Oh, So You Think Exponents Don’t Matter?

For roughly 75 years — since WWII — our “governing masters” — whether they be Fed officials, elected politicians or otherwise have run this general line of crap that indefinite forward expansion is not only possible, it’s likely and good.

As I pointed out in Leverage, and have made a lot of noise in regard to both before and since, that’s a lie.  It’s a knowing, provable lie, which can be easily demonstrated using nothing more than basic mathematics.

You see, this rock we live on has fixed size, mass and resource.  It is very large, and its resources are vast, but neither is infinite and yet that’s the requirement for indefinite forward compound expansion to be possible.

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We therefore argue not over whether such a paradigm is possible, but merely over when the failure to do so will be recognized, and who will recognize it first.  Will it be recognized because some material subset of the population figures it out and decides to stop participating, or will it be recognized by hitting the wall on a societal basis resulting in the deaths of billions?

Then there are the secondary issues, such as will those who promoted this lie be held to account and, if so, how?  Will it through some sort of civil process, or will it be much less lawful and much more-violent?  Most-likely will be some combination; there will be places where civility will remain and due process respected, and then there will be places where it will not.

There are many charlatans who think they can argue for this or that means of evasion — becoming an expat, for example, or hiding in a hobbit hole somewhere.

But I argue that among some reasonable subset of the population, at least in the United States and a number of other developed countries, recognition has already come — quietly — to very substantial subsets of the people.

Fertility rates in the United States are at all-time lows. There will be those who argue that this is just a continuation of a trend; as people become more economically successful they have fewer babies.  But there’s something very interesting happening in this regard — women and families aren’t just postponing having kids, they’re skipping it altogether.

See, there’s a basic problem that people in the so-called “ruling classes” fail to discuss, although they all know it’s true: Debt pyramids, like all pyramid schemes, only work so long as there are always more new suckers to come along and take the reins from those before them.

We’re running out of suckers in two forms — first, women are choosing not to have kids.  And second, some not-immaterial percentage of young people, along with some older ones, are deciding they are not going to pay debts accumulated by others who you wish to throw off on them.  They didn’t vote for it, they didn’t agree to it and they see no benefit from it either.

They’re simply not going to do it and they have and will continue to find legal ways to evade the millstone you wish to toss around their necks.  They’ll cut their incomes willingly, they’ll live closer to the land, they’ll make do with less, they’ll enjoy life more and put up with less of your ****.

There’s not really anything you can do about that, by the way.  Without an ever increasing number of people willing to go after the six-figure (or more) salaries — not just a small percentage but an ever-increasing number — the pyramid eventually collapses.

Illinois is seeing a piece of this right now.  But if you think this is confined to Illinois, or even that it’s a “state-level” problem in general you’re dead wrong.

Remember that the claim has been that “animal spirits”, infused by Trump’s win in November, has spurred economic activity.  Well, if it has then why hasn’t that shown up in tax liability and thus receipts by the Treasury because it is a fact that said alleged “activity” has not occurred.

In fact, including April, which of course means including April 15th, receipts are up by a paltry 0.74%.

Tax receipts over a period of a constant tax rate structure are the most-accurate means of measuring total economic activity.  It’s not complicated folks; nobody likes paying taxes, but nobody likes going to jail either and nobody pays taxes on economic activity that didn’t happen.

Meanwhile we have two other numbers to contend with: The working age population over the last 12 months has expanded by 0.63%.  This means that adjusted for population there has been almost-exactly zero expansion in the economy over the last 12 months as represented by tax rates normed for the number of persons who can pay.

Meanwhile, during the last fiscal year the Federal Government increased debt by an astonishing $1.422 trillion, or roughly $5,500 per working-age person.  (Unfortunately you can’t compare against the current year because we’re currently under a debt freeze; when and if that is lifted things should get interesting in that regard — quickly.)

This is on top of the medical insurance premiums you paid, the taxes you paid and more.  That debt is a check written against your future earnings, in short, but the government cannot compel you to make those earnings and thus cannot compel the tax receipts that must be generated to prevent a death spiral in debt service payments.

It looks like the people are figuring that out — at least at the margin — because despite the claims of various media (cough-CNBS-cough-cough!) in terms of alleged GDP “growth rates” it is simply not being reflected in taxes paid which means the claims of a “healthy economy” are almost-certainly wrong.

Or maybe — just maybe — they’re not “simply” wrong, they’re something materially worse.

They’re LIES.