Last fetch attempt was insuccessful.
Reason: Timeout was reached
-
23 May ' 09:00
Deflation, the Dollar and the Consumer Price Index (CPI)May 23, 2012Are we entering a deflationary era? Two charts suggest "yes".Are we entering an era in which prices stagnate and the purchasing power of the U.S. dollar rises? Our Chartist Friend from Pittsburgh has kindly provided two charts which suggest we have entered such a deflationary period. Long-time readers know I have presented technical evidence for over a year that the U.S. dollar appears to be in a long-term uptrend, at least relative to other currencies. These charts suggest the uptrend is not just nominal but in purchasing power.
Here is Chartist Friend's commentary on the charts:
After the bombshell disclosure by JPM there is no doubt in my mind that the financial system is in the process of relentlessly deflating. If they by themselves have the tens of trillions of derivative bets that they are alleged to have, then God help us if that bank blows up.
As I have pointed out previously, they topped the DJIA on an occult date (May Day) at an occult number (13,330.30) so I also have no doubt that the coming deflation is as much a part of the plan as the reflation off the SPX 666 bottom was.
The CPI purchasing power of the consumer dollar chart is simply an inverse CPI chart, though FRED presents them separately to make sure we are aware that the value of the dollar has been destroyed since the Fed took control of the currency. Since they each have their own chart it's best to view them together. In this way it becomes crystal clear that a rising dollar and deflation go hand in hand, and also that we are entering uncharted economic territory.
Thank you, Chartist Friend, for the eye-opening charts and commentary.
Deflation, the Dollar and the Consumer Price Index (CPI)(May 23, 2012)Thank you, Yoni F. ($50), for your splendidly generous contribution to this site--I am greatly honored by your steadfast support and readership. -
22 May ' 10:29
What Is Wealth?May 22, 2012We all think we know what wealth is, but sometimes the "obvious" misses the mark.Asking "what is wealth?" seems needless because we all know what wealth is: never having to work again, endless leisure, endless consumption of the "good things of life," being waited on hand and foot, luxurious belongings, vehicles and homes, a life of travel and sport, trust funds, stacks of secure gold, and so on. All this is "obvious," but is that certainty illusory? There are many people with $2 million in net worth, a significant number with $20 million, and more than a few with $200 million. All would be considered wealthy by the average household earning $63,000 annually with a total net worth of less than $100,000, not to mention the 61 million American wage-earners who pull down less than $20,000 a year who own negligible net worth.
Those with a mere $2 million may not reckon themselves wealthy, if their eyes are fixed on those with $20 million. But if a wealthy person suddenly discovers they are riddled with fast-growing cancer, then they quickly lose interest in financial wealth except in terms of what medical treatment it can buy.
There really isn't much more modern medicine can do for someone worth $200 million than it can for someone worth $2 million; once one's life and health are at risk, then conceptions of "wealth" are drastically reordered: health is wealth, and nothing else matters.
Once lost, health is difficult to restore, and financial wealth is no longer the key metric. The graveyards are full of extremely wealthy people who died "before their time."
A life of leisure may not be all it's cracked up to be, either. Whether it is paid or not, work is the foundation of meaning and identity. Those without work become depressed, those who retire often fade and die, and those with no goals or work ethic become dilettantes who enrich various therapists and pyschiatrists with their ailments and unhappinesses.
It's not just leisure that's wealth, it's control of one's work life.
We might also ask if wealth correlates all that closely with happiness. Judging by the hordes of wealthy people who are drugged-out, alcoholic, and in permanent therapy, we can surmise the correlation is not quite as strong as the "financial wealth is everything" PR would have it.
Who is happier, the "natives" serving the supine, isolated wealthy person, or the wealthy person? It turns out it's the people who have a well-earned place in a caring community who are healthier and happier than those who are unloved and isolated, regardless of their wealth and power.
If our labor is compensated in fiat currency that can be depreciated by official whim, then how much of our labor do we actually "own"? Frequent contributor Harun I. has asked this question here, and the line of inquiry it raises applies to all financial wealth held in currency.
