''on the world stage''.

Anonymous joe doakes May 16, 2015 9:16 AM  

You can judge the performance of the economy by official government numbers, in which case the Soviet Union was an immense powerhouse right up till the instant it collapsed. Or you can judge it by the evidence of your own eyes, in which case the United States isn't doing so well. It's a bunch of little things that add up to that conclusion. There are no Help Wanted signs because nobody is hiring. There are no .22's to buy because everybody is hoarding them. There are more people living here than ever before, but housing starts are dead flat. The economy doesn't FEEL like it's booming, it feels like it's slowing down to head into retirement along with the Baby Boomers.

Blogger Cataline Sergius May 16, 2015 9:22 AM  

And then there is the gorilla in the monkey house. Population decline.

Americans are breeding below replacement levels. And we are already being treated to frantic pleas to bring in more and more immigrants.

Upside: its the liberals who aren't having kids. Conservatives are willing to raise children in poverty if we must because we know what the true measure of real wealth is.

Anonymous Will Best May 16, 2015 9:58 AM  

Not exactly sure what China and Japan are going to do to collect their 2.5 trillion if we tell them to pound sand. Latin America has a long history of telling creditors to go away. One would think the advantage of the Latin invasion is that we would be able to benefit from those uh... economic practices.

Anonymous MrGreenMan May 16, 2015 10:10 AM  

"The inability to disprove that govt. data is fallacious does not prove that it is."

You are aware that in the last second term of a democrat president, they so misrepresented the macro numbers to try to boost the Gore campaign, that basically you had to negate them? They admitted so much and issued huge corrections and restatements in 2001 that basically two years of data was all lies. When they lied before, they will lie again for political expedient.

Blogger Retrenched May 16, 2015 10:11 AM  

"Relish [the collapse] for the splendid historical theater that it is. A better spectacle there cannot be." - Fred Reed

OpenID mattse001 May 16, 2015 10:55 AM  

The problem with all debt is that it is a claim on future resources. What happens if in the interim, the producers stop producing?

OpenID mattse001 May 16, 2015 11:09 AM  

But the fed ended QE a year ago
Other central banks have engaged in their own versions, and there's nothing stopping multinational corporations like Apple from borrowing in Yen. The crash will be global, since that's how it's being leveraged.
One can only hope our crash is similar to Japan's.
This is actually my nightmare scenario: a long decline with no hope of reversal. I would rather have the destruction of a sharp crash because it clears out the dead wood.

Blogger James Dixon May 16, 2015 11:17 AM  

> The S&P 500 made another high this week.

There's this think call "momentum". You may have heard of it. But even if that's weren't true, you can still have an overall decline with some people doing well for quite a while. The bigger fish can always eat the littler ones.

> The debt may seem unsustainable,

Not seem. Is. The debt will never be repaid. All your claims about it being the best and and safest option are immaterial. The best option available isn't always a good one.

> The bigger things get, the more effort goes into making them work.

There's also this thing called the law of diminishing returns. You might want to look into it.

> ....as America splits between a rarefied high-IQ elite and everyone else.

IQ is tangential. The real split is between those with connections to political power and those without.

> ...but the economy as measured by the actual data (real GDP growth, profits & earnings, etc..) doesn't show decline.

Factor out government spending, government debt, and inflation and see if that's still true per capita, I haven't run the figures, but I'd be interested in the results. I can always be wrong.

> Even if the govt. data may seem dubious, how would you explain the strength of major multi-national companies like Apple, Google , Disney, Facebook..and so on?

The key word in your sentence is "multi-national". Think about it.

> One can only hope our crash is similar to Japan's.

It won't be. Our economy drives the rest of the world, especially China's. When we renounce our debt, there will be war.

> What happens if in the interim, the producers stop producing?

The debt doesn't get paid.





Anonymous ticticboom May 16, 2015 11:32 AM  

Victoria is a great book, but it's ridiculously optimistic. What's coming is Yugoslavia writ large.

Tom Kratman's had some good columns on it at Everyjoe. It'll be on a global scale, too, as everyone with a grudge against their neighbors won't have to worry about a Carrier Battle Group appearing off their coast.

Blogger dc.sunsets May 16, 2015 12:47 PM  

What makes a land and its people wealthy?

When you answer that question as free of Chaunvinsm as possible (bias being a given), and you look at the USA of the last 15 years (or 40, if being more honest), it strikes me as impossible to see this as anything but a period of post-peak nascent trend reversal and imminent decline.

