By Charles Hugh Smith
http://www.oftwominds.com/blogdec17/cost-basis12-17.html
December 5, 2017
What will it take to radically reduce the cost basis of our economy?
If we had to choose one “big picture” reason why the vast majority of households are losing ground, it would either be the stagnation of income or the spiraling out of control cost basis, that is, the essential expenses of households, government and enterprise.
Clearly, both rising costs and stagnating income cause households to lose ground, i.e. their income buys fewer goods and services every year.
I’ve often covered the dynamics of stagnating income for the bottom 95%, and real-world inflation, i.e. a decline in purchasing power.
But neither of these dynamics fully describes the relentless upward spiral of the cost basis of our economy, that is, the cost of essentials and the foundations of the economy: education, healthcare, energy and labor.
These expenses are pushing the costs of virtually every good and service, public and private, higher in a self-reinforcing spiral. The costs of education are spiraling out of control, stripping households of income as an entire generation is transformed into debt-serfs by student loan debt. The soaring costs of healthcare are a core driver of higher costs in the education complex (and goverment in general), and to cover these higher costs, counties raise property taxes, which add additional cost burdens to households and enterprises as rents rise.
Rising rents push the cost structure of almost every enterprise and agency higher.
Then there’s the asset inflation created by central bank ZIRP (zero interest rate policy) which has inflated a second echo-bubble in housing that has pushed home ownership out of reach of many, adding demand for rental housing that has pushed rents into the stratosphere in Left and Right Coast cities.
Let’s look at a few charts that illustrate the relentless rise in the cost basis of our economy:
Do you reckon these two charts are connected–soaring costs and ballooning administrative payrolls?
Student loan debt is soaring above $1 trillion, guaranteeing profits to lenders and debt-serfdom to the students exiting with degrees that are in over-supply, i.e. possessing little scarcity value in an over-credentialed economy:
The echo housing bubbles in many locales exceed the nosebleed valuations of the previous bubble:
And how do we pay for these spiraling out of control costs? By borrowing more, of course:
Courtesy of Lance Roberts, here’s a chart depicting how households are filling the widening gap between income and expenses with debt. This is another self-reinforcing spiral of rising costs, as debt accrues interest, adding costs at every turn of the spiral.
What will it take to radically reduce the cost basis of our economy? A fundamental re-ordering that breaks up all the cartels and quasi-monopolies that push prices higher even as they deliver lower quality goods and services would be a good start.
Charts! Yeah!!
What the hell is a “Schnikes”? Does he mean “shit”? If so, should I continue reading an article whereby the author doesn’t have the balls to say “Holy Shit!”?
Cost schmost. Taxes schmaxes. Will I have to learn a whole new schmucken vocabulary? Schmocabulary? So solly, I can’t take the schmance.
I like to curse as much as the next guy but it isn’t always my go to form of communication. As far as charts go, even a low IQ sub saharan monkey can decipher these without getting a headache.
I knew I’d get some feedback from you Stuck. You hate charts.
OK.
I did not realize that YOU submitted the article! Therefore,i did not realize YOU came up with the headline.
Upon further reflection, consideration, musing, and general Deep Thinking …. I have come to the conclusion that my prognostication was too hasty. In short, I now LOVE the title!! Please accept my most humble apologies.
That being said, I did not bring up another most egregious error whereby you urged us to “take a LOT”. Take a “lot” of what exactly?
I don’t know why I hate charts. But, you’re correct … today’s charts are easy to read. I do hate those charts with lots of squiggly multi-colored lines going every which way. It’s like some drunk bastard went ape shit with an etch-a-sketch.
You must have changed the title? It looks correct to me. If I originally wrote “Take a lot at…” then, yes, I am the dumbfuck. There’s your cursing for the day.
Btw, I agree with you about some of the charts that get posted. I have no doubt they hold very important information. Admin it too smart to post them if they were useless. His charts make me feel a bit stoooopid. I guess I should have been an accounting major instead of a comp sci major.