Precious metals, long a favorite of those seeking timeless wealth, also have their own pitfalls. Being small in size and easily transportable, they are also easily stolen or confiscated by authorities. A few coins sewed into garments to be used to bribe border guards are an extremely useful form of wealth, but any large cache of precious metals attracts criminals and Central State authorities, i.e. higher-order crooks. Wealth that can be stolen or confiscated has a nasty habit of being stolen or confiscated.
What about real property? An expansive estate is certainly "wealth" if it generates income, but if it happens to classify you as an aristocrat in revolutionary times, then various unpleasantries typically follow, and the wealth that seemed so desireable is transformed into a death warrant.
Wealth is not as fixed as we might imagine; it only appears solid in eras of stability. In times of instability and transformation, wealth that appears solid can evaporate in crisis or crumble in devolution.
Health, skillsets, work you control and a caring community are peculiar "assets" in that they cannot be confiscated by others for their own use. They are uniquely bound to individuals and relationships in a way that financial wealth is not: financial wealth can always be separated from the individual, but the individuals' skills, community and relationships cannot be confiscated.
If financial wealth can't buy health or happiness, then what can it buy? Perhaps all it really buys is an illusion of security and happiness that turns to dust once it is within grasp.
What Is Wealth?(May 22, 2012)Thank you, David H. ($10/mo), for your awesomely generous subscription to this site--I am greatly honored by your support and readership. "It is not the strongest of the species that survives, nor the most intelligent, but the ones most adaptable to change." (Charles Darwin)
$14.99
$14.99
$14.99
$14.99 Iraq vet, Burma, Route St Jacques de Compostelle, saving dolphins and his marriage
-
20 May ' 18:39
Feedback, Unintended Consequences and Global MarketsMay 21, 2012We cannot know that unintended consequences will always be destructive. Neither models nor projections have accurate track records in predicting the future.It seems an appropriate time to re-examine why our ability to predict the future of complex systems is so poor. A significant number of well-informed, smart people believe the Euro Experiment is unraveling in a positive feedback (i.e. self-reinforcing) death spiral. Another significant number of people believe the market meltdown is overdone/oversold and global markets are set to rally despite the bad news. Their view is founded on negative feedback, i.e. forces that resist or counter the prevailing trend.
In the case of global markets, these forces include technical support/resistance, market intervention by The Powers That Be (TPTB) and the large number of people and instituions with stakes in the survival of the Status Quo: politicos, pension funds, wealthy Elites, government employees, and so on. These people stand to lose sufficient wealth and financial security to motivate them to "fight to the death," so to speak, to support the Status Quo.
All models of non-linear complex systems are crude because they attempt to model millions of interactions with a handful of variables. When it comes to global weather or global markets, our ability to predict non-linear complex systems with what amounts to mathematical tricks (algorithms, etc.) is proscribed by the fundamental limits of the tricks.
Projecting current trends is also an erratic and inaccurate method of prediction. The current trend may continue or it may weaken or reverse. "The Way of the Tao is reversal," but gaming life's propensity for reversal with contrarian thinking is not sure-fire, either.
If it was that easy to predict the future of markets, we'd all be millionaires.
Part of the intrinsic uncertainty of the future is visible in unintended consequences. The Federal Reserve, for example, predicted that lowering interest rates to zero and paying banks interest on their deposits at the Federal Reserve would rebuild bank reserves by slight-of-hand. Banks would then start lending to qualified borrowers, and the economy would recover strongly as a result.
They were wrong on every count. Zero interest rates (ZIRP) destroyed the returns of pension funds and savers, and drove investors into intrinsically risky "risk-on" trades such as stocks, long-term bonds (care to bet on what the interest rate will be in 5 years, 10 years or 20 years? Based on what crystal ball?) and various carry-trades. Paying interest to banks destroyed the incentive to lend and increased the incentives to speculate, knowing that "too big to fail"--the acme of moral hazard--meant the Treasury or Fed would bail out any bets that soured.
With margins so low and collateral so impaired, banks have had weak incentives to risk making loans and strong incentives to deposit money in the Fed to safely earn interest at zero risk.
