Klugman Cult

Here's a cult to fear, the Krugman cult and its faith in government control of interest rates. Let's have some clarity about these low interest rates. Short-term interest rates are controlled by our central bank, the Federal Reserve, a quasi-government entity. But not only does the Fed control interest rates, it's also a significant customer since it owns about $1.7T of bills/bonds in varying maturities.

The Fed has less control over long-term rates. So the Treasury seems to be purchasing more short-term bills at lower interest rates when they should be locking in those 30 year 3% long-term rates but that would cost them (us) more now.  Short-term thinking leads to long-term problems.  Want proof; Despite a recent auction in which $32B in 30 Bonds were tendered only $13B were accepted.

So, have no fear, the Federal Reserve is helping out by buying bonds with created money which increases the money supply dollar for dollar. There's nothing to worry about....Have a great Holiday....all is well. The government has everything under control, even the interest rates.

Dr. Krugman, "We are not having a debt crisis"

"We are not having a debt crisis". Really??

Interest on the debt currently makes up 6% of the federal budget, call it $227B per year on a $3.6T 2011 annual budget that was $1.9T a mere 12 years ago. It should only be about $2.75T assuming a 3% inflation rate.

Currently interest rates are at historical lows, as Dr. Krugman notes, but it will not always be thus. The 10 year bond currently pays about 1.68%. The long-term average is 5.57 or 3.32 times higher. When rates come back just to the historical average the cost of our debt ASSUMING THE DEBT REMAINS THE SAME, will be about $754B per year...a tad more than the entire current annual Defense Budget.

That additional $527B will come out of the defense or discretionary components of the budget (the rest of the budget, known as entitlements are on autopilot).  The discretionary portion is only 18% of the current budget. Assuming defense remains at its current level it would consume just about all of the discretionary spending that "includes such categories as law enforcement, education, homeland security, environmental protection, transportation, disaster relief, medical research and foreign aid" according to the Concord Coalition.

Don't tell me we don't have a debt crisis.

Where the Keynesian Solution Leads

Let's buy into Dr. Krugman's all in Keynesian solution.  The prescription to the problem is to increase debt (while interest rates are so low) to stimulate the economy to the point where economic growth (a new bubble) will eventually increase revenues.  The increased revenues would be used to reduce the deficit (while increasing the debt albeit more slowly).  I don't recall Dr. Krugman's specific position on Social Security and Medicare but I expect reductions in benefits are probably not a priority.  So demographics will continue to add to the debt as we monetize the Social Security trust fund I.O.U.'s.  And Baby Boomers will continue to make more demands on Medicare which will increase the debt much more than Social Security.

So while the debt continues upward the economy will pick up steam according to Dr. Krugman.  What happens next?  As the economy heats up the Fed will need to real in all that money it printed (with Dr. Krugman's blessing) to keep inflation low.  How?  By increasing interest rates of course.  What the consequence of increased rates?  The percentage of the federal budget that goes to paying interest on the debt goes up.  Currently net interest payments along with Social Security, Medicare and other “mandatory” spending make up 62% of annual outlays, so as interest rates rise the percentage of the annual budget for discretionary spending will go down.  Discretionary spending could be maintained or even increased but only at the expense of defense…not a bad thing in my opinion.  But it can’t go to zero.  There are people trying to kill us and all politicians say that protecting the American people is the number one priority of government.  It’s just not going to be the number one priority in the budget anymore.

But even you hardcore, irrational, arithmetically challenged leftists can’t deny where this will lead.  Social Security, Medicare, interest on the debt will become a higher and higher percentage of the federal budget.   Depending on where interest rates have to go to unwind all that Quantitative Easing it could consume 90% or even more.  This will force reductions in entitlements even more draconian that if we had addressed the problem sooner.

The other way out is a move to true free market capitalism coupled with smaller government (reduced entitlements, less defense spending, etc.), changes in corporate structure and a gradual return, perhaps initially, to a hybrid hard money financial system.  But Dr. Krugman would certainly not approve.

On Death and Religion

I watched a video this morning on the life of a former business associate, Mark Nilo, who died of cancer at the age of 54.  I happened to just finish reading a book by a rather obscure French poet and novelist that I started about 2 weeks or so ago.  It was novel about death and was the first book by Jules Romains the founder of the French literary concept of Unanimism which has to do with collective conscienceness.  I remembered receiving an email with the link to this video and decided this was a good time to watch it, 2 days having elapsed since my father’s funeral.  It was a bit surreal.  I was struck by the randomness of death.

I saw the movie “Lincoln” last night with my wife Jan and my 2nd sister Donna.  There was a scene in the movie when Lincoln asks a question of a Lt. and an engineer.  There were operating the newly invented telegraph which played a big part the war.  He asked them if they thought we were born to meet our specific times…or words to that effect.  The Lt. said he wasn’t sure about himself but thought Lincoln was.  The engineer’s answer was  and  I paraphrase, “I’m an engineer, I believe the machine has been designed then operates on its own”, a very Deist observation, probably a reference to questions about Lincoln's own religiosity.

