"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
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
| 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."
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
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.
MEDICAL INSURANCE PREMIUMS:
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
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
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
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.
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
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
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
"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.
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
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.
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
weapons program reaches a level "that we believe requires
action." (Associated Press.)
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
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
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
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
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
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
of states, counties, and communities?
We await the furor with interest.
WILL IRRITATE THE ANTI-GOLD CROWD.
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
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!
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.
AND WHAT IS
THE PROSPECT OF PRICE INFLATION?
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
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.'
gives us one thing to worry about, though. No money inflation
in the history of human -kind has ever "not ended!"
PROTECTING YOUNGSTERS FROM
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
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
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.
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
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?
HERE WE GO AGAIN. . .
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
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
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.
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.
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
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
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
day our alter ego, the staff curmudgeon, penned a short piece: COPING WITH DEFLATION
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.
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."
FAST FORWARD TO MARCH, 2017; THE VOTERS
OF THE USA HAVE PUT A BLUNT ACTION FIGURE INTO THE OVAL OFFICE WHO HAS THE
INSTINCT TO RUN HIS ADMINISTRATION AS A DICTATOR. THE NATION
CONTINUES TO MORPH INTO SOMETHING QUITE DIFFERENT THAN THE REPRESENTATIVE
REPUBLIC ESTABLISHED WITH THE ADOPTION OF THE CONSTITUTION IN 1789.