John Robb: Economic Reality & Political Treason

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John Robb
Phi Beta Iota:  This is the single best reality rant we have seen, kudos to Brother John for pointing it out.  No one is qualified to run for office without reading this first.  No on is qualified to vote without reading this first.  This is the “reset” button on reality & integrity in the USA and elsewhere.

Safety Copy Below the Line

The politicians are now reduced to begging:

(Reuters) – Prime Minister George Papandreou pleaded for patience from Greeks growing increasingly angry with relentless austerity efforts, telling a newspaper his government was struggling to prevent a financial “catastrophe.”In an interview with the weekly Proto Thema newspaper, Papandreou said the government was fighting to stop Greece defaulting on its debts but the road ahead was hard.

“I would very much like to guarantee everyone an immediate solution, a better life today,” he told the newspaper in an interview which hit newsstands Saturday.

“I would be the happiest man in the world if I could do that but I can’t and I have a duty to be honest and tell this truth to every Greek citizen,” he said.

Finally, the truth.

Here are some realities for everyone to think about and (hopefully) understand:

Government cannot expand faster than domestic economic output does.  That is, if you want government to get bigger, the economy must get bigger to support it.

Growth in the economy must come from economic surplus, not borrowing.  Economic surplus is what you have left after you (1) labor, and (2) pay for all of the things you must buy with that labor.  Whether your payment is direct (e.g. you pick strawberries and get to keep X% of your output) or indirect (you are paid a wage in “dollars” and then spend that money) the fact remains that economic growth can, in the long run, only come from economic surplus.

The process by which economic surplus is turned into economic expansion is called capital formation.  Capital formation is not borrowing; borrowed funds are fungible (that is, interchangeable) with formed capital but they are not the same thing.  Only capital formation produces lasting prosperity.  Replacing formed capital with borrowed funds produces bubbles; these are inherently pyramid schemes in both concept and execution and thus must eventually burst.

Due to inefficiency in all things, including the markets, when a bubble bursts you’re worse off than if it had never occurred in the first place.  This is the principle known simply as “there’s no such thing as a free lunch.”  It’s true in thermodynamics and it’s also true in economics.

Trade deficits are self-correcting phenomena without explicit and intentional acts by the government and monetary authority to cover up their natural effects.  Specifically, a trade deficit causes capital to drain from the deficit nation to the surplus nation.  This in turn makes their currency balance shift and shuts down the cycle all on its own.  Only intentional and willful distortion, in this case by injecting “credit” to replace capital, allows it to continue.  Yes, the Chinese are responsible for what has happened in this regard with offshoring, but so are our politicians and Federal Reserve!  Any actual means of addressing this problem must include all guilty parties.

Politicians turn to producing bubbles when they want to promise you something they cannot pay for via voluntary taxation.  And make no mistake on this point: All taxation is voluntary.  Greece is showing us this fact in stark relief.  The people can withdraw their consent to taxation any time they’d like.  Sure, they have to go on a general strike to do so, which is the inhibiting factor – it results in personal pain.  But it’s the correct, non-violent and legal means to tell the government to stuff it when it comes to their tax policies.

There are only two means to compel a government to act when it becomes co-opted by minority interests, such as what happened with the bailouts, banks and similar foolishness.  One is lawful and the other is not.  The unlawful means comes through violence.  In the “common name” we call these “riots” when they’re localized and small (e.g. looting, etc.)  When they’re not we call them “Revolution”, and the legal term for inciting one is “Sedition.”  The key point to remember about the latter is that on a historical basis you have a very low probability of success through revolution — most of the time what comes out of a revolution is worse than what you started with.  Keep that in mind before you go pining for it, because you are much more likely to get a Hitler out the other end of that process than a George Washington, and the outcome is generally not under your control.

The lawful means of compelling a government to act is called a “General Strike.”  It is a refusal to work, and it is effective because it is work that is taxable.  If you perform none then there is nothing to tax; ergo the government’s finances collapse.  This is what is happening in Greece.

Beware, however, that if you demand that which is impossible, you won’t get it – no matter whether you press that demand through a General Strike or through unlawful means.  That’s simply because that which cannot happen won’t.

There is no such thing as a Unicorn that craps out pretty colored candies.

In the case at hand in the United States we have a government on both sides of the aisle that has made promises that are mathematically impossible to keep.  That same government conspired with The Fed and with Wall Street to blow a series of bubbles that led you to believe, over the space of 30 years, that you could have more than you can actually pay for with your work output.  This claim was a lie and it infested virtually every area of our nation.  Housing, education, medical care – all were used as a means to blow up the bubble to larger and larger dimension whenever it threatened to collapse and expose the frauds.

