2005 -2020 part 2

"If a nation values anything more than freedom, it will lose its freedom; and the irony of it is that if it is comfort or money that it values more, it will lose that, too." – Somerset Maugham

Oil exports from the exporting countries are going to continue to decline. Period. Still, that begs the question: "At what rate?"

For American imports, I like my .7% per month guestimate - with periods of as much as 1.5% per month declines in 2013 to 2015 (depending on Iraq's production profile...) The other major industrialized importers should track the U.S.

Is that as big a problem for America as our unfunded pension liabilities and intractable deficits? I am not even sure that that is the proper way to frame the discussion. In the end I think what really matters in the West and in America in particular is the political and policy response. The practical responses will come. Not enough milk or eggs in the stores? Cows and chickens will show up in backyards and neighborhoods. Not enough money in the financial system because of mass defaults? That might actually be the more intractable problem.

People are already making adjustments, or as Jimmy Kuntsler is so fond of saying - "other arrangements". Well, Jimmy they ARE making other arrangements. Fewer households are forming, young people are putting off parenthood, and for many, many various and sundry forms of businesses... restaurants, stock brokers, realtors, lawyers... business really stinks, and it stinks because many people are unemployed and those that are employed have suddenly found humility... and while this is good for the individual it is not so hot for Social Security and Medicare revenue collection. Is it really necessary to point out that Bear Stearns, Lehman Brothers and hundreds of commercial and savings banks no longer exist. Head count in the financial services and banking has declined 3 years running, and will likely continue to decline for the next 20 years (or so).

The simple fact is this - the government's take of GDP grew from 3% in 1929 to 26% last year, it has grown steadily as a percentage of GDP for decades, and it has reached terminal growth velocity. Irrespective of what the Left has led people through the media to believe, the government simply cannot gain MORE revenues by increasing tax rates and real tax collections. I don't know why this is, but hey just cannot seem to grasp some simple economic concepts. Now throw in declining Oil imports... not some time in the future, not some silly doomer-disaster de jour, but REAL and RIGHT NOW Oil availability in the U.S. is declining. This is input (or lack thereof) is probably (almost certainly... even if nothing is certain) what set off the termination of government's ability to increase its GDP take.

Still with me?

Ok, so the People ARE responding. The People ARE making other arrangements (no, not fast enough... YET, but people will surprise you when their hand is forced). What about the governments? Have you seen any "making of other arrangements" by any state, city, county, or the Federal Government? Nope. Actually, there was one "other arrangement"... our idiotic federal government expanded the medicare tax to investment, interest, and dividend income. Right in the middle of biggest economic cluster f*** since the 1930's. I know this pleased the tye die and sneaker and Leftie set... but those folks were embarrassingly short changed in the economics section of the brain. Again, politics rears its ugly head.

The tax revolt cometh. The political outcome is far from certain.

"A man will sooner forgive the slaying of his father than the confiscation of his patrimony." - Machiavelli

And therein lies the rub... American's have no patrimony. Americans are broke, with nothing to start their lives with - the old folks can barely provide for their old age let alone patrimony for their children. There really is no middle class left... certainly not in the private sector... if there is anything resembling a middle class I think it would best be described as the public sector class or bureaucrat class. America has its professional class: Doctors, lawyers, financial professionals, CPA's, Engineers... and for the most part these are the rich that the Left and the Media despise so vigorously (I always refer to them as the middle-class-millionaires. Funny thing is, they don't think they are rich... likely from the daily indoctrination injected into our lives courtesy of the Media... Flying from Four Seasons to Cruise and back to the Four Seasons makes it difficult to see how billions of people live around the world... may I suggest a back pack tour of the country side in some third world nation?), in addition to the outrageous rich... and then we have our poor-as-a-church-mouse-deluded-into-thinking-they-are/were-middle class because they aren't on food stamps and don't live in the projects... and those that do.

The People were always broke down through history but now they have been collectively deceived into believing that they can all have a 25 year "retirement" of leisure and travel, and if they don't get it... somebody did it to them. Somebody is at fault. Somebody has to pay, and a lot of somebodies also want to benefit politically.

And that's where we are now. The People are either unable to grasp, or the Media are unable to explain the problem with Social Security and Medicare. What you hear is that "people are living longer" - and that is partially part of the problem. Very partially, if you will. The problem is far more the lack of population growth than life expectancy... as regular commentator "Coal Guy" so elegantly said after I pointed out that Social Security and Medicare were governed by "e" every bit as much as compound interest is:

A note on government Ponzi schemes and population growth. There is a vast difference in available funding for Social Security associated with a seeming small range of growth rates in population. Consider that if the population grows at 3% per year, it will double every 23 or so years. That means that every 70 year old retiree has two 46 year olds and four 23 year olds to support him. If all are to have an equal share, each of the seven would get 1/7th of the earnings of the working six. Social Security tax would be 14%. Of course attrition improves the situation for the survivors, but this is just for example.

If there is zero population growth, each 70 year old retiree has one 46 year old and one 23 year old to support him. In this case, each would get 2/3rds of the earnings of the working two and SS tax would be 33%.

If population declines by 3% per year, four seventy year old retirees would have two 46 year olds and one 23 year old to support them. Each would get 1/7th of the combined earnings of the working three, and the SS tax would have to be 57%. This is what China has done with their one baby rule.

The implications of exponential math are astounding and ignored and misunderstood.

Or as another blogger properly captured the issue:

As of today, nearly 19 percent of all Americans receive some form of Social Security. Compare this to 1970 when only 12 percent of all Americans received some form of Social Security.

The Left desperately NEEDS to have the level of acrimony and belligerence now passing for discourse in the political air in order to silence the rational mathematical analysis that might ensue. They need a contra Party, the Right, that spouts off with unimportant Bull Sh*t - gay marriage, flag burning, freedom fries, and "under God" - to fight about so that they, the Left, can go on about their business of destroying the country, the constitution, and the currency. And the morons on the Right are the unwitting dupes going bang for bang with sledge hammers provided by the Left to destroy the country and the rest of the West.

The People were always broke down through history, but for the most part they got by. The People were almost NEVER free, not in the way the American's were granted our freedoms by our Constitution. Now, many Americans are only too willing to give up those freedoms in exchange for something most never had and were never going to have.

How can we be this f***ing dumb?