Karl Denninger's Personal Blog

Labor Day Political Musings....

nospam@example.com (Karl Denninger) — Mon, 01 Sep 2008 16:05:00 -0500

Ok, I've about had it.

Within hours of John McCain announcing that his VP choice was Sarah Palin, Governor or Alaska, the rumor mill got going trying to destroy her.

First was the claim that her last child, Trig, who has Downs, was actually her daughter's - that she had fraudulently concealed her daughter giving birth.

That was quite-quickly disproven with a photo that showed an obviously-pregnant Sarah Palin. Oops.

Next up they went after Mrs. Palin's daughter with the (true) claim that she is in fact pregnant now, and every possible means of attack was launched.

On my forum the attacks included innuendos that this was caused by an "abstinence only" belief by her parents all the way to the possibility that she was raped!

Folks, this sort of crap is blatantly out-of-bounds and both candidates have now said so, including Obama himself in the national media.

I am outraged at this blatant exploitation of candidate's children in this regard, and let me remind the "liberal left" that Obama was born when his mother was 18 - and there is question as to whether she was married at the time of conception!

This has exactly nothing to do with legitimate political debate. It does, however, have everything to do with forcing the indoctrination of our children against the expressed wishes of the parents of said kids.

And there I draw the line.

My daughter has a good friend who's parents are strictly religious. He is forbidden to see certain movies that I personally think are great fantasy, such as Harry Potter, on religious grounds, among other restrictions.

I have no right to demand that this child be given access to material that his parents find offensive in their particular religious milieu; indeed, our First Amendment says quite the opposite, in bold, black print.

Now either you believe in our Constitution or you do not. If you do then a parent's decision on what to teach their children about religion and all matters related to it, including human sexuality, is none of your damn business.

It is my considered position that "sex education" in our schools is absolutely out of bounds in all forms just as is demand that someone attend a Bible Class. BOTH are exactly equal. You do not need to teach abstinence (or birth control methods) to teach the biology of sexual reproduction, nor the biology of disease progression. Both can be taught without any sort of religious or socio-political overtone, and should be.

But the indoctrination of our children in matters religious is explicitly barred in government schools by the United States Constitution in the First Amendment's establishment clause.

Period.

The fact of the matter is that The Hard Left is absolutely apeshit over Sarah Palin. There is no way to know how this pans out over time, but the idea that McCain would nominate a religious conservative woman who willingly bore a Down's child with full knowledge of the consequences utterly trashes entire realms of attack on the Republican campaign and leaves the Democrats exposed to extreme negative public reaction should they attempt it anyway.

The result was an outpouring of scurrilous nonsense and Obama was wise to say "stop it!" - although that it took him three days was curious. I suspect he was spending those three days taking polls and sticking his finger in the air, and only when it dawned on him and his advisers that trying to attack a 17 year old who got pregnant might end up blowing up in his face as his own birth is dangerously close to that very scenario did he step up.

But whatever prompted him to put a stop to it, I'm glad he did.

Now let's have a debate on the underlying issues - whether our government schools have any business teaching this sort of thing - in any way, shape or form.

If you answer "Yes", then I hope you're prepared to launch an immediate amendment to the Constitution to allow it, because as The Constitution stands today such instruction, no matter which form it takes, is explicitly barred by law.

Period.

Robert Reich, Politikal Hackster Extraordinaire

nospam@example.com (Karl Denninger) — Tue, 12 Aug 2008 21:18:20 -0500

Amusing; Robert Reich who has never been known to manage anything close to the truth in his speech, wrote quite a screed on "McCainonomics .vs. Obamanomics"

If only he had a brain. Pull up Sir Robert's idiocy and follow along; his claim is that McCain's program devolves down into:

1. Tax breaks to "the rich."

2. Tax breaks and fewer regulations for corporations.

3. Drill drill drill.

4. Insure Wall Street against losses (with taxpayer money)

Ok, let's rip this apart piece by piece.

First, 1 and 2 are non-events. McCain won't have a majority of either House of Congress, therefore we will get tax increases irrespective of what anyone wants. There simply aren't the votes to prevent the Bush Tax Cuts from expiring. Deal with it.

#3 sounds interesting but in fact there's more to this. See, it is the Democrats and specifically the left-wing ideologues who have prevented any sort of sustainable energy program in the United States for the last 30 years. Bob Reich is one of those people. An inconvenient fact.

As just one example, for several years Diesel engines in passenger cars were banned in California. Why? It was technologically impossible at the time for them to meet one state's emission standards. So as a consequence you couldn't buy them, never mind that they get 30% more miles from a gallon of fuel than gasoline vehicles do.

Conservation? Mandate compression-ignition engines and you go a long way toward making that happen. But no! We can't have actual solutions that work.

Drill drill drill? How about "nuke nuke nuke"? None in the last 30 years. Why? Lawsuits and blockage from Democrats. Oooohhhhhh its so SSSSCCCAAAARRRRYYYYY.

Does Nuclear Power come with risk? Yes. Now show me a technology that does not. Good luck.

You want to grow GDP, you must grow energy output. Period. This is a fact and no amount of whining changes it.

As for the Credit Markets, I've yet to hear McCain or Obama say anything about actually fixing that problem. Fixing it means locking up the people who did the evil things, which just happens to include a lot of powerful people and a whole bunch of common Americans too. Mortgage fraud was pervasive up and down the line, but this problem wasn't confined to mortgages, it was literally everywhere. We can start with Congresspeople who got $70,000 worth of "benefit" from below-market mortgage rates from Countrywide. What say you Bob?

Ok, now let's look at Obamanomics, which Reich identifies as:

1. Productivity of workers.

2. Education, health and infrastructure (paid for by government)

3. 1 + 2 makes capital come here

4. Non-oil and non-carbon energy, plus conservation, are the answer.

5. "Improve financial security of average Americans."