Debt, treated as an asset and grown to unimaginable size, allows the perception of wealth to remain even as capital-- physical, intellectual and moral-- erodes away behind the mirage of plenty. People respond to incentives; what incentives drive the surge of tattooed freaks and tsunami of gaming the handout system?

Whimpy ate all the hamburgers and Popeye's perception of great promises of "hamburger wealth" next Tuesday rests on the trustworthiness of a man who never actually delivers hamburgers, he just rolls over the debt to the next Tuesday.

Is this not a microscopic encapsulation of our "roll-over and accumulate) debt-saturated joke of an economy?

Anonymous Rolf May 16, 2015 12:56 PM  

It's rare that the elites within an empire can see it fall as it's happening, as they call those pointing out the obvious Cassandras. America has been a great empire, and as all empires it's become a decadent victim of its own success. Cosmas Indicopleustes said in "The Christian Topography," as an offhand comment, that Rome was eternal, that God (the Roman Empire was now Christian) would never let it fall, that it might struggle against barbarians from time to time, but it would always be the center of the civilized universe. He wrote that in .... about 550 AD, something like a century after what historians now consider the fall of the Roman Empire. Fish don't notice the water. Imperial elites don't see the decay from inside their bubble.

Empires expand or stagnate, and stagnation leads to decay, decadence, and death.

America is not expanding any more.

Blogger dc.sunsets May 16, 2015 12:59 PM  

What is coming?

Mental "balance sheet wealth" will simply disappear. People think they have X dollars in wealth sitting in bonds (IOU's), stocks, and other stuff, but all of those assets only sport that much "worth" as long as buying pressure keeps their prices elevated...which also means a relative few owners try to sell at any one point.

The moment mass psychology changes from trust to worry, turning those assets into actual dollars requires two transactions: turn the asset into a bank balance, and (if being literal) turning the bank balance to banknotes.

A "bank run" (panic) at either or both of these choke points can and will remind us that the boat only floats when it's load is balanced, and a rush of everyone from a stable "everyone on port" to "everyone on starboard" is likely to move the boat from stable and seemingly permanent to capsized and sunk in the speed of High Frequency Trading.

85 years ago a bank run or stock collapse required a fair amount of effort on the part of individual traders or depositors. Now it takes as much effort as shopping on Amazon.

Blogger darkdoc May 16, 2015 1:13 PM  

But the fed ended QE a year ago and began the taper two years ago, but the S&P 500 has surged 20% since then.

Massive stock buybacks have supported stock prices - possible for companies that can borrow so cheaply - but, the debt repayment requirements are much different than for money obtained by selling stock. It is not just changing one form of debt for another.

And yes, though Fed QE stopped, artificial low, even negative, interest rates are equal support. QE was bad debt transfer to the Fed to remove it from banks, not money printing as often stated.

And as stated earlier, foreign central banks have taken up where the Fed stopped. ECB, anyone? Japan? China? For those with access, the world is sloshing in cheap money. If it stops, what then? Apparently, you think it will never need to stop.

Anonymous BigGaySteve May 16, 2015 1:23 PM  

Gray enlightenment- Perhaps this story will help you understand. A Swiss town with over 1000 productive whites has over 1/3 of its taxes eaten up by a single black refugee sqatmonster sucking down ~$60,000 a month in benefits. If you are bad at math that means the whites taxes went up by over 50% because a squamonster landed there. The Swiss do a pay as you go instead of "Don't tax you, Don't tax me, lets tax the great great grandchildren of the man behind that tree" http://www.dailymail.co.uk/news/article-2758055/Outraged-Swiss-village-1-000-residents-forced-raise-taxes-African-refugee-mother-seven-moves-costs-40-000-month-benefits.html

Paul and Peter are one and the same person Not if Saul realizes he has destroyed his host nation and flees to Israel

The S&P 500 made another high this week. As long as you forget that $10 worth of pre 1965 quarters melt down to $180+ of silver

One can only hope our crash is similar to Japan's. After the tsunami Japanese turned in found containers filled with cash, during Katrina blacks shot at medical helicopters, something only seen in Somalia

Blogger ajw308 (#98) May 16, 2015 1:31 PM  

@Grey, DT gave a good list, but I'd like to add that why wages have stagnated, there's a lot who are getting hours cut or getting downsized and getting less pay in a lesser field.

