"When a thing ceases to be a subject of controversy, it ceases to be a subject of interest."  ~Wm. Hazlitt



Gateway to news, views, oddities, and entertainment.


March 24, 2017

   "A columnistís job is to tell readers things that they already believe. His function is purely confirmatory. What he confirms may be nonsense, and often is, but this is irrelevant. There is after all everywhere a boom market in nonsense."  ~Fred Reed.

    "A boom in in nonsense," says curmudgeon Fred Reed , a columnist writing about columnists.  It's a timely touch at the moment  columnists are turning themselves upside down and sideways in attempts to explain to we-the-people how awful Donald Trump is and how inept Republicans are in attempting to replace Obamacare with something else. 

             We'd love to read a columnist arguing against the idea of the federal government running an insurance scheme in the first place.  Anyone remember when insurance was bought in the hope it would seldom be needed?  

   We know all eyes are supposed to be on Congress today as it wrestles with replacing Obamacare, but we can't get the danger of unpayable debt off our mind. THE UNSUSTAINABLE DEBT 

   ...and, what happens to your personal debt when you kick the bucket?  

   ITEM:  "Youíre probably going to die with some debt to your name. Most people do. In fact, 73% of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875." < An acquaintance says that when he dies he wants to be "Five dollars overdrawn at the bank."  That's shorthand for wanting to check out at almost break-even between assets and liabilities'

      It hardly ever works that way.   After one's assets are sold to clear whatever debt remains the residue, if any, goes to heirs.  Happily, heirs may inherit net assets, if any,  but are not liable for unpaid debt owed by the deceased's estate.  It's up to Probate Courts to iron out complications.  

 People don't want to spend too much of their own money for medical services.

          After the federal government got into the medical insurance business people lost sight of the basic insurance principal - - that issuers of the insurance have to bring in more money in premiums than it pays out.  This accounts for the mess Medicare and Medicaid have become.  It's not unusual for much of the population to rush to the nearest ER for ingrown toenails and scraped knees.  Comedienne Ellen DeGeneres presented herself recently at an ER with a dislocated finger.  We haven't a clue what the total bill will be, but a competent Doc-in-a-box could probably have re-set the finger at a fraction of the cost of the Emergency Room with its costly overhead.  But with the flood of money available from third parties...including "endless" funds from government, thrift in buying medical services is rarely considered.

          . . . so the prices continue to rise.

   "University of Michigan economist Mark Perry discovered  illuminating numbers. From 1998 to 2016, the overall inflation rate was 47.2%. But for medical care services, prices went up 100%. And for hospital services, the inflation rate was 177%."  Medical Care Price Inflation

    The hot topic right now is not the steadily rising prices of medical care but of the complication of subsidizing sickness care INSURANCE.  Generations of us have been taught that medical care is a "right" whether we can pay for it or not, and no one has much interest in the economics of the issue.  Suggest that insurance companies must clear a profit in order to stay in business and eyes roll.  Point out that most customers (patients) of medical care pay only 10 percent or so of the actual of the cost after the insurance providers have been billed and the eyes will roll some more.  

     It's all about money...as usual.  Medicare, for instance, was founded on the principal of more people paying into the fund than drew payments from it.  A well-intended idea ruined by too many being attracted to a big pot of money.  Think of the providers who feel obliged to overcharge or the persistent phone callers trying to sell you a back or knee brace promising that if you're on Medicare it "won't cost you anything."

       We're lucky to live in the 21st century in which medical knowledge and technology have become so far advanced that life has been prolonged far beyond the norms of only a century ago.  Now we must figure out how to pay for it.  One thing that could make a huge difference would be for customers (patients) to stop leaving everything to third parties and take a keener interest in the prices of medical care.  It would also help if they put some effort into maintaining their own health at a higher standard.  Obesity should be the national exception, not the rule. 

Paying for the tools of war.
From whence come the dollars?

   "The arts are not a frill, a luxury, or some kind of extended vanity project.  The arts are part of what we are as a nation, and the arts put our nation to work."  ~Kate Shindlie, president of the Actors' Equity Association


< Ms. Shindlie overlooks  whether or not the federal government can continue to fund arts and entertainment AND sharply increase spending for military operations.  Going billions of dollars into hock each budget year is stupid and dangerous.  

       The math is simple. If the federal government can't bring in enough money to buy armaments AND subsidize entertainment, one or the other must cut back.  It's the old "guns and butter" dilemma..  If there's not enough revenue to pay for guns AND butter everyone must settle for less or none of one or the other. 

        "Oh, no!" cries the skeptic.  "The federal government can meet its wants just by borrowing from the future  when the economy will be booming and lots of money will be available."