Ok. Let's take 'em on.

1 and 2. Pay for it by government. Uh, how? Government doesn't make anything. To pay for this therefore, the people must pony up. Now we can either extract this by force and give it from one person to another, or we can effort to make the fruits of that expenditure available more to individuals and thereby incent them to spend and invest in themselves.

Which works better? Open question, but this much is for certain - welfare in all its forms has done damn little to benefit anyone except the government agencies that run the programs.

#3 - see #1 and #2. Oh, and how do you deal with the fact that we allow the Chinese to build DVD players for export to our shores; they're much "more productive" per unit of cost, but that has a lot to do with being paid 25 cents/hour along with being threatened in various forms if they won't work hard, fast or long enough. Does Obamanomics address this "wage arbitrage" that is founded upon abuse of people? Apparently not, because I've heard nothing of it.

#4; energy. Conservation can't fix this. Neither can non-carbon-based anything. Like it or not, thermodynamics get in the way. We can move to a sustainable non-petroleum infrastructure for transportation fuels, and we can move rail to electrified service, but to do both we need nukes, and lots of them. Hundreds. This means totally gutting the ability of environmentalist whack jobs like The Sierra Club to slow down or outright obstruct these plants.

#5; improving financial security. Well that one's easy Bob. Stop trying to give people a free lunch and stop telling them they can have one.

Really. See, it wasn't long ago that a middle-class house for a family of four was 1100 square feet with three small bedrooms, a living room, an eat-in-kitchen and a 20x15 living room, plus one bathroom containing a tub, two sinks and a toilet.

How do I know? I grew up in one. My father was a CPA.

Today such a home would be considered "ghetto". Its not big enough. It didn't have Air Conditioning. It had a black-and-white TV - one - and one telephone, wired to the wall, with basic phone service that cost a few dollars a month. We had two cars, but only one was "nice"; the other, for my mother, who didn't work, was pretty much an older piece of junk. It started and ran, but too had no air conditioning or fancy stereo - just an AM radio.

Today, nobody is willing to live like that and yet this is why we're in such trouble. Everyone in the so-called "middle class" needs two European or Japanese cars; an old beater is not good enough. Our houses have $500 monthly air conditioning bills, partly because we have (and use it) and partly because a 1100 square foot home isn't big enough for a family of four - we need twice or even three times as much space to be "middle class." We don't cut our own lawns, we have a lawn boy. Telephone? Cellular please, one for each family member - $150/month. TV? $80 cable bill (instead of the 4 stations over-the-air we used to get with an antenna we lashed to our chimney)

The truth, Robert, is that nobody wants to hear the truth.

40 years ago when I was young (but sentient) my parents wrote a check when I needed to go to the doctor. We didn't have fancy machines or fancy drugs. Life went on. Sure, some people died sooner, but we didn't spend 25% of our federal budget on trying to get you one more year of life, nor did we spend anything from the public budget on your lung cancer if you were silly enough to smoke. Yeah, I know, they didn't say it was bad for you - but everyone knew it was. Same with booze.

You want to show me a candidate that will address any of this please? It certainly isn't either Obama or McCain.

Obama wants to spend money we don't have, and McCain wants to look the other way while people rob us of money we don't have. The difference? Semantics.

Obama tries to claim he's "not in the pocket of Wall Street." Opensecrets.org says otherwise. McCain doesn't even bother running that line of claptrap.

Reality, Robert, is this:

We cannot give everyone health care on the government (that is, our) backs to the limit of their desire to ask for it. The money doesn't exist, so says the CBO. Remember David Walker? He's the former Comptroller General, knows the numbers better than anyone, and agrees with me.
We can't have $30 DVD players made in China and a strong, high-quality and high-paid labor force in America. So long as we offshore our manufacturing to places that allow people to literally be enslaved for pennies an hour sewing our jeans, along with permitting illegal immigrants to come into this country and pick strawberries so we pay 25 cents/quart less, global wage arbitrage insures that we sink our boat while theirs rises. Governments where the people cannot strike, cannot speak out, cannot even demonstrate during The Olympics are not presiding over a free people and their economic systems are no more free than their right to speak. We must choose as Americans between those $30 DVD players and quality jobs here at home.
We can't solve our energy problems, either in quantity or cost, with conservation. Further, if we want to grow our economy, we must grow energy output. Period. The options are few for short-time relief, and drilling is one of the most immediate and sensible. Intermediate term we need nukes, and lots of them. Longer-term we need to focus on a viable hydrocarbon fuel that doesn't come out of a straw. We can get there - blue-green algae aquaculture is one of the better potential solutions, but doing so requires that we prepare for a future in which vehicles are compression-ignition based and flex-fuel capable. This will mean giving up some of our "clear air" demands, in the short term. Life is about trade-offs; we get rid of coal as a generating fuel for electricity and trade nuclear for it, but we increase emissions somewhat from vehicles. Its worth it, and we should go that direction.
Our Capital Markets will not be the place to attract anything until we clean out the corruption and fraud. It starts with Congress. Those Congresspeople who got benefits from mortgage lenders all must go - out of office, and into jail. All lenders, bankers, hedge fund managers and others in the Wall Street business who committed fraud, without exception, need to go to Federal "pound me in the butt" prison. No exceptions. If we want a capital market system that attracts and hold foreign capital, we need a clean system that is beyond reproach. Are you up to calling for REAL reform Robert, or just slinging mud?
Taxes must shift to consumption and away from income. You want to encourage investment? Then stop taxing it. The Fair Tax is the only plan I've seen on the board in detail that does the job, gets the poor off the tax roles and removes the IRS from everyone's life. The rich pay more if they choose to live rich; if not, they have lots of capital to invest, and that returns its value all on its own. Taxing income is idiotic and counter-productive, not to mention leading to an entire industry on "K" street that exists only to game the system for their benefit and everyone else's loss.