Blogger Stephen Ward May 16, 2015 2:30 PM  

"The interest on an internal debt is paid by Americans to Americans; there is no direct loss of goods and services."

Does anyone else notice that the economist has just said that rising income inequality does not matter? Or that there is a limit to how much can be borrowed within a closed system, so that at some point you have to borrow externally?

Anonymous Roundtine May 16, 2015 2:34 PM  

The manipulation of government data is so bad that several countries have taken to publishing raw data. Another lingering cost of the bubble: weirdly seasonal GDP data?

If you think the economy is doing well, look into pension liabilities. Most states are going to be in serious financial trouble in the next recession/bear market. Chicago is already going down the tubes and the economy is still doing well. Aside from getting out of debt, everyone should get the hell out of states and municipalities with excessive pension liabilities. You are either going to be taxed back to the Stone Age or your neighbors are going to lose their homes because their pensions will be gone. If states were to fund their pensions today, they would have to fire government workers and put the money into investments in order to pay the other workers' pensions. Under funding of pensions is another form of debt.

The technology trend is totally separate. Even if there was zero debt in the economy, changes in technology would be causing incomes to widen. However, the main hit to earnings has come from immigration and debt. Name a major technology invented in the past 5 years that doesn't rely on a mass middle class. Netflix, Facebook, LinkedIn, Uber, AirBnB, Google, etc. all rely on a mass market of consumers. The earnings for these firms rely on debt fueled spending by consumers and the wealth of the creators relies on debt fueled asset prices valued in a world of 0% interest.

Blogger RobertT May 16, 2015 2:39 PM  

Quite frankly I don't understand why China, Japan & others continue to buy U.S. bonds. I keep wondering if there's some nefarious reason I simply don't recognize, or have they lost their collective minds?

Why don't they just wrap up their money with a pretty bow and give it to us?

Anonymous Roundtine May 16, 2015 2:42 PM  

A Swiss town with over 1000 productive whites has over 1/3 of its taxes eaten up by a single black refugee sqatmonster sucking down ~$60,000 a month in benefits.

If you ever come across someone pointing out improving US demographics for the economy, look if they go deeper than raw numbers. The cost of Third World immigration and welfare induced reproduction at the bottom rung of society is being hidden by debt.

Anonymous A.B. Prosper May 16, 2015 3:00 PM  

Let me let Captain Capitalist explain why the GDP and Stock market are doing well for any who do not understand.

http://captaincapitalism.blogspot.com/2015/05/what-precisely-is-quantitative-easing.html

Its 30 minutes well spent and will disabuse you of any notion that the US economy is functional or rational.

Now a few facts

#1 the birth rate is the lowest its ever been among every category including Hispanics. The only way we keep numbers up is by importing massive numbers of non White immigrants who do not assimilate and are basically economically either on the dole or exists for wage arbitrage. Its a best destabilizing

And note creating "mixed race" nations won't help. Brazil has around European/US level fertility and has for years.

Note also the US infrastructure, just recently the local news here in California was covering a water main break. The mainstream news media noted that at current rates of repair it would take 300 years, yes longer than the US has been a nation to effect repairs. This was the nightly news even!

Water infrastructure and waste is newsworthy since a State with 10% of the entire nations population and that grows almost all our fruit and vegetables is essentially out of water.

It has accordingly to a NASA scientist as little as one year groundwater left.

Its probably a bit more but in a few years, 5 at most we can kiss many vegetables goodbye. All over the Earth. Everywhere.

The States response was "dramatic" to cut household use by 25% which if effective a dubious prospect

Why ? 1st many people in this state do not generally obey the law as is seen in classic Hispanic dominated anarcho-tyrannies, Even if it worked it would reduce use by only 5% . So assuming a generous 5 years of ground water and complete success , we've managed to add another 90 days!

The entire West has the same problem, Arizona, no water left, Nevada generally well run and actually trying the best it can by adding more pipelines and adding new turbines to the Hoover Dam is basically screwed and in a few years that dam may not run at all taking 4 billion kilowatt hours off the grid for good,

So a no matter how inflated the GDP is by "monetary policy" reality will have its way.

On top of that, anyone who has ears can hear the civil war drums beating and there is a better than average chance it will be before our hosts predicted time.

Now as to afters? Well default will take the world economy down , the US GDP will drop by pretty much everything that isn't production of goods, upwards of 1/3 of its population and if we are lucky, it will recover as a somewhat smaller, marginally industrialized power with a better wealth distribution.