These claims were active frauds as anyone who examined them with any sort of critical eye toward the mathematical realities of the claims knew they were crap and could never happen.

As just one example of dozens the claim that “house prices are expected to increase 10% a year for the foreseeable future” was interpreted by many as “it’s safe to finance the purchase of a house and then withdraw the claimed increase in value as this will go on forever” (see the foreseeable future words for justification in the common man’s reliance.)

The lie is the mathematical impossibility of this.  A $150,000 house that appreciated at that rate for 10 years would be worth $389,000.  But over 30 years that same $150,000 house would be “worth” $2,617,410.  Nobody ever asked the obvious question: Exactly how was a “middle class” person going to afford to buy a $389,000 house, say much less a $2,617,410 one?

They couldn’t, of course, but this was the lie that was run.

In College education land the same lie was run.  It led to an outrageous increase in college costs that dramatically outstripped earnings for degree-holding graduates.  This in turn made college a bad deal nearly across-the-board and as it occurred colleges and lenders lobbied Congress to change the law so that when your kid got rooked by this scam they couldn’t file bankruptcy and force those who blew the bubble to eat the loss.

We did the same thing with Medical Care.  By providing “free” (or nearly so) care to Seniors and illegal immigrants, with the former being told “they paid for it” through Medicare taxes (a bald lie as on average they only put in 1/3rd in inflation-adjusted dollars as to what is spent on them) and the latter being simply told “you deserve it” the increase in medical insurance costs has run approximately 9% annually and will continue until and unless policies are changed.  This means that the $700 a month insurance policy for the reasonably-healthy 50 year old ($8,400 a year) who has been promised “no reduction in his Medicare” will cost $171,477 a year by the time he’s 85 with no adjustment for the higher expense that comes with age.  That is, today’s 15 year old will be forced to pay $171,477 a year for his medical insurance when he reaches 50.  Obviously, he won’t as that amount is more than three times today’s median family income and even if we allow a 3% inflation rate (which we should not) it will be more than 100% of the median family income in inflated dollars!  Since you can’t pay more for something than you earn in total, what the politicians are telling you they will do cannot happen.

This, fundamentally, is the problem.

The slams and frankly slanderous lies coming from the so-called “Tea Party” jackasses are just as bad as those coming from the Soros mouthpieces.  They’re all lies.

As an example:

I am saying that no matter what your reasoning is, beyond Pensacola Florida’s limited provincialism, or that of other small city’s, the VAST MAJORITY of the OWS crowd, its organizers and “friends” (ACORN, SEIU, UAW, AFL-CIO, Ayres, Dohrn, Obama & Co. underwritten by George Soros who certainly never made a dime on Wall Street), are NOT OUR FRIENDS.


Well, yes.  Now prove that the VAST MAJORITY of the “OWS” crowd on a national basis is affiliated with or paid for and/or underwritten by George Soros and those others who you claim have done so.

Prove it.  And do so under the rules of strict proof, because this sort of claim is an extraordinary one.  I didn’t see any evidence of it – at all.

There was one table that was clearly union-oriented.  It contained members of the local transportation union trying to get a petition going against Veolia, a foreign company that the local area apparently hired to run the city buses.  Is their complaint legitimate?  I don’t know; I haven’t looked at it yet.  I did take their flier and will see what I can find out.  It will be a feature article later this week, I suspect.

But there was no hidden agenda here; these were clearly people asking for a redress of grievances.  Isn’t that what you’re supposed to do when you have grievances?

They are generally the crowd of entitlements and breaking America down, dumming America down, LEGALIZING ILLIGALS, and making what made America wealthy in the first place – capitalism – into something evil, into something it isn’t and never was.

Oh really?  What “Capitalism” is present in making student loans non-dischargable, so that the student who does a dumb thing in taking them goes bankrupt and is hounded for life while the lender and their cronies can double – or more – the debt owed and lose nothing?  These same so-called “Capitalists” include the Mortgage Bankers Association who strategically defaulted on their own building mortgage, a common (and perfectly legal) tactic in the business world, yet they tell people it’s immoral to do it themselves, and when possible these same “capitalists” get the laws changed so you, the people, cannot do what they did and do themselves!

Capitalism?  Where, may I ask?  The penalty for making bad loans is you go bankrupt!