Its time stop lying to America Robert, and you're one of the liars.

If you're serious about Change We Can Believe In, then how come you're not pounding Obama over the head with these facts?

What is your real agenda Bob? Are you truly interested in bettering America, or are you interested in buttering the age-old political hacksterism for which both Democrat and Republican have become famous?

Let's find out.

More Fakes and Child Abuse by China

nospam@example.com (Karl Denninger) — Tue, 12 Aug 2008 16:45:39 -0500

So now we get the truth about China.

Its ALL a fake.

"The little girl who starred at the Olympic opening ceremony was miming and only put on stage because the real singer was not considered attractive enough, the show's musical director has revealed.
Pigtailed Lin Miaoke was selected to appear because of her cute appearance and did not sing a note, Chen Qigang, the general music designer of the ceremony, said in an interview with a state broadcaster aired Tuesday.
Photographs of Lin in a bright red party dress were published in newspapers and websites all over the world and the official China Daily hailed her as a rising star on Tuesday.
But Chen said the girl whose voice was actually heard by the 91,000 capacity crowd at the Olympic stadium during the spectacular ceremony was in fact seven-year-old Yang Peiyi, who has a chubby face and uneven teeth.
"The reason why little Yang was not chosen to appear was because we wanted to project the right image, we were thinking about what was best for the nation," Chen said in an interview that appeared briefly on the news website Sina.com before it was apparently wiped from the Internet in China."

Let me make myself clear:

YOU EVIL, ANIMAL BASTARDS.

You think you can call a 7-year old girl TOO UGLY to represent your nation by singing at the opening ceremonies, and then instead of choosing someone else, you stole her voice and associated it with someone who it did not belong to.

Fuck you China.

The world needs to put a stop to this shit. It is evil enough that you got people to register for your "protest zones" and then refused to issue the permits, so now (as soon as the Olympics are over) you can round them all up and either imprison (or more likely, shoot) them.

But when you stoop to child abuse, and that's exactly what you did here, you have gone too fucking far.

As for the IOC, fuck you too.

And as for the sponsors of the Olympics?

You can all eat horsecrap. I will buy exactly NOTHING that any of you make, and I believe that the world should boycott ALL of you.

Got it?

Good.

I think Yang Peiyi is both gorgeous and has a beautiful voice, while the government of China sucks hairy monkey balls and deserves to be stabbed to death with chopsticks for this stunt. I'd even go so far, were I a Senator or Representative, to introduce a bill to declare all of the Treasury and MBS debt that China holds worth zero.

Oh, and I volunteer to wield the chopsticks.

Is There Anything In China That Isn't Fake?

nospam@example.com (Karl Denninger) — Mon, 11 Aug 2008 12:05:00 -0500

So now we learn that the "dramatic" fireworks - showing more than a dozen simultaneous launch points - during the Olympic Opening Ceremonies - were in fact a expansive - and expensive - digital gimmick.

China, of course, has exactly one "news source" for the Olympics - them. Their cameras, their feeds. As such all of our "western media" had only their feeds to use, and we did.

Of course nobody told us at the time that this was all an elaborate digital ruse.

So now The Olympics join the rest of China in being a fraud.

They steal our software, our cellphone designs, and our machinery. They copy it all without regard to the owner of that intellectual property or bothering to pay for it.

We allow this all in the name of "free trade", when in fact the only thing "free" is their theft of everything we produce with our mental power and acuity here in The United States.

They then have the gall to create an elaborate digital ruse for the Olympics, after banning any sort of free speech (their "protest zones" are amazingly quiet - they created them, then refused to issue any permits to actually use them) and in fact violating a promise that for reporters, the Internet would remain open and uncensored.

The IOC? It does nothing. The US? President Bush shows up and allows our athletes to "compete." The Chinese field a team of "women" gymnasts, who under the rules must all by at least 16 on the year of the competition, who have no breasts and I bet not one piece of pubic hair under their spandex - my money is on none of those girls being older than 14, with most being 12.

Advantage? Oh sure, being lighter works. Never mind the permanent damage that an injury can do to a 12 year old who has a bad fall.

But its all in the name of "face", you see, and we Americans tolerate it.

Fuck that. My TV is remaining solidly tuned elsewhere for the next two weeks.

Thanks China for now pointing out what we all knew - its all a facade behind the smoggy, polluted and poisonous atmosphere in Beijing, irrespective of whether you're talking about the air or your government.

HOT DAMN, The Supremes Got It Right!

nospam@example.com (Karl Denninger) — Thu, 26 Jun 2008 10:04:26 -0500

HELD: The Second Amendment confers an INDIVIDUAL right to keep and bear arms

(a) The Amendment’s prefatory clause announces a purpose, but does not limit or expand the scope of the second part, the operative clause. The operative clause’s text and history demonstrate that it connotes an individual right to keep and bear arms.
(b) The prefatory clause comports with the Court’s interpretation 2 DISTRICT OF COLUMBIA v. HELLER Syllabus of the operative clause. The “militia” comprised all males physically capable of acting in concert for the common defense. The Antifederalists feared that the Federal Government would disarm the people in order to disable this citizens’ militia, enabling a politicized standing army or a select militia to rule. The response was to deny Congress power to abridge the ancient right of individuals to keep and bear arms, so that the ideal of a citizens’ militia would be preserved.

To the Gun Banners such as "The Brady" crowd: YOU ARE WRONG.

To those who lost loved ones at VTech, at Columbine, and elsewhere due to nutjobs showing up with guns and opening up on innocents - you have the right to defend yourselves, and if the government had not interfered with that right prior to these events, and someone had been armed, your loved ones might still be alive.

To those who think that "violence is not the answer" - when someone else is hellbent on killing you, it is the ONLY answer short of your death.

To the cities of Chicago and Morton Grove, along with many others: fuck you. You were wrong then and now your unconstitutional bans on firearm ownership are void. Oh, and God Bless Bessie Jones.