Schnock it off you guys. There are bigger schmucking fish to fry here. The bankers are cockschuckers.
Watch the movie Tommy Boy.
It is no accident that the title of this post conjured up an image of a deer in the back of a car kicking and thrashing its way out.
He who hath shall have less and he who hath nothing shall have it taken from him !
At 63 I witnessed what was happening to our nations economy and the damage incurred . The ohlagarchy or as George Carlin put it “The real owners of America” Do not give a fuck about you (middle Americans) the bulk of the population . It’s a big club and you and me are not in it !
The damage done to our nation to benefit so few is obscene and it is all thanks to the circle jerk in control from Wall Street to K-Street to Capitol Street wash Rinse Repeat !
Make America Great Again , OK with what and with who ?
The industries that had the economic force to supply the tax base that could do that was pillaged plundered gutted and left to wither and die nation wide . The steel workers the factory machine operators all gone and no one stopped the plunder for 40 years . Local governments losing the tax base contractors hire illegals , unions evaporating along with the higher pay and benefits those union blue collars supported . Teachers , Police and Fire also any and all other government employees lost sight of who was actually funding their salaries and benefits . So one arm of that circle jerk started borrowing to the moon and back and poof it’s gone all of it !
President Trump acted like he knew all this but as it turns out the view from the back of the Limo , the lounge from your own jet or the penthouse was quite different than the view from my 70 chevelle driving to my ship builder job at 5:30 in the morning in traffic with the GM assyembly the steel mill and the Air craft assyembly people . It’s all gone and it ain’t coming back !
Just got notice of medical insurance premium increases for 2018 for the company I work for.
30% increase! and this has happened twice since I’ve worked here. Fuck Obummercare.
Would you be able to pay less looking for insurance on the open market?
With the end of the insurance mandate coming up, there would probably be the option of tailoring your insurance to your actual needs and not pay a blanket cost for all the stuff you don’t need or want on top of what you actually need.
Some of us ARE seeing (and paying) the insurance premiums on the “open market”. Wait, what? What kind of market? Where do I look up the cost of a procedure IN ADVANCE? Not here in Utah! Where do I find the numerous, open-competition competitors of the three (used to be four) provider networks I have to choose between? How many more are moving in to make the marketplace MORE competitive? (hint, none).
F— ObamaDontCare; it was always a scam, that Reid/Pelosi stuck us with.
We are drowning in debt, the rest of the world is trying to create trade with one another while we invent the specter of evil Russians who stole our election just to undermine a president that is unpopular with progs and threaten war and sanctions on everybody.
“The Moscow stock exchange will soon issue nearly $1 billion-worth of yuan-denominated bonds. It could become the start of a new financial system not based on the US dollar, analysts say.
Russia will issue the 6 billion yuan (about $900 million) bonds with a five-year maturity in December or January. The Central Bank says it is testing the water for future investments.
“Such steps will make it possible to remove the dollar from mutual settlements and use only yuan and rubles (mostly yuan for the moment) in the mid-term, if more specialists from the Russian financial sector work in this direction,”
Russian bonds in yuan could be interesting for the Chinese, as China has trillions of dollars of excessive liquidity, as well as hundreds of thousands of new investors who are interested in trying new markets, the analyst said.
For Russia, facing a new round of US sanctions aimed at its bond market, it is a great opportunity to get closer to China, according to Zadoya.
Petr Pushkarev, Chief Analyst at TeleTrade, says investing in Russian yuan bonds is a great opportunity for Chinese investors to diversify their dollar-dominated portfolios.
“The step itself is more symbolic for now, because $1 billion is too little given the relations between Russia and China. Yet this is the beginning of a long journey, and this is a landmark move that shows the international monetary system is moving towards multipolarity, and that Russia is ready to take active steps in this direction with a certain development of events,”
According to Pushkarev, It is very natural for China, Russia and other countries to want to create a dollarless system.