Whatever happens, the entire Left edifice will implode.

I suppose its possible the Left could somehow keep in charge with an Army of NAM enforcers somehow but that just ends up a slower death since the fake economy grows and there is better than average chance that basically food won't be available in cities in such a scenario, The way US ag. is done is very brittle.

Anonymous A.B. Prosper May 16, 2015 3:09 PM  

feh, I forgot a part. If somehow the situation doesn't blow, in the end the US will be a full bore 3rd world country and take a lot of nations down with it.

There will be massive efforts to prevent this, cash grabs, tax hikes, more money printing and levels of economic collusion that are unheard of but its all futile. In the end, at most a few decades the US will be fully 3rd Brazilified and no longer contributing much of anything.

At some point China and possibly other nations like Russia will probably have gotten out of the dollar trade, divested from dollars and simply pull the plug.

We won't be strong enough to fight them or the blackmail them with violence, no ability for a hegemon enforced a dollar boarst (SP?) and as such will basically have all our chickens come home to roost. My guess and its a guess is $10 dollar and hour wages and $10 milk for most people who have jobs with vegetables and meat being unaffordable and most of the budget going to handouts just to buy stability.

Basically Mad Max One or Prayer of the Rollerboys not the apocalypse.

Anonymous Jack Amok May 16, 2015 4:32 PM  

The problem with all debt is that it is a claim on future resources. What happens if in the interim, the producers stop producing?

All money is a claim on future resources, and the people currently piling up the most money are doing the least to ensure future productivity.

There's one sliver lining to the non-democratic political system we've had for the last few decades. When the can finally hits the brick wall at the end of the road, people will have an easier time saying "I'm not the one that promised you that. Go pound sand, freeloader."


Quite frankly I don't understand why China, Japan & others continue to buy U.S. bonds.

What else are they going to buy? Euro bonds? Chinese bonds? South American promises? The US is headed for hard, hard times, but I don't see anywhere else that's going to be safe for foreign investors. Chinese know their own government is perfectly willing to steal anything it wants. Japanese know their own economy is stagnant and offers little opportunity.

Anonymous NorthernHamlet May 16, 2015 5:10 PM  

Jack Amok,

When the can finally hits the brick wall at the end of the road, people will have an easier time saying "I'm not the one that promised you that. Go pound sand, freeloader."

The Baby Boomers in my family insist my generation owes them everything they're getting and more because they "paid" into the system, fair and square.

Then they ride out on their real-bad-ass-biker Harley's and go to the Rum Runner to mix multiple medications into their pina coladas.

Blogger Tommy Hass May 16, 2015 6:23 PM  

I don't use biblical metaphors often, but this reminds me of the Tower of Babel.

Blogger Cuca Culpa May 16, 2015 7:24 PM  

The S&P 500 made another high this week.

Lies, damn lies, and statistics.

Went grocery shopping today. Just reenforced my gardening plans (4b here, waiting until next week to plant due to frost warnings). The unemployment figues are jacked thanks to that 'discouraged worker' nonsense, and we're in the era of the desperate and greedy falling victim to scams.

Aside from the usual suspects GamerGate fights, do a news search for medical fundraising fraud. Prostitution is up (see 'Tag Your Sponsor'). I have no idea of the local drug market, but it likely expanded too. (Mostly pills... weed is just another vegetable around here.)

Saw this crazy train wreck coming two years ago and got out of the city. As for sudden loss, my great-grandfather was filthy rich in real estate but lost it all in '29. My granny took in stride, but her sister was bitter for the rest of her life.

Blogger Cuca Culpa May 16, 2015 7:32 PM  

Victoria is a great book, but it's ridiculously optimistic. What's coming is Yugoslavia writ large.

I guess you don't live in Maine.

Loved it, since it is plausible in a place with low population, lots of fish and trees, and homogeneous population. The idea of Japanese seaside resorts is interesting... PEI caters to that by catering to their Anne of Green Gables obsession.

Not sure what King book to use in Bangor or Old Orchard, though...

Anonymous BGS May 16, 2015 7:49 PM  

A.B. Prosper- Let me let Captain Capitalist

Did you see that despite CA using smart meters to fine people for showers Nestle and Wallmart are exporting/ selling water.
http://www.dailymail.co.uk/news/article-3082478/Chief-executive-INCREASE-water-Nestl-pulls-parched-California-given-chance-saying-didn-t-sell-would.html
Speaking with NASA hydrologist Jay Famiglietti, Brown admitted that the company wastes around 30 percent of the water it captures in California through bottling and other processes....Brown's plans for the company put it at odds with other bottlers such as Starbucks's Ethos Water, which recently announced it was ceasing bottling California water during the drought.