To those who think that the Second Amendment is about hunting or self-defense, in the main: FUCK YOU. The Supreme Court just told you in blunt fucking english what I and others have said all along - The Second Amendment exists for the express purpose of insuring that should GOVERNMENT ever become so oppressive that armed revolution is necessary, the people will have the means to prosecute it.

Those of you who have refused to understand that the writings of our Founders found in The Federalist and The Antifederalist made this very point over 200 years ago have now had it explained to you by the Men and Women in Robes on the US Supreme Court.

The very presence of this right is the reason why we do not today need to use it for its original intended purpose, and why, so long as the Second Amendment stands, we are unlikely as Americans to ever suffer a government so oppressive as to require its use.

We have four boxes that guard our freedom in this nation:

The Soapbox
The Ballot Box
The Jury Box
And finally, if and only if the other three fail, the ammunition box.

In short, it is GOOD that a government fear its people's right and ability to overthrow it, as that is one of the prime reasons that the sort of outrageous conduct that would give rise to such an event will not happen so long as the right and ability do enforce that capacity exist.

Congratulations Anton Scalia and others in the majority.

You got this one right.

Will The Candidate With A Clue Please Stand Up?

nospam@example.com (Karl Denninger) — Tue, 24 Jun 2008 08:11:38 -0500

When it comes to energy, that is.

We hear lots of complaining about high gas prices, but is anyone really interested in addressing the problem?

More than two years ago I put forward a roadmap right here in Musings that would address, to a large degree, our energy problems.

No, that roadmap won't solve all the problems. But it sure will do a lot more to address the high price of energy than will blustering about gas tax holidays or threatening to "go after speculators."

It is a fact that if we want to grow GDP, we must grow energy supplies. This is reality. To produce 10 LCD TVs instead of 1 LCD TV you must expend more energy. To produce 1,000 tires instead of 500 tires, you must expend more energy. To build 10 houses, you must expend energy.

In fact, there is no way to grow GDP without growing energy supplies and consumption. This is axiomatic, and no amount of bleating will change it.

If we want a vibrant, growing economy, we must solve our energy supply problem. If we refuse to do so then we will be saddled with moribund growth at best or a deep and long recession at worst.

Those are our choices folks, and campaign rhetoric will not get the job done. We need concrete, actual proposals that can be implemented, not bluster and BS.

Ms. Sink, CFO Florida - TIME TO RESIGN

nospam@example.com (Karl Denninger) — Fri, 20 Jun 2008 07:21:40 -0500

Your appearance on CNBC this morning was outrageous.

You claim that we "can't drill off Florida" because it might endanger our tourism industry, and that we're being "snookered" by Charlie Crist's endorsement of drilling.

Ms. Sink, BITE ME.

I live here in Florida. In fact, I live on Choctahatchee Bay, right near Destin, and right where one of the most promising places to drill happens to be.

I want the rigs here, and I want them here NOW.

Screw the fatcats with their $5 million condo penthouses who don't want to see lights at night from their 40th floor enclaves. That is who you are "protecting".

The rest of us, including people with ordinary waterfront property like me, have a different view.

We see a huge decline in tourism right here and now. Traffic levels this summer are way down. I can drive on US-98 at 5:00 PM, which for the last eight years has been impossible during the summer months. I can walk into a restaurant at 6:00 PM and get seated immediately - last year there was an hour wait. I see the boards going up on business windows, and its not due to an approaching hurricane. I see the "available" signs all over the commercial property landscape. And I see the short sale and foreclosure signs all over our residential real estate.

You cannot have tourism here without reasonable energy prices. Period!

Whether you like to admit it or not, Ms. Greenie-who-needs-a-public-spanking, the people who come here to spend money all must burn dead dinosaurs to do it in some form or fashion.

Your position - that we should drill somewhere else, like out West, is the same sort of NIMBY crap that Demoncrats have run for the last 30 years and it is time for you and your rhetoric to leave the goddamn stage!

Further, it is an absolute lie that tourism doesn't have a balance on this. Rigs are excellent fish habitat. I like to fish. So do a lot of people who come here on vacation and spend a lot of money doing so. Rigs in Florida waters will increase our fishing opportunities and thus those who do that for a living (I'm not one of them; I fish for fun) will both cut their fuel bills and increase tourist interest in spending money on fishing.

The claim of "environmental harm" is horsecrap. During Katrina hundreds of rigs in the Gulf off Lousiana were severely damaged or destroyed.

Not one drop of oil spilled from a deepwater rig.

There is no such thing as a free lunch. We are an oil-based economy, like it or not. You can look back through Musings for my plans to fix this problem in the intermediate (20-30 years) term, but for right now stabilizing the energy markets and reducing our dependence on unstable foreign supplies means drilling here and now.

We have $4/gallon gasoline in no small part due directly to the failed policies of obstruction over the last thirty years that Democrats - people just like you - have run all whining about development of our own home-grown energy resources in America.

The results of these policies are now on display and we, the people, most certainly "get it." You're prepared to sacrifice our economy on both a state and national basis to "protect" the right of fat cats to not see a few lights off on the horizon at night from their 40th floor Penthouses while the rest of us can't afford to fill up our cars!

The claims of "conservation now!" ring hollow with people like me while Kerry and Gore jet around in their private aircraft and cruise in their yachts, burning 60, 100 or more gallons per hour.

They don't care what it costs but we, the ordinary people of this country, do!

Yes, you were elected by Florida residents (although I didn't vote for 'ya.)

Guess what? As the tourism industry (along with the rest of our economy) crashes you are very likely to be shown the door.

Hopefully, sooner rather than later.

USSC Gitmo Ruling - A DISASTER

nospam@example.com (Karl Denninger) — Mon, 16 Jun 2008 01:47:08 -0500

Time to comment on this, because there are apparently a whole host of people who have their heads firmly planted in their asses in applauding this ruling from the United States Supreme Court.

