The unforgiving certainty of math

(2 pm. – promoted by ek hornbeck)

  I was scanning the news today when I came across an article that caused me to say, “Damn! I’m going to be right again.”

 WASHINGTON — Debt ceiling negotiators think they’ve hit on a solution to address the debt ceiling impasse and the public’s unwillingness to let go of benefits such as Medicare and Social Security that have been earned over a lifetime of work: Create a new Congress…

  Legislation approved by the Super Congress — which some on Capitol Hill are calling the “super committee” — would then be fast-tracked through both chambers, where it couldn’t be amended by simple, regular lawmakers, who’d have the ability only to cast an up or down vote. With the weight of both leaderships behind it, a product originated by the Super Congress would have a strong chance of moving through the little Congress and quickly becoming law. A Super Congress would be less accountable than the system that exists today, and would find it easier to strip the public of popular benefits. Negotiators are currently considering cutting the mortgage deduction and tax credits for retirement savings, for instance, extremely popular policies that would be difficult to slice up using the traditional legislative process.

 I will let others address the Constitutionality of this new legislative body, and instead focus on a target of the budget cutting – retirement savings.

   I’m a certified “Doom-and-Gloomer”. I won’t deny it. Many of my posts focus on negative things that I want to see changed. For this and other reasons, many of my predictions have been ignored and dismissed

  For instance, three years ago I started ranting against the 401k system. I said that the numbers didn’t add up, and that all the profits were being siphoned off by Wall Street. Two years ago I said this:

Unless the federal government simply defaults on its Social Security and Medicare promises then taxes will have to be raised dramatically. You can bet the trillions of pre-tax money sloshing around in 401(k)s and traditional IRA’s will be at the top of the hit list.

 The reason I said this is because of cold, hard math. Today, this was in the news:

 [The tax reform proposal] would reduce but not eliminate tax breaks on mortgage interest, higher-cost health plans, charitable deductions, retirement savings like individual retirement accounts and tax-free savings accounts known as 401(k)s, and tax credits for families with children.

 Don’t kid yourself. This is merely the start. Governments have a history of ignoring past promises and changing the rules when crunch time hits. Even the Democrats have been looking at removing the tax break promises for 401k’s and IRA’s for two years now.

  My predictions of a government 401k cash-grab were mostly dismissed at the time. I wonder how long people will refuse to believe it?

  Cassandra was cursed by the gods with the ability to see the future, but have no one believe her.

  I do not claim that ability. I only claim the ability to do math. When a trend can’t continue, it doesn’t.

 18 months ago I said that Greece would eventually default and have to leave the Euro-zone, and that this would spread to other peripheral nations. As we stare at the second round of bailouts, with no long-term solution at hand, it appears more likely than ever before.

 The market rally that followed last week’s Greek bailout could be short-lived, say financial analysts.

   They claim the package proposed by eurozone finance ministers fails to tackle the underlying problems and sets a dangerous precedent in permitting a country to default.

 It didn’t take a genius to see this one coming. Just someone who can do math. It is strange and disturbing that many of the largest investment firms in the world have been taken by surprise by this development.

 When you think outside of the box, people tend to dismiss you as a crank. For example, I recommended buying gold in late 2005, when gold was at $500 an ounce. The response was less than enthusiastic.

  17 months ago, with gold at $1,100 an ounce, I tried to burst the popular opinion that gold was in a bubble.

  Today gold is at $1,600 an ounce and finally hitting the mania levels.. in Asia.

 “Record high prices won’t scare away investors,” said Shi Heqing, an analyst at Antaike, a state-backed metals consultancy based in Beijing.

   “Investors are likely to chase the rally and continue to buy gold because paper money feels increasingly worthless and they are worried about inflation.”

 Until the debt situation in America and Europe plays out the price of gold isn’t going to drop, but most American investors are still thinking in terms of the 1990’s – buying houses and putting money into their 401k. Even Wall Street is bringing back the oldies.

  I’m afraid to say that I think most of the American public will continue to invest by the rules of the last trend until the housing market finally washes out, their 401k withdrawals lose their tax break status, and the gold bull market is ready to peak. It is safer to lose money with everyone else than to think for yourself and go against the herd.


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  1. Just a little disgusted with everything today.

    Gonna walk to Haiti.

    • banger on July 25, 2011 at 01:39

    And what it is — is intolerable to the vast majority of people. This is normal and appropriate. All systems have inertia and conservatism–it is necessary and required or the system loses integrity. Also, all systems need those that inhabit the edges and are more adaptable and “see” beyond the narrow confines of conventional thinking. Interestingly many people talk about thinking outside the box but they are lying. Yes, we need to do that at this time because the system(s) we are living in are facing a drastic need for fairly radical change and only those that live on the edge can direct that change.

    Having said that, I have been predicting for almost two decades a gradual move to neo-feudalism which I saw as inevitable taking the logic of ths system even back in the early 90’s. Why? Because by the then the income trends were clear. Real wages were stagnating, income differential was increasing and it took more work to earn enough to maintain the same economic status as the late seventies when the trend began. Also, it was clear by the early 90’s that the MSM had become solidly entrenched within the corporate/oligarchical structure such that no world-view or alternative vision was possible other than celebrity culture and a very narrow range of political ideas.

    I don’t think most people understand how narrow the mainstream political spectrum is. The narrowness is mainly on the left. If you look at the mainstream there is the center (which is considered the left), the center-right (basically Obama and the “moderate” Republicans who were once considered solidly conservative like Baynor and is now considered the center) and the right which extends as far as the eye can see as the only place to go. In fact moving as far right as possible may be the only place to go since the center clearly isn’t really there anymore is it? Maybe I’m wrong.

    I think we can get ourselves out of this mess. But it means concentrating on cultural change through education and changes in consciousness. If we don’t address the culture of narcissism the people will demand neo-feudalism sooner rather than later.  

  2. That we abolish the Fed and return the issuance of currency to the government rather than leave it in the hands of the Fed.

    It is hard for me to take any economist seriously who does not recommend that above all else.

    If we can’t print our money to pay our bills and instead have to borrow our money to pay our bills, we will always be in deep shit.  

  3. income tax rate was 90%, and it lasted well into the cold

    war-if I recall correctly. Now this was a reversal of

    2,500 years of “trickle down if you’re a lucky peasant”.

    It wasn’t just a great American Invention, but a turning point in Western History. There was a recognition of the value of labor vis-a-vis wealth and power, individual and corporate. It was a Magna Carta of the Common Man, just like its distant predecessor was of the Nobility. It’s strange how one is now called an expensive entitlement program (along with Medicare).

    The best way to return to the good ole days is to reduce the top tax rate (as it’s already been done), convince the peasants that they have to sacrifice for the sovereign interest (literally and figuratively) and resume the 100 years war, unfortunately now reaching about 70 years since the beginning of WWII, with “refreshing pauses” in between just like the great wars of the past.

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