Debt Rattle Mar13 2014: The Demise Of The Ponzi Democracy
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Carl Mydans Auto transport at Indiana gas station. May 1936 Britain’s Institute of Economic Affairs (IEA) recently issued a report on the future of pe
[See the full post at: Debt Rattle Mar13 2014: The Demise Of The Ponzi Democracy][quote]Can you imagine such tax raises? While the economy is in the doldrums? Me neither. But that would mean:
In the absence of further tax hikes [..] total spending would have to be cut by more than 25% or health and welfare expenditure by 53% compared with the current implied level if all future spending was to be met out of tax revenue.[/quote]
No. I cannot imagine such tax increases or so much cutting of expenses.
The bankers/politicians will keep the printing press going rather than face the ponzi democracy.
Jal
Not a dime of stimulus has gone towards the people so far. But you think central banks and cabinets would do a 180?! I think maybe if they’d had any such intentions, they would have acted that way long before.
It is an oft repeated meme that the majority, the bottom 51%, can vote themselves huge benefits and tax breaks. If so, then why don’t they do so?
Look at the Social Security Tax. All income over $117,000 is not subject to this tax. The top 1%, with incomes averaging $380,000 pay less than 1/3 the tax rate as poor schmucks making less than $117,000.
Also, the rate at which people vote is in inversely related to income and education. In other words, poor people don’t vote, at least not in the USA.
I don’t see how raising the retirement age does that much good, when there aren’t any jobs, unless they raise the early retirement age too. However, let’s say they are somehow able to significantly cut ss benefits by under reporting COLA CPI inflation and other means. That will mean you have a millions of people sitting at home, eating saltine crackers and not much else, and staring at the boob tube all day. In a consumer based society, I’d hate to see how we go from the present system of 70% consumer spending to one where it is more like 50%. Almost all community service work for lawbreakers will be in tearing abandoned malls and shopping centers.
I did not mean to imply that money would go towards the people as a direct stimulus.
The bankers will not do a 180.
The printed money will keep going where it is going now.
It is hiding the true conditions of pension funds etc.
The ponzi democracy is ignoring the true conditions of their pensions etc.Of course the stimulus (free and cheap money and credit) has gone to the little guy as well as the top. Had the .gov/Fed not gone full retard with printing, new credit creation and sweeping toxic paper under the rug, unemployment would have gone to 50%, the over indebted would have defaulted, imprudent banks would have gone bankrupt, profligate local, state and central government payrolls and benefits and deficit spending would have all been defaulted on, as they filed bankruptcy and,,, well,,, we would now have been well on the road to real recovery, as those who have lived within their means, and the productive, joined in rebuilding a better world.
The masses who feed on government largess would have been sent back into the private sector in competition for jobs and subsistence, driving the costs of redundant labor lower, repricing the artificially low value of scarce commodities, dropping taxes, bringing on deflation, driving up the value of the dollar, increasing the spending power of the very people who are now suffering.
But, naturally, the unwashed would have never stood for it, all the while believing their elected officials know much more than all the markets players, so will “mandate” Shangri-La for them, given enough devaluation, destruction of purchasing power and redistribution.
As in everything, there is natures course, and there is the course of egotistical, know it all, and in most cases ill advised egalitarian, authoritarianism. Therein lies both the problem and assurance of it’s continuation.
Default, and rebirth, or destruction of the currency resulting in societal collapse. The choice was made.
The governments of the world will not relinquish power back to the people now. They will attempt to take it down with them. Unbeknownst to them, the real core is the individual, and he will not invite Con-gress to join him for dinner when there is no longer enough to go around.
And no, I don’t believe the collectivism of government run programs is the answer, because, when something belongs to everyone, but no one in particular, no one gives a damn about it. So, off it morphs, into an empire building tool of the few elite who run it.