The premise is that "we should apply Habeas Corpus to everyone we capture, everywhere, irrespective of the circumstances." That's the bottom line of the ruling.

Now here's why its stupid.

The United States Constitution only applies to United States Citizens while in the United States.

I am free to drink here in the US. If I go to Saudi Arabia, I am not free to drink. In fact, I can be jailed for drinking.

Their land, their laws. Follow them or go to jail.

Now - on the subject matter.

It is a long-standing principle of International Law and The Rules of War that if you are shooting at troops "out of uniform" you are not entitled to Geneva Convention protections. In fact, you are subject to being shot on sight.

The reason for this is really quite simple - when you do that sort of thing you are taking human shields in the form of the civilian population where you are.

This is seen as a seriously undesirable thing because it causes innocent civilians to die, and to deter it, The Geneva Conventions explicitly exempt people performing acts like this from its protections.

We caught these people outside of the United States. They are being fed and clothed. They are not being given the right to Habeas Corpus, nor should they - they are not US Citizens and were not apprehended in the United States. They further were engaged in hostile acts against our troops but were not wearing a uniform of an opposing force, and were explicitly seeking to blend in with the civilian population - effectively taking them as human shields.

Under longstanding International Law they were subject to being summarily shot. I would say we are treating them considerably better than what International Law says is both appropriate and lawful conduct on our part.

You want these people to be treated in accordance with US law? Ok, then tell me why we should not be subject to Sharia Law from a Muslim country while we are in the United States.

Oh, the shoe sucks when its on the other foot, does it?

Well gee, funny how that works. The "peacenik" folks would have a CAT if the women among them were forced to wear burkas under penalty of being caned!

So just what sort of hypocrites do we have in the USSC? Further, its obvious that these dishonorable men in robes can't read the damn Constitution or, more likely, they just don't give a good damn what it says - they wanted to come to a given result, so they did - and whether that was supportable by the black letter on the printed page didn't matter a bit to them.

This ruling places our nation and our people, here and abroad, in more jeopardy than they were before.

It also opens up other nations to being able to claim that OUR citizens, inside OUR border, should be subject to their laws.

Those of you who think this was a "victory for America" are smoking crack and need to put down the pipe.

And George Bush needs to grow a set of balls and tell the USSC that they have their ruling - now let's see them enforce it.

The Coming Fiscal Meltdown (2008 Edition)

nospam@example.com (Karl Denninger) — Sun, 15 Jun 2008 14:45:39 -0500

Back in 2005 I penned an entry here called "The Coming Fiscal Meltdown of America"

You might want to go back and read it.

Why do I bring it up here again today?

Because the situation has gotten much worse.

Back then the total tab was around $43 trillion.

Today it is nearly $100 trillion, or more than a doubling in the last three years.

How?

Simple - we have done nothing to address the geometric growth of the problem, and in fact have made it worse.

Read this from Dallas Fed President Mr. Fisher:

"Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon. Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percent."

Nice eh?

Well, this all ties in with something that has been a "back of the envelope" thing for a while, which is investable capital.

What is that?

It is the total sum (either net in or out) that is available to invest into the economy in the form of stocks, bonds and other similar instruments by individuals net-on-net.

This has been a positive number ever since WWII.

However, when the boomers really start to retire en-masse, this figure will shift towards and eventually cross into negative territory. My original estimate for when that would happen was 2030, plus or minus five years.

Unfortunately, the housing bubble (which I did not manage to properly account for back in 2005) was far more pernicious than any could have imagined. We have "pulled forward" demand through this, and in addition have left behind debt. As such there is double trouble coming directly ahead from the impact on investable capital from the bubble and its popping, and my new estimate is that we now face the rate going negative in 2020 - plus or minus five years.

Note that this means that we could reach the "knee" in as little as seven years from now.

Why is this important?

Because when that "knee" is reached outflows from all forms of investments will exceed inflows, and a secular top in all capital markets will have been reached. This is not a short-term "Bear .vs. Bull" thing - it is the defining element that has led to the stock market returning over 1,000% in the last 40 years.

Now certainly I do not expect the S&P 500 to go back to 100 or any such thing. But the sort of "bull market" we have had since 1992 simply cannot be sustained without a positive investable capital flow.

We as a nation must address our medical cost issues. We as a nation do not want to, but we must. It is not an option. The choices are to deal with this or it will explode in our faces.

As you can see, the explosion has already begun.

The "bad debt meter" has doubled in three years.

Now on the forum there was a rather lively discussion that devolved down into one of the participants trotting out the old tired "but if you cut off free medical care and your kid gets run over by a car, he might diiiiieeeeeee" chestnut.

Yes, he might.

Guess what? Life isn't fair.

Let's look at the Canadian system. They have a set amount budgeted for medical care every year. They add up all the diseases and their costs, and put them on a list. When the cumulative cost of the treatments reaches the budget level, a line is drawn. If your disease is below the line, you don't get treatment. Period.

If you are in one of the "ok" categories, you still are rationed, because there is a waiting list. Money can only be spent at $X/month on said disease, because that was the budget. Your place in queue is established and you wait your turn.

For many people this means they die first.

And in Canada, you can't buy the treatment even if you have the money and are too far down the list (or below the line) at all! As a consequence Canadians who do have money frequently come to the US (or go somewhere else) to get their maladies attended to.

How is that different than "but your kid might diiiiiieeeeee?"

Its not.

Guess what - unlimited demand and limited resources can't work. Ever. Period.

So now we have crazy credit overhangs, an investable capital rate that is about to go negative in the near future, and entitlement promises that can't possibly be met.

Folks, we had better get off our collective asses right here and now. We are simply running out of time in this regard; the fact that investable capital will go negative cannot be avoided.

