Tuesday, May 3, 2011

The Economy: Karl Denninger, “While You’re Being Juggled by the TSA”

“While You’re Being Juggled by the TSA”
by Karl Denninger

“When it comes to the TSA, a ring of baggage-handlers allegedly have been smuggling drugs from Jamaica into Detroit. But remember, we're all "safer" because of the TSA ****scanning you.  Never mind the obvious: If I can smuggle a bag of dope into the country through people that are in the "secure" area of an airport, I can also smuggle a bomb through the same mechanism and blow the plane to bits with you on board.

Likewise, watch the misdirection from the so-called "Gang of Six,” is converging on a proposal that would cut the deficit by roughly $4 trillion over 10 years through spending cuts, a tax-code overhaul, and reductions in the interest the U.S. would have to pay on its debt. A key element: The plan likely would give Congress a specific window of time to make deficit-cutting changes—locking in a commitment to reach the goal but giving lawmakers time to decide how best to do it. The buried leade?


Let's revisit the facts.  The CBO's baseline says we'll basically double the total federal debt (including Social Security and Medicare, which aren't actually debt) outstanding by the end of the decade.  That is, we'll go from $14 trillion to somewhere between $25 and $30 trillion.  Therefore, this "proposal" would cut the "average deficit" from somewhere around $1.5 trillion (annually) to somewhere around $1.1 trillion (again, annually.)

In addition, note that the "projections" make several assumptions relating to taxes and interest rates.  Neither of these is anything close to an assured outcome. But more to the point, nothing in these "projections" actually decreases the debt.  The entire scheme once again relies on the premise that we can "grow" our way out of the mess we've created.

The error in this thought process is that we haven't actually grown from production in the last thirty years. That is, the only way we've put up "growth" numbers in GDP, which is what debt percentages are measured against in the Federal Government, is by enticing private parties to take on more and more debt.  Hitting the wall on that debt acceptance is why we went down the toilet in 2007 and 2008.  But that debt has not been cleared from the system.

As such these so-called "plans" are nothing more than glad-handing the truth and an attempt to continue to run the convenient scam that our government wishes to get you to believe in - that it can somehow goad people into taking on more and more leverage. In fact, the World Economic Forum (and BIS) has said that in order to obtain the "growth estimates" that have been put forward total systemic debt worldwide will have to increase by an astonishing $100 trillion dollars during the next decade - that is, effectively a clean double.

About half of that will have to occur here in the United States. That which cannot happen, will not happen. This projection will not happen. It is for this reason that the "plans" being cooked up by the so-called "Gang of Six" are an artifice.  A fraud.  A scam.  They cannot lead to a resolution of the problems our nation faces because they are reliant on the further abuse of debt and leverage that both got us into the mess in the first place and have not been cleared out."

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