“By doing so, they can gradually abandon the obsolete system of dollar settlements, where the US dominates and doesn’t fully accept Russia or other countries as equal and respected partners,” said Pushkarev.
The Russian bonds boast high yields, and even western investors are likely to find ways to bypass any possible American sanctions, says Ivan Kapustiansky, Forex Optimum analyst.
“The five-year Russian euro bonds are trading at 3.2 percent per annum, and the Chinese government securities boast a 3.6-3.9 percent yield. However, Russian bonds in yuan are likely to offer a better yield than the Chinese national debt.”
The Handwriting is on the Charts. The Late Great United States is about to take a great fall and all TPTB horses and all TPTB men can’t put it back together again. The fall will have been caused by the Cultural Marxism and Economic Plunder of the ZOG’s Barbarians on Wall Street and Capital Hill. The ZOG Fools claim their is no god but their god and Christians may not honor God The Father and Jesus openly any more but He will show them Who Can Control All Things including earthquakes, volcanoes, weather, wars and plague. Americans became remiss in many things and one of them was to not expel the ZOG like the Russians did 20 years ago. Jesus Christ is The Blessed Hope and We The People are going to need Him.
Great post rhs jr praying that it’s read 7000 times,,,,,,,,,God read it while was still in your mind!
Wip ,you need to be careful.Stucky is so sensitive it’s easy to make him cry.You don’t want that ..do you ?
Just another article telling us how fucked we all is. Past Time to head to the mountains .I just wish I could convince my Mom to go but she is determined to stay in our home come hell or high water.I guess she wants to hold on to the memories of our family.
I watched the movie ” The Deer Hunter ” last night.Those mountains in Pennsylvania sure are beautiful.
In 1958 I worked for USSteel………mill closed in 68! Lived in E central PA……Did my share of deer hunting in the mts, now in St Louis,mo! Loved the Deer Hunter, Thank you.
@Stucky
I have mad respect for you. I didn’t call you a low IQ sub Saharan monkey. It’s clear to every high IQ Burning Platform monkey you are the opposite of that. I just assumed (correctly?) that you didn’t look at the charts before you commented. I was trying to shame you into looking at them is all. I hear shaming works really well.??
DUH. This is the slow-motion[China shipping container-laden]train wreck of the GreatER DEpression beginning 2007-9, and now gaining momentum. Really know now why the sports stadiums are emptying and petroleum prices remain low? Middle class being decimated and the consumers increasingly “tapped-out”/ too busy sexting to buy discretionaries.
Amen to that ….we are doomed no going back!
Sorry BB.
The hunting scenes are from the Heather Meadows area of Mount Baker, Washington State, close to the British Columbia border.
Those were Stag, not White Tail deer.
I wish he had done a chart on the increase of administrative costs in businesses due to increased regulations. I know this is one of those things that prevented me from starting another company in the last decade, and it’s only gotten worse.
It would probably be a nearly vertical line if the administrative costs for government were to be plotted…
There isn’t any more “keeping up with the Joneses” because the Jonses are underwater on their mortgage and working 3 jobs to make their monthly bills. At best we can try to stay BEHIND the Joneses as they sink lower and lower.
I was supposed to be retired, but after 2 of my retirement plans were basically cut to nothing, I am considering my working the gig economy and building out my farm as retirement. The only way I can get my SS bennies is to cease working and get even poorer – talk about a racket…
First I have to say that this is a fantastic column and the charts are fantastic. Sad, but fantastic.
One comment I’d like to add is that the Physican vs Administrative chart reflects not anything provider driven, but is a necessary response that the insane complexity of the requirements of all of the vatiiis insurers – both governmental and private. In a effort to control costs they have constructed rules that would make your head spin. Thes always so much talk about the complexity of the Tax Code, but it’s nothing compared to the shit providers have to go through to get paid.