We are therefore stuck with the fact that we must have an honest discussion and debate between and among The American People about this problem and what it means.

We must repudiate this entitlement spending now so that those people who can do something about it - the folks who are currently working - have time to make some sort of plan.

We must stop promising that which is mathematically impossible, and hold the politicians feet to the fire.

We must deal honestly with our children and grandchildren, and stop holding them up at gunpoint for what amounts to our own desire to live longer and more pleasant lives while forcing them to pay for it.

My daughter deserves a future. So does your son or daughter.

Whether they have that future depends on us, and if "we the people" refuse to deal with this in an honest and forthright manner, some of us - myself included - might resort to taking out full-page ads in national newspapers with the math displayed for all to see.

Why?

Because if this is not dealt with the system will collapse, and when it does, you will inevitably come banging on your kid's (now as adults) door asking for help.

Their proper response, after you have screwed them out of their future, is to slam the door in your face.

I think its critical that they know what you did to them - and why.

Something to think about......

Obama or McCain?

nospam@example.com (Karl Denninger) — Sat, 14 Jun 2008 20:30:55 -0500

Ok, so let's see here, which choice would you like?

MSNBC says:

"Obama promised to cut taxes for the middle class, raise taxes on the wealthy, pour money into "green energy," and require employers to set up retirement savings plans for their workers as he campaigned Saturday in Pennsylvania, a key battleground in the November election."

That's nice. How are you going to pay for all that?

Speaking of paying, how do you think McCain would do handling our economy? Better than he does handling his own debt?

"The bulk of the McCains’ obligations stemmed from a pair of American Express credit cards that are held in Cindy McCain’s name. According to the disclosure reports, which present information on debts in a range rather than providing a precise figure, Mrs. McCain owed $100,000 to $250,000 on each card.
Another charge card, held by what was described as a “dependent child,” had also accumulated debts of $15,000 to $50,000. In addition, a credit card held jointly by the couple was carrying $10,000 to $15,000 in debt, the filing indicated, at a stiff 25.99 percent interest rate. "

Why do I feel like I'm gonna get fucked from an economic perspective no matter who I vote for?

Talk about a Hobson's Choice.....

Mike Huckabee - The Only Republican You Can Vote For? NOPE!

nospam@example.com (Karl Denninger) — Tue, 14 Aug 2007 09:27:00 -0500

Well, no. There are actually FOUR, although the second two I didn't catch right up front.

I want to lead today with a message of hope instead of one of doom and gloom.

Two words: Mike Huckabee. Two more: Tom Tancredo.

Mike Huckabee was a candidate that I had basically written off as a "no way in hell" odds guy for the Presidency. But his showing in Iowa was amazingly strong, and frankly, he's right about just about everything.

From an investors' perspective, he has the message you want to hear. Its spelled "Fair Tax".

I know there will be people who want to attack that, but please be informed before you do. The Fair Tax, should it be enacted, would lead to a boom in American competitiveness, business, and the markets that would outpace all other nations and perhaps even surpass what America saw in the early 1900s.

Believe this - if we end up with a Democrat in the White House - who would almost certainly be Obama or Hillary - you're going to see major tax increases in a raw attempt to push towards the magical 50.1% of voters paying no federal tax. The purpose of such a push is transparent and obvious on its face - nobody ever votes for a tax increase on themselves! So by reaching that magical nirvana, the Democrats believe they can cement a permanent position in power - and they may be right.

Of the Republicans, there is only one choice I can find who will actually accomplish improving American Competitiveness and fix our tax system - and that's Mike.

I rarely make political contributions. To anyone. I believe most politicians are snakes and interested in only one thing - getting re-elected - no matter who they have to screw to get there, especially if the screwee is you.

Mike may have this flaw. But if he does, I'll take it if it means that we wind up with an economy that prevents the implosion of America.

Tancredo is even better on the issues. His biggest problem? He's WAY, WAY behind, without material support. And that's a damn shame, because guys, out of everything he says, I can find exactly one problem with his platform - he uses the word "Democracy" to describe our system of government in one place. We live in a Constitutional Republic. He does, however, appear to know that, from what I can see in the rest of the platform, so I'll give him a pass on that.

It just goes to show you that being outspoken is a HUGE fucking liability in American Politics. Now you know why I could never run or be elected - even to DOGCATCHER!

Anyway, as they say, "do your own Due Diligence."

The Private Equity Scam Vis-A-Vis Taxes

nospam@example.com (Karl Denninger) — Sat, 16 Jun 2007 23:49:00 -0500

Boy, listen to those Wall Street boys whine!

Congress has introduced a bill to change the way publicly-traded private equity firms are taxed, and they're not liking it at all.

Frankly, they're not going far enough. All hedge fund managers should be taxed the way they're proposing to tax the public ones!

What am I talking about?

Here's what all the furor is about.

When you invest, assuming you keep your investments for at least 366 days your capital gains are taxed at a lower rate. For instance, if you buy a stock for $20 a share and one year and a day later sell it for $30/share, you have a $10 gain per share.

Instead of ordinary income tax, you pay a lower tax rate on that $10.

This is justifiable because investment puts people to work. That is, by investing you make possible the employment of others, who will also pay taxes. The economy grows. Therefore, this beneficial act (to the general economy) is reasonably entitled to a better tax rate than ordinary income is. In addition, when you invest you take the risk of a capital LOSS - that is, you might buy that stock only to see it decline in price to $10!

At least this is the argument.

Well, for private equity guys, the game's a bit different.

See, they get 20% of the gains when they make investments and it turns out well. But they don't share any of the losses when the bet goes bad, because they're investing other people's money!

In my view, there is nothing here for them to complain about and in fact they should thank Congress because they've been able to profit from what was a clearly-wrong classification of their tax rate for a very long time! These firms should have ALWAYS had their management income from profit sharing taxed as ordinary income, because everyone else who earns on this basis pays that rate!