I believe it’s all here,
And here,
https://bastiat.org/en/the_law.html
But, alas, no one will read it. So, carry on. As with any Ponzi, most will carry their belief in their rulers to the poor house, or gulag, with them.
It all ends with the dependent setting on the curb, hands outstretched, and the prepared behind the scenes offering what they can spare.
Do, at least, read Bastiat linked above, please? So I have someone to talk to about it.
Hi Professor
I have just read about 2/3 of the Bastiat pamphlet. I consider myself on the political left close to socialism, so Bastiat is twisting my gourd a bit! I can see his point about the unsuitability of law (backed by force, as law is) in any kind of redistribution of wealth because the law always represents the wishes of a subset of society, therefore, the results are likely to be unfair (or legal plunder to use his term).
Another point is that trying to balance a money system by creating distortions in inducements in law is likely to have unforeseen effects or to enable current voters to be able to get future or voters to pay for their lifestyle – hence generational Ponzi schemes in pensions.What is so hard for an idealist like me to figure out, is just how much law is needed. You have to have some in order to prevent the powerful (e.g. mega rich, corporations, connected etc.) from being able to plunder the less powerful. Not doing this will mean regular political upsets as the the poorest have nothing left to lose.
How about we have just the right amount of law so that nobody takes advantage of anyone else! There, world fixed. I knew I could do it!
Carbon
I think you’re wrong Raul on the premise that UK taxes will rise to maintain public services. They will, but not much. You see the one big difference between us here in the UK and you continentals is that we have an elite here that wants to see minimal public services or even none at all. Currently they are running down services massively in parts of the UK that have Labour support. It’s getting run down and third worldesque there.
This is their big chance to spread that out and they will take it. We will see a massive roll back of public services. Erosion of welfare provision is already in full swing. Food banks are busy. Disabled people are losing benefits. Bedroom tax is a travesty. There’s not a sign of discontent.
They’ve already privatised essential public services (like trains and buses) against all common sense. Sold it to the elite at knocked off prices and we have a fragmented, expensive and a third rate transport system. Huge profits are being raked off at the taxpayers expense and there is little resistance against that too.
Watch ’em finish the job off.
If the Scots know what’s good for them they’ll take independence because austerity anglo saxon style hasn’t got going yet. They’ll get it big time from London.
Hi Sanjay
The Tories have successfully reframed the debate about public services. If you are poor in this country, you must give up your safety net of public services because austerity is required to reduce the deficit. If you are rich and do not need a safety net, you arent required to give up anything. I think the rationale is that the wealthy drive the economy and must not be disturbed. I don’t believe the wealthy drive the economy, I think they collect the wealth of the country and sequester it in non commons assets like mansions and bling, or in offshore bank accounts. Is that a rude thing to say?
carbon
Debt Rattle; the state of affairs depicted in your excellent article ignores a most likely reality. The ‘end’ is likely to arrive very lumpilly around the world. Some places may enjoy a relatively painless descent from our energy-fueled peak of conspicuous consumption, but I believe that for most the end will be pretty abrupt and grim.
The best telling of how it is likely to be for most ‘civilized’ countries may be found in this excellent account by Kathy McMahon of the brief ‘end of oil’ in Britain and Europe which occurred in September 2000:
https://www.peakoilblues.org/blog/?s=Remember%2C+remember+the+5th+of+September%2C+2000
‘The impact on critical infrastructure was devastating. Food didn’t get delivered to supermarket shelves. Ambulance services stopped as did blood supplies to hospitals. One hospital ran out of stitches and many more complained about being unable to move hazardous materials from their facilities, creating health risk. Medicines were not delivered to pharmacies. ATM machines weren’t loaded with money. ‘
‘…Despite a five percent increase in rider-ship on public transportation (causing overcrowding), trains and buses were required to reduce frequency or stop service on many lines because of lack of gasoline or drivers who couldn’t get to work. Hospital personnel shortages also caused all but emergency hospital care to be cancelled. The ambulances that did run were told to keep their speed below 34.2 km/ to conserve fuel. (6)
Food sales increased 300 percent, and as the sight of empty shelves became common, panic buying increased. By September 13th, having no bread or milk, a number of supermarkets began rationing food purchases.(7)
Postal services were gradually reduced and “seriously threatened.” Guaranteed next day delivery was suspended, and plans had to be put in place to insure that social security checks were delivered to those dependent on them. (8)…’
Yup, for most the term ‘Ten Days to Anarchy’ describes the most likely transition route between the civilization of today, and that of tomorrow.
