Friday, March 5, 2010

epilogue -1

Today's quote:

"You know the difference between a terrorist and a do-gooder? You can negotiate with a terrorist." - Unknown. Brilliant, but unknown...

Some have turned to free clinics. It’s just one indication that the health care crisis is really an economic crisis. And for the boomers it’s only going to get tougher, according to Harvard financial historian Niall Ferguson.

“If they’ve done their homework, then they’ll be afraid,” he said. “Very afraid.”

Ferguson says it won’t be easy to care for a generation with ailing bodies and many more years to live.

“The baby boomers have set us on a path towards a massive fiscal crisis,” he said. “Which is going to hit as the baby boomers retire.”

The recession, though devastating, will pass. But rising health care costs as boomers age may bring lasting harm to this generation’s financial well-being. By the time all boomers are 65, the senior population will have grown from 40 million now to about 72 million. Who will pay their medical bills?

“This thing is going to blow up,” said Ferguson, “because A: The number of retirees is about to zoom upwards just the way the number of teenagers once zoomed upwards in the ’50s, ’60s and ’70s; and B: Because the costs of these systems are completely out of control.”

The strain that the burden of caring for aging boomers will put on the health care system could overwhelm the economy.

If current trends continue, in 20 years almost a third of everything we spend on goods and services will be spent on medical care.

“The cost of health care for the elderly has been explosive,” said Ferguson. “And that is the crisis which seems to be the really big crisis lying ahead of us. We simply don’t have an answer as a society to the problem of a very large number of relatively unhealthy people who live into their 80s.”
And so it goes and will go and go and go until the mushroom cloud climbs over the horizon, blowing up what had been a noble experiment because a bunch of do-gooders really thought they could change the Facts of Life, or that there would never be an unintended consequence to their do-gooding, or that as long as you meant well its ok if you bring down the world's great Liberal Democracy...

Great nations are destroyed from within... by sloth, greed, unrestrained extravagance, arrogance, pride, boastfulness... of their people. They are not destroyed by their enemies nor by the frugal, modest, reasonable, and rational. Our foolhardy attempt to remove personal responsibility from the lives of our citizens and its celebration in our sh*t-for-brains media and pop culture has led us to this sorry state of affairs.

Doubt this? Let me ask you a few questions:

Was our society harmed by:

People starting businesses and employing people?
People saving their money and living within their means?
Parents providing for their children and making sacrifices to provide for themselves?

Not a shot.

Our society has come to this unhappy place because of the unholy alliance between a political elite that sold out the people mentioned above, pandering to those that did not or would not and expanding their numbers with the confiscated resources of the productive portion of society to the point that our financial system is unraveling.

I am sure to get ridiculous anecdotal data points about Ken Lay and Enron... or whoever. I could reply that Bernie Madoff was one of the New York Liberal elite's biggest financial contributors. But this is unimportant. All of us under the age of 60 have already been ripped off, the proceeds of the Ponzi scheme have already been distributed by the political elites, and there is no way to get it back - but the expectations remain.

"And therein lies the rub..."


bureaucrat said...

Oh, don't worry, the old people control the vote, but the young people control the military. The Khmer Rouge didn't conquer a nation using old people. They used the kids. :) The young will get their revenge. From the news coming out of CA, the students have already started.

Japan, Western Europe, Portugal, Italy, Spain, Greece, Germany, France and even Russia have much larger "old-age dependency ratios" than the U.S. has -- in some cases twice as bad. But, we have Mexican children by the truckload both pouring into and being born in this country (I have made friends with several, just in case :))

When the old people realize these "spics" are all that stand between themselves and rotting starvation & neglect, the old people are going to get religion. Immigration reform will turn on a dime. I predict movies about the old trying to understand and help the young (like Gran Torino) will be all over the theaters. How about books like "Neo-parenting Wetbacks for Dummies?"

The boomers had a big impact. They flooded the college campuses, then increased the crime rate for awhile, then flooded the job and housing market, and now we are guessing what kind of impact they'll have on the medical/benefits industries. The safe bet is they'll swamp and bankrupt them. That's why I'm not taking that bet -- it's too obvious. :)

Donal Lang said...

But you're complaining about Democracy! If people can vote for more benefits, or for less taxes, which way do you think they'll always vote?