With money supposedly "cheap" but scarce and dear in real life (other than mortgages backed by the Federal Government, another extension of moral hazard), then the reflation of assets the Fed predicted has failed to materialize except in the stock market, which has doubled under the fire-hose of liquidity provided by QE1, QE2, Operation Twist and various other monetary-inflation gambits.
Rather than organically boost risk assets via stronger demand in the real world, all these measures accomplished was to addict the markets to Central Bank injections of "free money."
Not only have all these consequences been unintended, they have also been perversely and highly destructive to the real economy, systemic stability and trust in the institutions of central states and banks. If you had set out to bleed the real economy, stability and trust in institutions, you could not have designed a more effective policy than that of the Fed and the European Central Bank (ECB).
There are no easy or painless ways to undo the unintended consequences, just as there are no easy or painless ways to "fix" what is unfixable, i.e. the euro, the U.S. financial system, the Chinese real estate bubble, etc.
All these forces are positive feedback, as each reinforces the others. Given this data, it seems obvious the global market systems will destabilize and disintegrate, and probably sooner than later.
But this overlooks the difficult-to-quantify forces of negative feedback, mostly based on the great number of people who have much more to lose if the Status Quo crumbles than they stand to gain. Thus artifice, slight-of-hand accounting, empty promises, money-printing and all sorts of other attempts to stabilize what is clearly destabilizing will be applied in full measure.
Just as we cannot predict the future, we cannot predict unintended consequences. We cannot assume they will all be destructive or negative; on occasion, policies "get lucky" and the unintended pathway has unexpectedly positive results.
Given what we know about failed fixes, it seems clear the global financial Status Quo will continue to destabilize if current policies continue. What we don't know is the precise pathway of that destabilization. We could summarize this uncertainty by saying that various feedbacks, positive and negative, will counter each other and feed back (self-reinforce) similar feedback loops, and which one has the upper hand at any one moment sets a trend that lasts until the other gains the upper hand or the two reach some sort of equilibrium that may or may not last for a time.
It's easy to model systems with a few variables, but the predictive track record of models is poor. It's also easy to project current trends, but the predictive track record of projecting current trends is also poor.
The best we can do, it seems, is to be alert to both existing positive and negative feedbacks, and be alert to new feedbacks which could fundamentally alter the system.
Feedback, Unintended Consequences and Global Markets(May 21, 2012)Thank you, Ishabaka (Gerber wilderness knife), for your practical, useful and most thoughtfully generous contribution to this site--I am greatly honored by your steadfast support and readership. -
18 May ' 23:58
Part 3: Winner's EuphoriaMay 19, 2012Here is Part 3 of my serialized novel "For Bidding For Love." Across the Bay in San Francisco, the mood was considerably more ebullient in the tastefully furnished second-floor flat of Alexia Rudge, a.k.a. GreenDollGal. Arising from her chair, she lifted the hem of her red hibiscus-print muumuu and danced a gleeful jig on the burnished hardwood floor, repeating "Two cents! Two cents!" until her tabby cat Hanover must have doubted his human caretaker's sanity. A visitor might have reached the same conclusion, for her impromptu dance and ecstatic chant was sorely at odds with the somberness of Beethoven's Pathetique piano concerto which played softly in the background Though the visitor might note the one characteristic shared by Ross's cavelike abode and Alexia's bright flathardwood flooringtheir attention would undoubtedly be drawn to the many contrasts, perhaps starting with Alexia's swirling vintage muumuu and Ross's crumb-encrusted red Ohio State sweatshirt. Where Ross's room smelled of musty paperwhat else could a room stuffed to the ceiling with old catalogs and magazines smell like?Alexia's flat was scented by octagonal bowls of aromatic pot pourris and the fresh salt air coming off the nearby Bay. Where Ross lived in darkened troglodyte squalor of blocked windows, Alexia's expansive bay windows gleamed with white trim and natural light, affording her living room a nearly unobstructed view of the sailboats drifting across the quiet blue waters of San Francisco Bay. Ross's room had no exposed walls, and