Monday, March 30, 2015

Talking the long view on the national debt

The average age that a woman first gives childbirth is about 25 years. That means that if we pay down only $180B (1%) a year the national debt will last to our grandchildren's grandchildren.

Yet, as crazy as this sounds, it would it take a miracle to convince anyone - ANYONE - in Congress to make it happen. After all, our current obligations already carry $435B a year in interest. That means we'd have to dedicate about $615 billion dollars towards the debt, and not accumulate any more.

Federal revenues in 2014 were about $3 trillion. That would leave about $2.4 trillion for all of the rest of the spending, but we spent $3.5 trillion! So not only do we have to dedicate more money toward the debt, we have to cut a LOT more out of our spending.

Exactly which politician is going to cut $680 billion dollars, and out of which programs? Are we going to end medicare or social security? Because that is what it would take. Is the Republican party going to do that? Are the Democrats?

No. We have no one, anywhere with the willingness to do what it takes. Even if we did, even if they were in elected office, they wouldn't be able to overcome the demagoguery that exists. If it were possible to overcome this, if it were possible to convince 100 years of legislators and citizens that they had to pay off the debt for their great-great-great-great-great (that's right, 5 greats) grandchildren, we still have to contend with the growing population. Some estimates put us at close to 600 million by 2100, fifteen years before the debt would be paid off.

Every one of those additional 285 million people would need to be willing to go without any government handouts. And if the trend in takers continues as it is, we'll be suffering 300 million loafers in this country. We'll have to somehow deal with them too. But we won't. We've become a nation of children, petulant, demanding children, unwilling to detach from the teat of mommy.

Thursday, March 26, 2015

The Liberal Empire Strikes Back: Peruta to be reheard en banc

They're intent on going down swinging.
THOMAS, Chief Judge: 
Upon the vote of a majority of nonrecused active judges, it is ordered that

this case be reheard en banc pursuant to Federal Rule of Appellate Procedure
35(a) and Circuit Rule 35-3. The three-judge panel opinion and order denying
motions to intervene shall not be cited as precedent by or to any court of the Ninth Circuit.

Almost 5 months ago at NLOGAM, Sebastian blogged about the call for en banc from one of the judges. It looks like a majority of them voted to rehear the case.
Given the strong Second Amendment rationale in the Peruta decision by Judge O'Scannlain, I'm guessing some of the more liberal judges on the 9th Circuit don't want to be bound by it. After all, the 9th Circuit has a reputation as the most liberal circuit. Only 18 out of the 38 current active judges - those not having senior status - were appointed by Republican presidents. 
They don't want to be bound by a precedent that more strongly protects your rights. Gotta love these judges.

Friday, March 20, 2015

The very first Quote of the Day!

LaughingTarget has the honors! :) Thank you sir, for this excellent explanation of the trap the FED has created.
The elephant in the room is public debt. The Federal government leans heavily on short term debt instruments and rolls them over year to year. 
On page 19, it shows the maturity schedule by year. Most of it is due by 2019 with a huge portion of it due this year. The average interest rate in 1989 was close to 9% and has been driven down to 3% this year. With the tremendous debt load on the books, if rates rise, it will create a major fiscal problem for the Federal Government. Current debt servicing is running $443 billion, or 10% of the total annual spending. If rates rose up to the 1980s average, debt servicing would be 25% of all spending just at the Federal level. 
It would additionally cripple municipalities that rely on short term rollover debt as well. The Federal Reserve has incentivised huge debt loading over the past decade and any attempts to return rates to relative normal will destroy numerous governments and undermine a large portion of the Federal level's programs. 
Despite what everyone wants us to believe, the Federal Reserve is not independent. With these huge debt levels hanging over our heads, the chances the Fed will raise rates are slim. They'll continue to use every excuse in the book to avoid admitting that they fueled government debt and don't want to be the cause of the reduction or elimination of redistribution programs.
Yes, that sums it up quite nicely. They have created so much debt, that increasing the rates on borrowing would destroy the system. It will happen much faster than anyone most people would believe, given the annual turnover is close to 10 trillion. Even though they've been pushing for longer turnover since the crisis began, an increased interest rate fueled sovereign debt crisis could not be held off for more than one presidency.

Fixed GAO audit link, and adding the following:
For fiscal year 2014, interest expense incurred totaled $433 billion; [~2.4%] this consisted of interest expense on debt held by the public of $260 billion, and $137 billion in interest incurred for intragovernmental debt holdings. [Social Security and Medicare]
Investors may be piling on US treasuries right now, but that will only last while the US looks like the best ship in a sinking fleet. If our average interest rate rises to 4% we would need to divert an additional $300 billion towards the interest payments. In the meanwhile, we continue to overspend, so the number will continue to rise. Without balancing our budget, there is no way out of the hole - remember the last time we were close to balancing our budget the Federal funds rate was over 6%, and so was the average interest payment.  Today a 6% interest payment would cost $1 Trillion! That means we have less than $1.5 trillion of revenue remaining for spending on programs such as the military, medicare, and social security.

Something's got to give, and something WILL give. Reality is, and always has been, unforgiving. We are in for a lot of pain in the very near future. It won't be decades, probably not even one decade.

Eighteen Trillion One Hundred Fifty Two Billion Four Hundred Eight Million Six Hundred Thirty-Five Thousand Fifty-Five Dollars and Fifty-One Cents

$18,152,408,635,055.51. The debt to the penny.

In just 81 days, the national debt has grown by $122,295,278,979.46. Your personal liability for this has increased by $994 and you now owe $147,579.

This is becoming a habit for me.
As of today, our national debt is $18,030,113,356,076.05. 
In just 70 days, the national debt has grown by $130,797,271,522.68. Big Gov has added $1,063 to the debt of every producer in America. You now owe $146,585! Aren't you lucky.

People out there are paying for...

"Adult Preschool." You read that right. There are people out there, right now, paying up to a grand to pretend to be children in the company of other adult pretenders. They play with playdoh, do finger painting, and sit around on alphabet mats. I kid you not.

Day by day I realize I am not wrong. The Rubicon has been crossed, the event horizon reached. There is no turning back for this society.
Getting in touch with your inner child has never been so expensive.
The Brooklyn-based Preschool Mastermind, as it's called, is a preschool-type experience for adults. No, really. And according to its founder, there's show-and-tell, arts-and-crafts such as finger paint, games (think musical chairs) and even naps.

PHOTO: Michelle sees the class as a form of therapy, allowing adults to deal with their real world problems using the mind of their inner child.
Barcroft Media /Landov
PHOTO: Michelle sees the class as a form of therapy, allowing adults to deal with their real world problems using the mind of their inner child.

"I realized all the implications of what we learn in preschool," said founder Michelle Joni, who said she went to school for childhood education and always wanted to be a preschool teacher. "People come here and get in touch with their inner child. It's magical."

PHOTO: The full class starts at $333 and goes up to $999 with the adults paying as much as they can afford.
Barcroft Media /Landov
PHOTO: The full class starts at $333 and goes up to $999 with the adults paying as much as they can afford.

The class runs through March and meets weekly. Joni was getting ready for tonight's class when we spoke. She facilitates the class with two assistants. There are six students in the class, each hoping to get something different out of the experience.