Hi Anonymous
Yes, I remember the 2000 fuel protests and the following breakdown of supply. It’s one of the reasons I got interested in peak oil. I think most people who are interested in financial collapse know about energy peak.
I personally think that resource problems and lower EROEI have been limiting growth for a while and that our financial problems are due to the growth economy diversifying into monetary instruments for their “growth” which is required to prevent financial collapse. Therefore, energy and resource problems may manifest as financial problems with a few years time lag.
If you prefer; the proximal mode of failure of the system may be financial while the fundamental failure is resource based.Is this what other commenters think?
Carbon
Hi Carbon
You raise a good point about “framing the debate”. When Raul often says words to the effect that you all accept this or aren’t doing anything about it, over here in the UK the framing of the debate is crucial to implementing farcical policy.Benefit scroungers is a sure fire winner. All these people (often immigrants) taking huge amounts of benefits. We must act etc. The real issue is these people (often new immigrants) are claiming benefits but as income top ups because they’re working in very low paid work. Work that isn’t providing a living wage so the tax payer is topping it up. In essence subsidising the coporation they are working for. But frame the debate as the benefit scrounger who is workshy etc and bingo you have an argument to rollback the welfare net.
This has been very powerful way to subdue any public opinion. It also helps to have a media owned by your coporate friends. Witness Lord (ha ha) Lawson given prime time on BBC TV to say climate change is baloney and this winter’s flood are just normal climate variation. What a swell guy.
Hi Sanjay
I detect a very strong reality distortion field around the Tories these days. I guess they feel they need to get a lot done in a short time.
The problem is there is a working principle in journalism (and law) that the truth lies somewhere near the middle between two polarised narratives ( I think it’s called balanced journalism ) This benefits the liar as they can draw the frame of reference towards their narrative. You have to have your critical thinking engaged to detect this, and you often have to research the facts. This is really the journalist’s job, but they are not always honest.Most people do not have the time or energy to engage their critical thinking faculty, so to the distorted aguments are accepted.
It would be nice to see public figures reputations in tatters if they are caught wilfully misrepresenting anything, but we are conditioned to accept this practice, indeed it seems to be a part of adversarial law system as well. As long as this endures, people forget who the liars are and they will be easy to manipulate.
A quick but imperfect way to detect lies is remember who you detected lying to you before and distrust them totally.
Carbon
Hi Carbon!
Yes indeed one of the probable causes of a breakdown will be collapse of the financial systems; if you cannot outbid China for oil then at some point your local refineries will not get any, and bang! You are into the Ten Day countdown.
Look at places like Egypt which turned from being a net oil exporter to a desperate importer with minimal internal production to pay for oil imports. GB is in the same state with its careless depletion of North Sea reserves, and the risks of a sudden collapse are not dissimilar.
There is time for some pottering with policy, and redistribution of wealth and benefits, but energy supply and affordability is (in my view) top of the worry list. Clearly the major private oil companies think oil production is a loosing game as they are now reducing capex on exploration and focusing on selling assets to pay dividends. Not exactly a vote of confidence in the future of oil production!
They term it ‘… changing the focus from barrels of oil per day to profitability.’ I guess you can be profitable by selling the family silver, for a while. But in the mean time production can be expected to fall off a cliff quite soon.
It will be interesting to see how it works out, wont it?!
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