In the book by Romains entitled “The Death of a Nobody”, a young man who had attended the funeral of Jacques Godard (the “nobody”) a year earlier is thinking about the dead man whom he had never met and is contemplating death, life and eventually his own death and makes a poignant observation, “The beyond, better world, spirit, ghost – all those vulgar catchwords annoy me.  I must drive them away.  Otherwise, they will end by becoming an obsession, and I shall not be able to see anything anymore.”  This can be extrapolated to mean religious obsession or obsession with any idea or ideal can blind you.

This reminds me of a quote Jan and I heard recently….I can’t remember where.  It goes something like this, “Trust in people who seek the truth but not those who claim to have found it.”

The Election Part 1

There’s much that can be said about this election.  It could be said that Romney, a Northeast, I’ll be generous and say moderate, was a bad candidate to deliver the message of fiscal restraint and smaller government. True enough.  He never really believed it and therefore didn’t come across very genuine.

There are already calls from mainstream Republicans that Romney didn’t pivot to the middle soon enough to capture those independents.  And if that is the correct analysis then the underlying reason is really quite simple, while American’s poll their support for smaller government, it’s not true.  America has become an entitlement minded country.  It was foisted on us by F.D.R. and embraced by Republicans and Democrats  ever since.  It has taken 70 years to create this mindset and the demographics are not helping.  Until Americans relearn that government can’t bring security, eschew both of these parties and embrace new ideas our slide into oblivion will continue. 

So, on that happy note….Congratulate your Democratic friends and stock up on food, ammunition and buy a generator.

God endorses Barack Obama

For God so loved the United States he killed 80 people and caused $20B in damage that whoever believes in Barack Obama shall not want but have everlasting entitlements.   Hang in, the blasphemy has just begun….

Hurricane Sandy is the ultimate October surprise.  There’s a reason these things are called Acts of God.  For fundamentalists of all Abrahamic traditions God controls all things.  So, what’s a religious Republican to think?  Has God chosen a side?  Which side has he chosen?  There’s no way one can deduce that this event helps Romney.  He who wants to cut the Federal government and according to the Democratics, gasp, FEMA too.  This storm doesn’t let Romney look presidential.  He AIN’T the president!! It lets President Obama look presidential!! And what does that mean?  Four more Years!!  God help us or continue hurting us??....whatever.

We all know that God is not going to just descend from the heavens and announce to the world his preference for Barack Obama, I mean, this isn’t 1041 BC uh, E?  I mean, ever since the New Testament He’s been more nuanced than that.  And anyway, Barack isn’t exactly the second coming of King David, so God may be putting some distance between His choice and Himself just so He doesn’t get all the blame when things don’t work out.  Hey, wait a minute, God KNOWS what’s going to happen.  What is he trying to pull with this mind manipulating preemptive ballot stuffing con?  Could it be he wants to PUNISH the United States for all its SINS, like legalized abortion and for not allowing the state to endorse religion?  If that’s what’s pissing Him off, go fuck with Europe, Oh wait most of them HAVE state sponsored religion…they’re just not religious.

Well, the irony just doesn’t quit.  If one has to assume that the events of the last few days supports the theory that God has endorsed Barack Obama then all those good religious Republicans have to rethink this election and do what God is obviously signaling to them.  Re-elect Obama to fulfill God’s plan, YOUR plan for America!!!

The writers at “The Daily Show” should wrote this, not me…I’m just saying…

Run Paul Run…Away from that stupid lie

Exaggeration is something we all accept in politics. We also accept it in product marketing. In sales and marketing there’s a concept called “puffing”. Puffing is a slight exaggeration, like, “this is the best car in its class”, or “you can’t buy a better broadcast video server than the Grass Valley K2”.

Saying you once ran a marathon in the high two’s, “2 hours and fifty-something” minutes when you haven't….is NOT the same thing. Even if he had run it in 3 hours and 1 minute he would not have remembered it as 2 hours 59 minutes. You just don’t. I know that I’ve never shot 79 at golf but shot 80 several times. I remember that I never ran a 10K (6.2 miles) in less than 62 minutes which equates to a 10 minute mile average. I remember that. And I don’t have a particularly great memory.

So, my level of trust in Paul Ryan has waned. It’s not going to change my vote because it's still my intent to vote for the Libertarians; Gary Johnson and Jim Gray. It's stuff like this that just really gets on my last good nerve and why I simply don't trust the two major parties. They make for good entertainment but their thirst for power is such that they'll lie about just about anything. Oh, and Gary Johnson REALLY did climb Mount Everest.