When you change the laws so that the other guy goes bankrupt and you get to keep the loot the word for that is not capitalism, it is THEFT.

Where are the so-called “Tea Party” people that should be arguing for the REVOCATION OF BANK AND CORPORATE CHARTERS when they steal in this fashion?  Isn’t that the same thing at a corporate level as imprisonment is at a personal level?  It sure is!

Now explain the so-called “Tea Party’s” utter refusal to demand that Wachovia have its charter revoked for drug money laundering, something they admitted to doing, or shall we talk about the drug company that got caught twice committing the same criminal offense of marketing for unapproved purposes with the second offense occurring as they were negotiating a trivial FINE for the first one!

The so-called “Tea Party” is “for” the drug war, but refuses to demand that the penalties enforced against PERSONS who participate in the distribution of drugs be applied against CORPORATIONS that are part and parcel of the same offense!

They are the Politics of Envy, of DISTRIBUTING of OTHER’S PROPERTY. Of other’s sweat and blood; of other’s future, the eventual and certain diminishing of the quality of lives of our children. And equal society where the LCD’s run things for the LCD’s benefit. Where excellence is punished, stupidity and commonness rewarded.

Again, oh really?  What’s Capitalist about Citifinancial who had their former chief risk officer testify under oath that the firm was selling on loans that they knew did not meet underwriting guidelines – that is, they knew they were defective and not what was represented to buyers.  This isn’t conjecture and it wasn’t a “small number” either – he testified that 80% of the loans they made in 2007 were defective.

Is it “capitalism” when I sell you a car showing 50,000 miles on the odometer but I rolled it back from 150,000, or is that theft and fraud when you buy said car and discover later that the engine and transmission are basically worn out, and thus you paid $10,000 for something that was worth $2,000?  I ****ed you out of the other $8,000 – I stole it – and in every other area of business when I do that it’s illegal.

That is not capitalism – it is theft.  THAT is what you are supporting.

Reducing the ability of our nation to defend itself. That is what it’s about. It is redistributing the nation’s revenues from defense to various social programs (green energy and glabal warming concerns) under the phake and phoney flag of blaming banks and “banksters” for everything that went wrong with the economy and the human race. The irony never sparks in their minds that the banks allowed 99% of Americans to own a home in the first place.

Oh, “reducing our ability to defend ourselves”, eh?  This is why after 9/11, when we knew that the majority of the people who did it came from and were funded by Saudi Arabia, we did not act against them?

What are we “defending”, may I ask?  Oh I don’t have to: We’re defending “access” to cheap oil.  We’re promulgating a failed foreign policy that has now turned to propping up literal Kings and Dictators (Chavez anyone?) so we don’t have to face the fact that we didn’t do what was required to have a secure and thermodynamically sound energy policy for 30 years.

What went wrong, and why the unions are out in force, is the FACT the $85/hw wages the UAW now takes for granted cannot compete with $2-5/hr wages in Korea, Taiwan and China and the $1 TATA Motors pays in India to manufacture low end cars in second and third world countries in Asia and Africa – the only global sector that is actually growing.

And what is your solution?

My solution is to stop the stupid, including but not limited to those who want to promote mathematically bankrupt and therefore stupid policies in the monetary, economic, trade policy, tax policy and energy realm.

We cannot have illegal aliens in this nation at the behest of so-called “capitalists” who are simply exploiting effective slaves, smug in the knowledge that not only can they not complain when abused (lest the INS get called) but that when or if they get hurt, have a baby, or send their kids to school they will get to force, literally at gunpoint, everyone else to cover those costs they shoved up everyone else’s ass.  The bleeding heart liberals are bad enough, but it is the hard-core right that has serially pandered to the “demand” for illegal labor for the farmers, home builders, lawn services and poultry houses across this nation!  I stand for ejecting every illegal immigrant from this nation right now!

We cannot have a Federal Reserve that believes in “2% inflation” when the law says STABLE PRICES.  A 2% increase is not stable; over the average man’s working life of 45 years that leads to prices that are 244% of where they were when he was 20.  This makes it impossible for him to save for retirement; he either “takes risk” or winds up with literally 1/3rd of what he saved when he was 18.  This is theft and fraud; the value I earned and that represents my economic surplus is mine and when you steal it whether you do it a penny at a time or all at once you’re still a thief.

