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Old 10-23-2011, 10:39 AM   #1
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US Debt and the absolute mathematical certaintude of doom

Per Karl Denninger (excerpted just the part i wanted to discuss):
Quote :
...
Now let's ask the uncomfortable question: How much time does the United States Government and our society generally have left?

Let's figure it out as a process of elimination:
  • Can we pay eight times as much interest as we pay now? (Today it's ~$450 billion/year on federal debt, so this is $3.6 trillion dollars.) The obvious answer is no as the total federal revenues are somewhat over $2 trillion at the present time. This is the 12.5% "coverage point", so we cannot withstand three more "doublings."
  • Can we pay four times as much interest as we pay now? That's about $1.8 trillion, leaving about $400 billion for all programs ex-interest. To put this in perspective that would cover about half of the Defense Department and nothing else, meaning no Medicare, no Social Security, no Welfare in general, not even the guy to sweep the Capitol Building. That's the 25% coverage point, so we cannot withstand two more doublings.
  • Can we pay twice as much interest as we pay now? That's about $900 billion, leaving roughly $1.5 trillion for all programs ex-interest. To put this in perspective we could fund Defense and one of Social Security, Medicare, or the combined Medicaid/Welfare/etc social programs. We could not, however, fund more than one or pay for any other programs at all. That's the 50% coverage point, so we cannot withstand one more doubling.

Now how long do we have? That is, how much is a "doubling time"? That's easy too. We open up The Fed Z1 spreadsheet and Look at column Z1/Z1/LA314104005.Q, which is the Federal Government quarterly. Over the last decade that went from $3.284 trillion to $9.77 trillion, or 297%. This is roughly a 12% rate of increase annually.

The Rule of 72 tells us that this means that the debt at the government level, given what we're doing today, will double every six years. Don't believe me -- get out your calculator and check it.

This means that Paul Ryan's plan is a public fraud as it is mathematically impossible for the republic to survive long enough for his "40 years" to pass, as just one example of many. You are challenged to run any of the so-called "Tea Party" or "Fiscal Conservative" plans against this metric: Six years to a full stop in deficits or we're all dead and see if you can make your plan work recognizing that no Congress can bind the next one and there are elections every two years for the House.

Want to run the game for all debt? That works too. All Debt was about $27 trillion 10 years ago. Today it is $52.7 trillion. That's 195% of the starting value (and note it understates things slightly as "social security and medicare" are not counted as debts because legally they are not.) This is roughly a seven percent annual growth rate. The Rule of 72 tells us that this means it will double in approximately every ten years, and we won't survive in the private economy paying twice as much interest as we pay today either.

So take your pick: We stop this or we economically die in less than six years or less than ten years. In no case can we continue to add to the debt at a rate that exceeds economic growth. That was a Ponzi scheme, it is a Ponzi scheme, and we are now in the last doubling time available to us before the surface of the pond is entirely consumed by lilies and we all suffocate. If we continue to add to the debt at a rate that exceeds the change in GDP, either systemically or at the government (or both) we may extend the time before we are all screwed but the government and/or our economic and monetary system will fail with mathematical certainty.

Got it yet folks? This is the debate at hand -- the only debate. Everything else is bull**** because if we do not stop this absolutely no other debate you wish to have matters.
...
full tl; dr rant: http://market-ticker.org/akcs-www?post=196321

I assert that Ron Paul is the only candidate for POTUS who is convincingly pushing the kind of severe and immediate spending cuts that could affect Karl's calculus.
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Old 10-24-2011, 06:53 PM   #2
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I read Karl too. Some of his stuff I skim, but when he starts to explain it so my six year old could understand it, I walk away knowing it's exactly how he says it is. Lets face it. He does support his numbers.

And his
Quote :
Got it yet folks? This is the debate at hand -- the only debate. Everything else is bull**** because if we do not stop this absolutely no other debate you wish to have matters
is exactly what a true representative of "The People" should say when they get TV or air time. I don't know why the people in charge don't do something, besides the obvious... Most or all of them are making money from it.
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Old 11-12-2011, 04:17 PM   #3
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Normalcy bias. Encouraged by the controlled media.
Aint gonna be no debate.


None of us can truly envision the full consequences of the inevitable failure of the ponzi, yet someone, somehow, has to prepare the people, just like the doctors and nurses have to gently prepare the cancer sufferer for 'bad news'.

The, so called, democratic system makes it impossible for anyone elected to even hint at the full and terrifying truth cos thats not how you get elected.

Ron Paul can only hint as whats coming and in the event that he becomes a threat to TPTB, he will almost certainly develop some 'health problems'.

I would fear for us all but know that fear is the main weapon of control so simply accept that we will all know our future as it arrives.

And yet I still cling to the idea that there are good people amongst the 'lizards' who even now look for better ways to run the planet.

I guess thats my normalcy bias ......
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Old 11-12-2011, 04:20 PM   #4
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Karl is pretty good, but IMHO he puts too much detail in that clouds the message. Although I can distill it, sometimes it is tedious. Otherwise, I would say he is a great source of info, as he has access [early access that is] to important info that he can include in his analysis.

That said, I agree we are well past the tipping point, and I fear the consequences of collapse.
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Old 11-12-2011, 05:29 PM   #5
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I would have to agree with you all.

I only know ONE person who has significantly more money now than in 2008. Green Shoots, my a$$.

It is hard to argue with math (correctly presented), and I believe K.D. and everyone else here in fair Bearville (as opposed to those in Bullishton) has it right. This ends up in default or hyperinflation or some combination of the above.

So, OK it is all likely to end badly. Maybe very badly. I just hope it is not TEOTWAWKI, at least a hard and fast one. We have a kid, so the future is important to me. Were we childless, Mr. and Mrs. Bearing would probably just decide to die broke, and have lots of fun along the way... But, we cannot do that, we have to think of the future. That's why I choose to buy and hold gold.
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Old 11-07-2012, 04:19 AM   #6
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Originally Posted by rblong2us View Post:
I would fear for us all but know that fear is the main weapon of control so simply accept that we will all know our future as it arrives.
"Fe-ar is a weapon of mass-destruction(...)"
"Dis-information is a weapon of mass destruction"

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Last edited by bushi; 11-07-2012 at 05:54 AM.
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Old 11-15-2012, 06:59 AM   #7
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Just found this by accident and thought it would be a good illustration
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Old 11-15-2012, 07:24 AM   #8
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