Look at the proposals coming out of the Californian petitions; lower taxes, more spending on this or that....

Personally I'd go for a Benevolent Dictatorship and stop all this democracy rubbish!

Hey Greg, wanna job?

Greg T. Jeffers said...


I am surprised at you, professor.

Our founders went to great pains to AVOID direct democracy, which always leads here... instead they gave us a REPUBLIC, and as Ben Franklin famously quipped of said Republic " We have given you a Republic...if you can keep it."

We have done everything we can to destroy that Republic with a "Democracy" of special interests and lobbyists - and, most likely, not on purpose. Our founders likely could not comprehend the scale of complexity that has engulfed our politics, society, and economics.

Ah, well. I do not have a solution to that either... though a "solution" will eventually come...

gardenerG said...

Neat. A new book to contrast your "enlightened self-interest": How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism

Book review quote:
Smith’s coup de grace is the human factor, something else from which economists mostly avert their eyes:

“If people will be foolish, lazy, or cheat, the certainty, the scientific mantle is nothing but the emperor’s new clothes.”

Hitch the spurious certainty that the “free market” defined in its most extreme form knows best, first to the neo-liberal creed (Chapter 4), and then to policy recommendations (this cozying up of economists and politicians is covered in Chapter 5), and you have a prescription for officially sanctioned thievery on an epic scale.

Dan said...

One of the biggest immediate problems I see is the composition of our age stratification, to avoid a financial calamity we need a pyramid with elderly at the peak. In other words it must either continually expand or collapse.

We have some similarities with the long depression where there is a demographic hole of roughly 4% of the male population due to the civil war, and an unknown number of cripples and invalids, but I would guestimate it at around 10%. Today, for now at least, we have petroleum to do the heavy lifting but we have aborted roughly 20% of the tots we would have had entering the labor force and lost an inestimable number to birth control. It’s worth noting that the long depression lasted 23 years or roughly one generation.

“Oh, don't worry, the old people control the vote” LMAO, thanks I needed that.

Greg T. Jeffers said...

Man will be forced to accept the "forces of nature", the "facts of life", whatever you want to call them... its already happening.

I am merely pointing how FOS the Keynesians, the Left, the Right, Feminists, Vegetarians, animal rights activists, Wall Street, Madison Ave., Hollywood, Washington, DC, California, Obama... and anybody else that comes near me lacking an understanding of simple mathematics and the interrelations of it all but propagating a bunch of Bull S**T.

And as I have pointed out before, we all make our rationalizations - including me.

Best wishes!

Anonymous said...

Do you agree with Ferguson that the 'Recession' will pass? It seems to me that the Peak Oil/Capitalist economy conundrum is that every time the economy starts to recover, energy costs skyrocket thus whacking the economy back into recession at a lower level. So instead of 'recovery' we get ratchet down.
The social consequences of that that could happen in any of a number of ways.
Oh, and as far as the old people are concerned,,, they might be better off with half the 'health care' that corporate health and pharma deliver. Get every geezer on at least 10 scrips is company policy That together will really screw you up.
My parents are long since dead, but I have shepherded several of their friends thru the last six months of life recently and it is absurd.
Most of them hate what is going on but are helpless to do anything about it. Doctor knows best!
Just give em some feel good drugs and send them home.
In addition to the Nature Bats Last aphorism, another good one is,
Nobody Gets Out Alive.

Dr. Michel said...

But things are improving:

Greg T. Jeffers said...

Of course the REcession will pass!

Nothing moves in a straight line... any recovery from a trough is considered a REcovery.

I expect lower highs and lower lows...

bureaucrat said...

You are right anon ... once the per barrel cost goes above $80 for an extended period, the U.S. economy, at least, gets slapped back down. We saw this in 2008 when it artificially soared to $147 a barrel. It is also logical. When was the U.S. economy at its best? 1990-2000, a period when gasoline was selling for a dollar a good chunk of the time. Oil controls the world. :)

Donal Lang said...

Apropos of not-a-lot......