If you work for a company and they pay you a performance bonus of 20% of the firm's profits (split among the sales people, for example), you pay ordinary income tax on that bonus. Why is that not a capital gain? Because you are not exposed to a risk of loss if the firm does not meet its profit targets!

This has been an incredible windfall for these guys for years - a windfall that "ordinary investors" cannot take advantage of, and not even the rich can (usually) manage to pull off! You have to be able to find other people who will let you invest their money in order to pull this trick and get away with it.

Sorry guys, you'll find no sympathy here. As a trader and investor who has to take actual risk of loss of my own capital to qualify for the long term capital gains rate, I don't see where you should be able to circumvent those rules through tricky business structures.

I say pass the law and tax those gains as ordinary income - because it is.

The Private Equity Scam Vis-A-Vis Taxes

nospam@example.com (Karl Denninger) — Sat, 16 Jun 2007 23:49:00 -0500

The Idiocy Of The New US Immigration Bill

nospam@example.com (Karl Denninger) — Mon, 04 Jun 2007 17:35:00 -0500

I have written before about this particular sort of stupidity, but the “new ideas” presented in the legislation now being debated must reach a new low.

Let us first deal with the myths and truths that are out on the table regarding the US Immigration policy, specifically dealing with Mexican Immigrants, and then analyze whether any of the political activities currently underway on The Hill will make a hill of beans worth of difference.

Immigrants cross illegally to better themselves and their families. True. The Mexican government is horribly corrupt and the Mexican economy as a consequence suffers mightily. While there is a working class in Mexico it is far less of a “fair” society, where hard work and industry are rewarded than in the United States.
Immigrants are doing jobs that Americans won’t do. False. What Immigrants are doing is jobs that Americans won’t do at the offered wage. This is important, because as we shall see below, the current policy won’t solve the problem – and in fact may make it far worse than it is now!
We cannot possibly deport 11 million illegal immigrants. True. But we can destroy their employment and by doing so, they will leave of their own accord. Without the means to work in the United States they will have no incentive to remain here.
Immigrants are not lawbreakers; they just want a better life. False. ALL illegal immigrants broke the law by coming here illegally. Many broke further laws by stealing or forging identification from other, legal US Citizens in order to be able to work in this country.
We can’t identify these people, and thus, we can’t readily figure out who they are. False. If someone is using a stolen Social Security number, the government knows, because there are two payments being made into the system for the same identifying number in two different places. Unless the two employers are in the same immediate geographic area it is a physical impossibility for a single person to be working two jobs.
We don’t have a good way to find out which employers are hiring illegal immigrants. False. There is already a mandatory “new hire” reporting system in place that is ostensibly used to track down “Deadbeat Dads”. As a former employer I was required under penalty of federal law to report all new hires within a very short period of time.
We can fix this problem by “regularizing” the current illegal immigrant population and then put in place a strong border security system. False. By “regularizing” the current population we remove them from the labor pool that employers want!

To actually solve the problem of illegal immigration in this country we must acknowledge that there are multiple intertwined components to the problem, and as such there must be multiple intertwined components to any solution.

We cannot control the problem until we solve the employment side of the equation, nor can we force current employees out of their jobs by “regularizing” them without first sealing the border, or we will simply have another 11 million illegal aliens come in their place, and 11 million unemployed “green card” holders!

The reason we have this problem in the first place is that employers have found that they can hire illegals for far less than the “fully loaded” cost of an American Citizen. They are able to pay farm workers, for example, a fraction of the US Minimum Wage, they do not make social security payments, and they do not pay unemployment insurance, health insurance or workman’s comp. When that illegal worker is hurt on the job the cost of their care falls back on the rest of us as they have not paid into the system nor can they pay for their care in cash.

As a result any serious immigration reform bill must include:

Instant verification of employment status similar to the NICS system for firearms purchases. The employer must be required to physically see and copy the documents establishing the right to work and must transmit them to the Federal Government for clearance electronically. In response the system must come back with one of three status codes:

Verified – The documents presented are considered “authentic” and the hiring may occur. An example of positive identification sufficient for this purpose would be a valid US Passport, although other combinations may be acceptable.
Deferred – Hiring may proceed but validation of credentials has been withheld. A final determination will be made within three business days. Pay may not be disbursed until final determination has been made.
Declined – Hiring may not proceed; the documents submitted either fail validation or the person is positively identified as ineligible to work in the United States.

Unlike the NICS, records will be retained for at least three years after the tax reporting period has expired. Employers are subject to audit at any time against these records.
Any pay found disbursed in violation of these requirements subjects the employer involved to an administrative fine of double the gross pay, plus all taxes, interest and penalties otherwise assessed. In addition any person found to have actual or constructive knowledge of circumvention of the Employment Check system must be prosecuted as a federal felon with a minimum sentence of one year in prison for each person hired or compensated improperly.
1099 contract employees and “job shops” are subject to these requirements as well.
We must not allow those here now to “jump the line” to get into the United States. There are currently millions of individuals who want legal access to the United States for residency purposes. While one can empathize with those who have come here and bore children, the latter being citizens, we cannot allow adults to come here and “buy themselves entry” by having a child. The simple fact of the matter is that by producing an American Citizen while knowing that they are not entitled to be here is an act of child abuse, as these adults are well-aware of their risk of deportation. Rather than allowing people to find new ways to cheat, we must instead make it known that we will enforce our laws against child exploitation and abuse to the fullest extent, and that illegal immigrants who come here and have children in a gambit to gain residency will either find themselves going home with their children (who are citizens but are unable to care for themselves) or will find themselves on the wrong end of a child endangerment prosecution.
Any person now here as an illegal immigrant who wishes to apply for residency must not have committed a federal offense in the process. This means that any persons who used forged identification must be barred from conversion. In addition those who came here and worked without valid identification must identify their employers and pay all unrecoverable taxes (if their employer is insolvent or for any other reason cannot make the payments) plus penalties and interest. The $5,000 “fine” proposed is in fact a joke, as for most illegal immigrants that will not even cover the FICA and Medicare payments they didn’t make, say much less unemployment and workman’s compensation! While there will be made a claim this is “unfair” the fact of the matter is that what is really unfair is allowing these people to enjoy the benefits of US Citizenship, including subsidized emergency medicine, without having made the contributions that all US Citizens make to the system when we are working!