         Several decades of experience show the government can't subsidize the people, entertain them, and buy all the war materiel everyone wants without running up an un-payable tab.  Reagan was the first president to top the trillion dollar public debt mark.  The tab has now run up to $20 trillion.  

"Take a look South Carolinaís government pension plan, which covers roughly 550,000 peopleó one out of nine state residents ó but is a staggering $24.1 billion in the red."  ~Zero Hedge

   We'll go to our grave believing that excessive debt leads to ruin.  "Excessive" is the key word, here. 

   The idea of spending money one doesn't have is well rooted.  Students borrow huge amounts of money for their college training in the belief they'll land high paying jobs that will allow them to make good on their obligations. It was an attractive idea when it was launched but now is in trouble, having run up on the shoals of reality.

    Pension plans are another example of programs launched on a rosy scenario which now find themselves in big trouble. Where, for example, will little ol' South Carolina find $24 billion it needs to put its promises to pensioners in the black? It has boosted the cost of participation for eligible state workers, but is still in the hole.  

    Pensioners quite rightly expect government to make good on its solemn promise to make good on the pension plan even it requires drawing on general taxes - - yet layer upon layer of tax eventually builds to a limit of what the public will pay.  This is estimated to be roughly 50 percent of income, above which many more people will become tax cheats.  (By the time total tax reaches 75 percent of income we'll ALL throw in the towel.)

    Student debt, pension debt, public debt. . .it al must be paid, either by the borrowers or the lenders.  Prospects for future prosperity seem not to be as bright as political leaders promise.

The Winds of War
Secretary of State Rex Tillerson said Friday it may be necessary to take
pre-emptive military action against North Korea if the threat from their
weapons program reaches a level "that we believe requires action." (Associated Press.)

    North Korea's portly oddball dictator certainly needs his hands slapped to prevent him from lobbing dangerous missiles into other countries.  As usual, the U.S. feels obliged to do it.  

      How will the U.S. pay this additional expense?  President Trump has alread outlined an increase in the military budget and quite rightly calls for cuts in in other areas of federal spending.  Politicians once understood it would be a strain to buy guns and pay troops for far-off battles and also maintain the illusion of peace and prosperity at home.   But the modern method of paying for both "guns and butter" and borrowing billions of dollars to do it has its dark side in the sweet bye and bye when the debt must be paid.  

      We remember the last Korean War.  In those days we were told it wasn't really a war...it was a "conflict."  But it was certainly a war in the eyes of American men and women who were caught up in it.  At home citizens didn't have to deal with shortages, rationing, blackouts, and other inconveniences as the did in WW2.  

       We can't guess how all this will play out, but history shows that if the voters want to maintain a police force to make the world behave according o their precepts they'd better be willing to give up something to get it.  One chore from WW2 that annoyed civilians was buying white oleomargerine and having to bring it up to room temperate and mix a yellow powder into it to make it look like butter.  No matter what other sacrifices we may called upon to make in time of war THAT won't be one of them!  

     ITEM: " President Donald Trump made good on a long-time conservative goal in his first proposed budget Thursday morning, targeting the Corporation for Public Broadcasting and the National Endowments for the Arts and Humanities for complete elimination."  

       Well, no one expects President Trump's initial budget to get off the ground.  After all, the idea of cutting federal funds to PBS, NPR, the Endowment for the Arts and Humanities, etc., etc., is unthinkable.  How could a nation's citizens appreciate art and enlightenment if the government didn't spend millions of tax dollars promoting these things? 

         On the other hand, if the military budget to be sharply increased without adding to the budget deficit from whence will offsetting cuts come?  The liberal approach has been to let the deficits run.  The debate promises to be noisy and contentious.  

          This curious fact:  The U.S. Constitution calls for funding a Department of War but has nothing to say about spending tax dollars to entertain the masses.  Defenders of the status quo will argue in support of NEA, et al, because of their "vast educational programs."  Harking back to the Constitution, where is the mandate for the federal government to spend tax dollars in overriding the public educational tax supported programs of states, counties, and communities?    

            We await the furor with interest.    


   ITEM:  "By an overwhelming 56-13 margin, the Idaho House of Representatives today voted to end all Idaho taxation on precious metals, e.g. gold and silver coins and bars.

                      "Bill sponsor Representative Mike Moyle (R) and the entire Republican caucus voted for the measure. If the Republican-controlled Idaho Senate follows suit and Governor Butch Otter (R) signs the bill, Idaho citizens will better be able to use gold and silver as a form of savings which protects against ongoing devaluation of Americaís currency."  Zero Hedge

                        One of these days this issue will wind up before the U.S. Supreme Court, although decide if gold is "money" is something jurists have avoided for a long time.   The hypocrisy of claiming a gold U.S. Eagle is legal tender for only $50.00, while it simultaneously fetches well over $1,200.00 in the market place, would be a juicy puzzle for the superior courts. 