It's a slow day in a little Yorkshire village.
The rain is tipping down, and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.
On this particular day a rich tourist is driving through. He stops at the local inn and lays a £100 on the desk, saying he wants to inspect the rooms upstairs in order to pick one to spend the night.
As soon as the man walks upstairs, the owner grabs the cash and runs next door to pay his debt to the butcher.
The butcher takes the £100 and runs down the street to
repay his debt to the sheep farmer.
The sheep farmer takes the £100 and heads off to pay his bill at the feed and fuel suppliers.
The man at the Farmer's Co-op takes the £100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.
The hooker rushes to the hotel and pays her room bill with the hotel owner.
The hotel proprietor then places the £100 back on the counter so the rich traveler will not suspect anything.
At that moment the traveler comes down the stairs,
picks up the £100, states that the rooms are not satisfactory, pockets the money, and leaves.

No one produced anything. No one earned anything. However, the whole village is now out of debt and now looks to the future with a lot more optimism.

And that, ladies and gentlemen, is how the Government is conducting business today !

Greg T. Jeffers said...

Donal, that was priceless! For better or worse, you just gave an example of the Fractional Reserves banking system in reverse... that is... deflation!

Greg T. Jeffers said...

Deflation can occur if everyone (or even most) pays off their debt or if they default... and/or if everyone (or most, or even some) default.

westexas said...

Dividing an expanding economic pie is difficult enough, but dividing a contracting economic pie is, and will increasingly become (perhaps literally in many cases), a bloodbath.

The division between the savers and the spenders, between producers of essential goods & services and consumers of essential goods & services, will become increasingly apparent. Kurt Cobb probably had the best image, he showed an inverse pyramid with 95% of the US economy resting on the 5% represented by the food & energy producers.

I have described developed countries with out of control debt financed government spending as the Grand Prix of Debt Race; some countries are just closer to the edge of the fiscal cliff than others. The "Thelma & Lousie" moment is the point at which local, regional and national governments can't borrow enough money to fully finance their deficits. For national governments, it would especially be the point at which they can't borrow enough money in their own currencies to fully finance their deficits.

Circa 2005/2006, I started describing the probable impending decline of (North) Ghawar Field in Saudi Arabia and the certain decline of Cantrarell in Mexico (the two largest producing fields in the world at the time) as "Two warning beacons heralding the onset of Peak Oil." From 2002 to 2005, combined net oil exports from Saudi Arabia and Mexico increased from 8.7 mbpd (million barrels per day) to 10.8 mbpd (close to one-fourth of total world net oil exports, EIA)--as annual oil prices rose from $26 to $57. But from 2005 to 2008, their combined net oil exports fell from 10.8 mbpd to 9.5 mbpd, a decline of 8%, as annual oil prices went from $57 to $100. This was, IMO, a huge confirmation of the "Warning Beacons" thesis, but our government/finance system can't handle to concept of a finite earth, so these warning beacons continue to be largely ignored.

To put projected US deficits in perspective, let's assume that we had to repay the debt with barrels of oil. The CBO is projecting 10 year cumulative deficits of $9.8 trillion (let's call it $10 trillion). Of course, this assumes economic growth. In any case, let's assume $100 oil, so if we had to pay back $10 trillion of debt with oil, if my math is correct, we would have to come up with about 100 billon barrels (100 Gb) of oil--the equivalent of about eight Prudhoe Bay Fields.

And to put 100 Gb of oil in perspective, if we extrapolate Chindia's (China & India's) recent rate of increase in net oil imports out to 2018, they would be net importing 15 mbpd, when our best case projection puts the combined (2005) top five net oil exports at about 15 mbpd. So, based on these two projections, the total volume of post-2010 cumulative net oil exports from Saudi Arabia, Russia, Norway, Iran and the UAE--after subtracting out Chindia's net imports--would be about 22 Gb.

Estimated annual 2010 net exports from the (2005) top five exporters--less Chindia's estimated net imports--are about 5.5 Gb.

22 Gb divided by 5.5 Gb/year is four years. In other words, based on the above projection, the estimated volume of post-2010 cumulative net oil exports from Saudi Arabia, Russia, Norway, Iran and the UAE, after subtracting out China & India's net import,s would be depleted in four years at the current import rate. The key point here is that recent data show a clear pattern of developing countries like Chindia outbidding developed countries like the US for declining oil exports.

Again, my forecast for the US is that we are going to be forced to make do with a declining share of a falling volume of global net oil exports.