Unfortunately the current immigration bill fails all of these tests. It allows for line-jumping, it does not prohibit “anchor babies”, it fails to penalize employers who have been hiring these illegal workers and it fails to prevent them from hiring a new crop of illegals once the current aliens are “regularized” and thus their cost of employment has doubled – or more.

As such passage of the bill today in the Congress will do nothing more than generate another 11 million illegal immigrants in the years ahead, while creating a permanent underclass of legal residents who will be unable to retain their jobs and yet who are insufficiently skilled to compete effectively in the skilled-workforce economy.

Passage of this bill will hurt both the current illegal immigrants and, in fact, all of America.

So why do it? Because the lawmakers smell 11 million new votes – not today, but tomorrow. And passing this bill they will gain access to a huge pool of new eventual voters, all of whom will be beholden not to their ingenuity and industry, but rather to government, as they simply lack the skillset necessary to do otherwise in today’s US Economy.

America cannot afford this bill and neither can the nation’s current illegal immigrant population.

The Idiocy Of The New US Immigration Bill

nospam@example.com (Karl Denninger) — Mon, 04 Jun 2007 17:35:00 -0500

I have written before about this particular sort of stupidity, but the “new ideas” presented in the legislation now being debated must reach a new low.

Immigrants cross illegally to better themselves and their families. True. The Mexican government is horribly corrupt and the Mexican economy as a consequence suffers mightily. While there is a working class in Mexico it is far less of a “fair” society, where hard work and industry are rewarded than in the United States.
Immigrants are doing jobs that Americans won’t do. False. What Immigrants are doing is jobs that Americans won’t do at the offered wage. This is important, because as we shall see below, the current policy won’t solve the problem – and in fact may make it far worse than it is now!
We cannot possibly deport 11 million illegal immigrants. True. But we can destroy their employment and by doing so, they will leave of their own accord. Without the means to work in the United States they will have no incentive to remain here.
Immigrants are not lawbreakers; they just want a better life. False. ALL illegal immigrants broke the law by coming here illegally. Many broke further laws by stealing or forging identification from other, legal US Citizens in order to be able to work in this country.
We can’t identify these people, and thus, we can’t readily figure out who they are. False. If someone is using a stolen Social Security number, the government knows, because there are two payments being made into the system for the same identifying number in two different places. Unless the two employers are in the same immediate geographic area it is a physical impossibility for a single person to be working two jobs.
We don’t have a good way to find out which employers are hiring illegal immigrants. False. There is already a mandatory “new hire” reporting system in place that is ostensibly used to track down “Deadbeat Dads”. As a former employer I was required under penalty of federal law to report all new hires within a very short period of time.
We can fix this problem by “regularizing” the current illegal immigrant population and then put in place a strong border security system. False. By “regularizing” the current population we remove them from the labor pool that employers want!

Instant verification of employment status similar to the NICS system for firearms purchases. The employer must be required to physically see and copy the documents establishing the right to work and must transmit them to the Federal Government for clearance electronically. In response the system must come back with one of three status codes:

Verified – The documents presented are considered “authentic” and the hiring may occur. An example of positive identification sufficient for this purpose would be a valid US Passport, although other combinations may be acceptable.
Deferred – Hiring may proceed but validation of credentials has been withheld. A final determination will be made within three business days. Pay may not be disbursed until final determination has been made.
Declined – Hiring may not proceed; the documents submitted either fail validation or the person is positively identified as ineligible to work in the United States.

Unlike the NICS, records will be retained for at least three years after the tax reporting period has expired. Employers are subject to audit at any time against these records.
Any pay found disbursed in violation of these requirements subjects the employer involved to an administrative fine of double the gross pay, plus all taxes, interest and penalties otherwise assessed. In addition any person found to have actual or constructive knowledge of circumvention of the Employment Check system must be prosecuted as a federal felon with a minimum sentence of one year in prison for each person hired or compensated improperly.
1099 contract employees and “job shops” are subject to these requirements as well.
We must not allow those here now to “jump the line” to get into the United States. There are currently millions of individuals who want legal access to the United States for residency purposes. While one can empathize with those who have come here and bore children, the latter being citizens, we cannot allow adults to come here and “buy themselves entry” by having a child. The simple fact of the matter is that by producing an American Citizen while knowing that they are not entitled to be here is an act of child abuse, as these adults are well-aware of their risk of deportation. Rather than allowing people to find new ways to cheat, we must instead make it known that we will enforce our laws against child exploitation and abuse to the fullest extent, and that illegal immigrants who come here and have children in a gambit to gain residency will either find themselves going home with their children (who are citizens but are unable to care for themselves) or will find themselves on the wrong end of a child endangerment prosecution.
Any person now here as an illegal immigrant who wishes to apply for residency must not have committed a federal offense in the process. This means that any persons who used forged identification must be barred from conversion. In addition those who came here and worked without valid identification must identify their employers and pay all unrecoverable taxes (if their employer is insolvent or for any other reason cannot make the payments) plus penalties and interest. The $5,000 “fine” proposed is in fact a joke, as for most illegal immigrants that will not even cover the FICA and Medicare payments they didn’t make, say much less unemployment and workman’s compensation! While there will be made a claim this is “unfair” the fact of the matter is that what is really unfair is allowing these people to enjoy the benefits of US Citizenship, including subsidized emergency medicine, without having made the contributions that all US Citizens make to the system when we are working!