                         Were you to pay taxes with a gold eagle or deposit one in your bank account, it would be legally accepted at its face value -  $50.00.  However, if you were given one for a piece of work for somebody the IRS insists you report it as income at its market metallic value, which is presently in excess of $1,200.00.  No wonder jurists run away when the subject is raised!

  The Ides of March had many economics newsletter writers predicting chaos of one kind or another today.  The changing status of the PUBLIC DEBT CEILING for instance.  It had been suspended in late October, 2015, to be reinstated March 15th, 2017.  

 It's a problem that must be faced...but not at this moment.  It turns out that Treasury Secretary Mnuchin has an arsenal of bookkeeping tricks to keep paying the federal government's bills for a few more months.  Congress must, however, belly up to the question well before the year is out and decide whether to drop public debt limitations altogether or set a new ceiling that will let them run their usual budget deficits. 

  And this is the day the Federal Reserve Open Market Committee is expected to nudge the federal funds rate up by another fraction.  Will the banks start paying as much as 1 percent on checking account balances above a certain level? Maybe.  But with price inflation running at 2 percent or higher, annually, those deposited dollars are losing purchasing power at the rate of 1 percent or more each year.

Read on!

"James Grantís Interest Rate Observer warns that 'digital inflation detectives' are reporting that American consumer prices at the end of February were up 3.6%." NY SUN   < An interesting editorial in the NY Sun speaks of "digital detectives" unearthing a 3.6 percent consumer price inflation rate, annualized, at the end of February.  We have no idea who these sleuths are or where they get their data, But a casual glance at restaurant menus, grocery store bills, and medical costs indicates a steady upward trend in prices.

      Since WW2 the U.S. has only had a couple of years in which price inflation dipped into negative territory. ( Deflation is such a hated word it's rarely used.) So it's reasonable to say that people accept inflation as normal in the modern economy.'

       History gives us one thing to worry about, though.  No money inflation in the history of human -kind has ever "not ended!"  


   Surely, Thomas Lifson is making this up.  (Or is he?) "Harvard librarians do not trust students to make up their own minds. Instead, they find certain viewpoints dangerous, and want to make sure that youngsters are warned away from viewpoints dissenting from liberal orthodoxy."

   Youngsters warned away from non-liberal viewpoints? Read on - - "
The Harvard University library system is now in the business of warning away students from polluting their minds with dissident information that might raise uncomfortable questions in Liberalville.  Canít have the youngsters questioning the orthodoxy of the Left!"  HARVARD GOING ORWELL

    Thomas Lifson spent 20 years of his life at Harvard as a student and faculty member.  

Question:  Why do Central Banks and Governments hate gold?

Answer:  Because they canít print it

   We were a wee lad when the United States dollar was officially defined as 1/20th of a troy ounce of gold.  Today the dollar has no connection to gold (or silver) at all.  However, if you wanted to swap paper dollars for gold today it would take 1,200 of them to purchase a troy ounce.  That is to say, that as of today the dollar could be said to be worth 1/1,200th of troy ounce of gold.  Of course, banking and government officials are dead-set against re-defining the dollar as a weight of precious metal.  They argue the idea would be like hanging a dead weight around the neck of the U.S. economy, 

     Today's currency can be easily printed as needed by the U.S. Bureau of Engraving and Printing.  Base-metal coins can be manufactured at the U.S. mint as required.  Most of the money supply, however, is not printed or minted.  It's created by simple keystrokes in the giant computers of banks and government.  "This is the age of technology," we are told, "and we certainly don't want to get bogged down grubbing through tons of earth searching for little bits of rare metal with which to create money."  

       But there's this question;  If central banks and governments truly hate gold why do they hoard so much of it?  Since they do, why shouldn't an individual tuck away a gold coin or two - not necessarily to profit but to maintain purchasing power?    


  What is it about March 15th that has brought reams of "warnings" from economics newsletters? Scary teasers by the dozens have been dropping into email accounts.   We are warned that all hell will break loose on the monetary scene in mid-March.

   Well,  in 2015, Congress and the White House agreed to suspend the federal debt limit until March 15, 2017. After that point, the government cannot continue to borrow money to pay bills. Past treasury chiefs have also pushed Congress to raise or suspend the ceiling.  With the debt ceiling in suspension the Treasury Department has kept on borrowing as necessary to pay bills and has driven the public debt to just over $20 trillion.  Treasury Secretary Mnuchin can limp along for a few more weeks but needs action by Congress by August or September to avoid defaulting on its obligations.