We cannot have a Federal Government that spends more than it takes in via taxes for so-called “social programs” – or anything else, including “defense.”  Compound growth – the very nature of exponents – makes such concepts, irrespective of where you try to run them, literally impossible to sustain over the long haul.  This rock we call “Earth” is of finite size, mass and resource.  Those resources are vast but the “dominionists” who believe they are infinite are factually wrongThe House, Republican controlled, has not put forward a budget containing one dollar in actual spending reduction and they continue to pass “continuing resolutions” to permit continued increases in spending despite the Senate’s refusal to follow The Constitution and pass a damn budget!  Republicans support “The Rule of Law” my ass.

We cannot have an economic system where debt grows faster than output does.  The fundamental nature of exponents — mathematical law — guarantees that any such attempt will failThose who argue otherwise are doing the equivalent of persecuting Galileo, are just as evil, and should be tried and imprisoned for their crimes that they intentionally and willfully inflict upon society with their factually bankrupt and morally evil stupidity.

You want to know what I stand for?

THAT is what I stand for.

It is why I started writing The Market Ticker in 2007, when I saw the exact same wingnut crap being run by Bush and company after seeing the same bull**** run by the lefty redistributionist Clinton and company in the 1990s with his willful and intentional refusal to deal with obvious frauds in the Internet space that led to the Nasdaq market collapse.  I gave interviews at the time (1998/99) stating exactly this.  It was a known fact that the claimed “doublings” were not happening yet they were reported in so-called “Earnings” reports.  Literal thousands of people knew this was a lie and yet not one person was indicted or imprisoned for these intentionally false statements.  When I saw evidence of the same crap again in 07 I decided that it was not going to happen to the public a second time without me raising hell about it.

It was that fact and the fact that the so-called “conservatives” in fact had stolen the wealth and futures of people from infants to young adults who they scammed into taking unpayable loans for “college” while changing the laws so they could not petition for bankruptcy and blew an intentional housing bubble while offshoring our jobs at the same time, thereby guaranteeing both a monstrous bubble and the ensuing bust that led me to this publication.

It was the fact that McCain and his advisors knew damn well that this was theft and fraud yet he suspended his campaign to bail out the thieves that led me to publicly denounce him and everyone involved in it.

It was the fact that instead of focusing on this where The Tea Party began with both my call for tea bags to be sent to Congress and Santelli’s scream, which was focused on exactly the same scams and theft, the so-called “Tea Party” instantly turned to “Guns, Gays and God” and gave a complete and utter pass to the intentional theft that led us to where are now, and has to this day refused to demand that those who participated in that theft face the music for their acts and that the stupid lenders go bankrupt right next to the stupid borrowers who must be afforded the same opportunity, including students who were scammed into taking unpayable loans with ridiculously rosy and intentionally false projections of job prospects that the math PhDs at those colleges had to know were factually impossible.

It is the fact that despite claiming to be for “fiscal responsibility” The Tea Party folded with many of its members voting Yes to the debt ceiling increase, refusing to publicly denounce the Ryan and McConnell plans that do not cut one single dollar of federal expenditures; they in fact both RAISE federal expenditures. Worse, both plans contain projections (such as Ryan’s “5% growth rates”) that have never been sustained on a forward basis over the time projected in the history of the nation once one subtracts out additional systemic debt.  In other words these plans are knowing and willful frauds upon the public and the Tea Party is supporting them. Even the CBO, which has historically always projected a too-rosy future on a fiscal basis (they projected in 2000, remember that the nation would have no debt whatsoever by 2010!) says these plans rely on unreasonably-rosy projections into the future.

You want to know why I said “**** the Tea Party”, called it out before the 2010 elections as a bunch of bull**** artists playing the same tired “Guns, Gays and God” song that the Catholic Church ran against Galileo oh so long ago?

THAT is why I did so and will continue to do so right up until people just like you who claim to be “affiliated” with that “movement” (which you stole from one Sam of some 200+ years ago; you no more own it than I do as it’s an idea, not a person or organization) quit perverting that idea and*****ing on the graves of men who actually were great, actually had sound ideas, and gave us this nation – a nation you seek to destroy through utterly bankrupt and knowingly-fraudulent promises just as do the hard-core leftists.

Incidentally, the Catholic Church eventually apologized for what they did.  The Tea Party has not.

PS: You want to know why I should have not had to write Leverage?  It’s found right here – it is the willful and intentional refusal to understand what you learn in fifth grade, which is the subject of a rather dry academic lecture you can find online.  It is this willful and intentional refusal to deal with these fundamental mathematical facts that led to the outright theft and fraud in our economy and government, and until the so-called “Tea Party” comes to face mathematics you’re just as much a part of the scam as is the left.  Period.