Blogger James Dixon May 16, 2015 8:26 PM  

> Aside from getting out of debt, everyone should get the hell out of states and municipalities with excessive pension liabilities.

As far as I've been able to determine, all the states have excessive pension liabilities. :( Not all municipalities do, however. And some states are far worse than others.

> Quite frankly I don't understand why China, Japan & others continue to buy U.S. bonds.

As Jack Amok said, it's the best of a very bad lot of options. That's the one point grey enlightenment has correct. That still doesn't mean we won't default. We will. It's far too late to simply inflate our way out of this level of debt, especially since everyone else is doing the same thing and they're better at it than we are.

Anonymous A.B. Prosper May 16, 2015 8:29 PM  

BGS, yes I did. I live in California for now anyway and water weighs heavily on my mind, This water situation is lose/lose though. Heavy enough rationing and it spurs capital fight.

The state already has big troubles with losing skilled labor, mostly though not entirely white and businesses to other states. Yes a few stay and a few even come in but as the quality of life declines, and its declining fast the state will find it harder and harder to function. The inequality is also creating serious problems and as the general lawlessness of the population.

There is no long term fix except with really difficult choices, basically putting most of the state budget to infrastructure and lowering regulation and gutting pensions (we still haven't resolved that crisis either) Pushing the Feds to repatriate a lot of illegals and immigrants would also help, we could over some years remove as many as 10 million people reducing water use and water for food.

In the end its going to be an economic and social disaster exacerbated by very bad and crooked governance, As I sometimes explain to people, make of it what you will but Jerry Brown as actually the best we could get.

Anonymous Jack Amok May 16, 2015 11:48 PM  

The Baby Boomers in my family insist my generation owes them everything they're getting and more because they "paid" into the system, fair and square.

Yup, that they did. And then turned around and voted for politicians that squandered every last dime on useless, stupid stuff.

Not that it actually mattered all that much. It's sort of the same problem with "savings" I mentioned a couple threads ago. The Boomers can stash their money privately or publicly, but when the future arrives and they want to spend their retirement bundle, they've got to spend it on stuff being made in that future. If nothing much is being made (because the idiot Boomers were too fucking stupid, lazy and vain to maintain, let alone improve, the productive infrastructure of the country) whether they get paid their "savings" or not won't really matter.

Then they ride out on their real-bad-ass-biker Harley's and go to the Rum Runner to mix multiple medications into their pina coladas.

Yesterday I saw an electronic billboard advertizing the Husk of Barry Manilow appearing at a - I'm pretty sure it was an Indian (Feather not Dot) gaming casino. He looked like a corpse after an apprentice undertaker got done making him up for the funeral.

Anonymous Jack Amok May 16, 2015 11:50 PM  

Did you see that despite CA using smart meters to fine people for showers Nestle and Wallmart are exporting/ selling water.

Starbucks announced last week that they wouldn't sell bottled water from California any longer.

Blogger Joe Keenan May 17, 2015 10:46 AM  

There is of course no drought in California, there is a 40 year record of mismanagement though. http://blog.heartland.org/2015/04/californias-water-shortage-self-induced/

Blogger HickoryHammer #0211 May 17, 2015 2:07 PM  

What we are witnessing is nothing less than the gradual demise of the biggest, wealthiest economy in world history. It is truly a privilege and an education to behold. It is rather like being able to witness the death of the last Tyrannosaurus Rex. Regardless of how the fallout from the event may affect us personally, we have seen and experienced something that very few men have ever known.

Yeah not cool to live through though. But hey, everything will be ok if they can just ban paper money.

Anonymous NorthernHamlet May 17, 2015 2:25 PM  

Jack Amok,

If nothing much is being made (because the idiot Boomers were too fucking stupid, lazy and vain to maintain, let alone improve, the productive infrastructure of the country) whether they get paid their "savings" or not won't really matter.

Damn, I hadn't really ever realized that.

Anonymous FriarBob May 18, 2015 9:07 PM  

Anybody know which version of Hobbes Law he's referring to? Was this the oft-quoted "nasty, brutish, and short" bit? Or something from among the 19 "natural laws" instead?

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