    It's quite possible Congress will simply re-impose a debt ceiling suspension, citing "unusual circumstances",  kicking the can down the road for another couple of years.  

     But the public debt pales in comparison to total obligations.  George Melloan, author of "When the New Deal Came to Town", comments today: "Total obligations in the U.S. have reached 370 percent of Gross Domestic Product (GDP) - and Trump seems intent on making matters worse."

        How much more debt can our posterity handle before their life prospects are dangerously affected?  Congress will surely stay on the road to insolvency until its apple cart is upended.  

   This CNBC chart makes the whole sordid public debt game more impressive.

    Recall that the debt did not rise to $1 trillion until Ronald Reagan came into the presidency.  By the time Bill Clinton arrived in the Oval Office the total debt had reached a smidgen over $4 trillion.  George W. Bush saw a steeper increase (shown in red) but the debt achieved supersonic speed under the Obama administration.   

     Notice the arrow near the top of the incline.  That little plateau marks October 30th, 2015, when Congress essentially said "Oh, to hell with all this fuss over setting new debt ceilings...let's just suspend the whole damned thing until, say, March 15th, 2017.  .  This gave the Treasury Department permission to continue to borrow as needed without worrying about a debt limit. 

     Defenders of Congress's habit of spending beyond its means will point out that that a piddling $20 trillion doesn't matter much because federal assets clearly exceed the debt  impressively.  That's true, although it's doubtful the government will sell off buildings and national parks for the purpose of clearing debt.  Besides, the famous "unfunded liabilities" that loom in America's future makes the $20 trillion debt pale in comparison. 

      The geniuses of academia will justify the push for ever increasing debt, but common sense dictates that even great nations wither when persistently spending more than their income.  

 Hyperinflationary Flood
A long run of low inflation does not mean the hyperinflation threat is dead.

    "We know of course that the Mediterranean countries will not and cannot repay up to Ä 1 trillion. As often is the case, it is not the borrower who is in trouble here but the lenders. Therefore, Germany is in bigger trouble than Italy, Spain, or Portugal. Those countries canít pay so Germany will have to foot the bill.

     "But German banks led by Deutsche Bank, have extremely weak balance sheets and massive derivative positions. So they are in no position to settle. That leaves the ECB and European central banks which will need to crank up the printing presses.

      "Letís be very clear, the trigger to end this economic super bubble could come from almost anywhere, whether it is Target2 in Europe, China, Japan, the US or Emerging Markets. They all have insurmountable financial and economic problems. It looks like 2017 could be the year when many of these problems will be triggered."  EGON VON GREYERZ  

         What is "Target2"  and why should we care if Eurozone nations fall into the hyperinflationary trap in order to offset their unpayable debt overload?  It makes one's head swim.  Besides, if it was something to seriously worry about wouldn't the mainstream media have caught wind of it and said something?

        No.  Media have no time for trivial stuff like the deep-seated trends in currency and credit.  The main focus is the controversial president of the United States.  There is little time to look into something so trivial as the destruction of the money units of Europe or everywhere else in the world.  (In our own lifetune the U.S. dollar has lost 97 percent of its purchasing power.  Why is this so readily accepted?)

Step Right Up and Place Your Bets!

   Remember March 1, 2009? Economists were stumbling all over themselves trying to explain the mire into which the U.S. financial sector was sinking and the need for the Federal Reserve to open the money gates to stimulate the spongy economy.  It was a simple formula.  The Fed would hold interest rates in a low range which would stimulate borrowing. Its goal was to maintain a price inflation rate of 2 percent and higher.  If the Fed couldn't inflate the economy might (gasp!) sink to deflation.

   On that day our alter ego, the staff curmudgeon, penned a short piece: COPING WITH DEFLATION

   "And what of the bank failures?  There have been sixteen in the first two months of 2009.  The FDIC is already feeling a pinch and is increasing the premiums member banks must pay to replenish the fund..  Depositors' accounts are insured up to $250,000.00 each.  However, the FDIC only has the funds to cover a fraction of the total demand deposits in American banks, although in the case of a run on the banks it can tap directly into the U.S. Treasury.  Also, it is not unlikely a surge in demand for cash would result in cash rationing.  There is not nearly enough paper currency or coin to meet demand if depositors suddenly decide they prefer their mattress to the bank vault. 

   "The most worrisome thing about this major economic correction, in my view, is the damage it can do to the social order.  The U.S. population in 1932, when FDR was elected, was 125 million people.  In 2008, when Barack Obama got the nod, it was 143 percent greater, 304 million.  Should the masses become angered in their scramble for their share of the pie we can expect to see ourselves put the Constitution on the shelf and install a dictator.  This is the usual way a democracy that stumbles badly ends its days."   (3-1-'09)