hence no artwork; Alexia's cream walls displayed a cannily-placed assemblage of 20th century art: striking film posters, mostly Italian, a modern Japanese print of Ryokan's Mount Kugami, and a scarlet-hued roux of primary colors painted by a rising Chinese-American artist. She'd been offered collectable Persian rugs, but declined for ethical reasons; having seen photos of indentured young women weaving the beautiful carpets, she would have nothing to do with supporting such servitude. She'd brightened the rich oak hardwood with a single cheap cream-and-coffee rug; the expanse of wood was easier to clean and suited her preference for spare simplicity. While Ross's prized appliance collection was displayed on pine shelving in his cramped dining nook, Alexia's dolls were displayed in carefully arranged splendor in sleek Japanese maple glass-door cabinets which occupied pride of place in her sparely furnished living room. Ross's standard meal of microwaved stuffed pita bread could be eaten while standing in his crowded kitchen, or even in the rooming house hallway; a world away, Alexia dined on a sturdy French Oak table in a tile-and-blond-alder kitchen designed for a no-nonsense cook who ruthlessly imprisoned clutter behind pantry doors. Dinner was home-prepared braised tofu and savory garlic haricots, not some microwaved junk food, and Alexia's slightly soft figure proved her love of butter-based sauces and desserts and a near-addiction to deep-fried Asian delicacies. Her friendsyes, even her female friendsreckoned she wore the few extra pounds well, given her above-average height and bustline, and her glossy hair which matched the blond-alder of her kitchen cabinetry in color and highlights. As she bounced about her sparely furnished living room, chanting the praises of "Two cents!", an observer might have been impressed with the lightness of her movements; for walking to the small groceries in Chinatown kept her fit and her long years of arduous ballet classes as a youth had imprinted a grace unknown to the less disciplined. The jumble of shoes won on eBay which would have laid instant waste to the living room's serenity was relegated to the second small bedroom, where it was sorted, catalogued and priced before being taken to her corner of the Union Street vintage-clothing boutique owned by her friend Katy. It was a mostly pleasant way of paying the mortgage; by specializing in smaller shoe sizes catering to the neighborhood's population of petite, high-earning Asian-American women, Alexia earned enough to pay the bills even after Katy sliced off her commission. Small sizes were relatively rare on eBay, but Alexia had refined her skills such that many a pair of shoes purchased for a few dollars in a batched auction would fetch five or ten times' that sum in Katy's store, snatched up by a customer delighted to save half or more off retail. To win an auction was always satisfying, but to beat out experienced competitors by a razor-thin two centsit was a rare feat, akin to winning a lottery. She'd had even sweeter winsthe vintage film poster for Contraband, for onebut none that were closer finishes. Basking in the glow of her victory, Alexia ended her spontaneous dance in front of her framed Contraband poster. It was the ultimate example of her collecting strategy: buy under-appreciated value in a well-established market. Categories which had once been collectable by people of average meansvintage 1960s-era electric guitars, or Frank Lloyd Wright furniture, to name but two outrageous exampleshad shot into the high firmament of millions of dollars in the boom years. Even as the boom disintegrated into bust, the values of these rarities remained far above the pocketbooks of most collectors. Original posters for films such as Casablanca had followed similar trajectories, and so Alexia had sought posters of lesser-known films with tie-ins to the highly valued collectibles clustered around such classics as Casablanca and Blade Runner. The World War Two spy drama Contraband cast the German actor Conrad Veidt, famous for playing the evil Nazi in Casablanca, against type as the heroic Allied leading man. He'd been paired with beauty Valerie Hobson in a previous film, The Spy in Black, and Alexia had, after a long search, acquired an original poster for this film. Once she found another Veidt poster, then the sum of the parts would far exceed her purchase costs. It was the way collecting worked, and it was the reason behind her bid for the Sunbeam T-20Z toaster. Her ex-husband Viggyaggravatingly messy, hopelessly counter-culturehad given her two exceedingly valuable things: a stake in this San Francisco flat just off the tony stretch of Union Street, and a deep insight into building valuable collections. His comment had been offered as a throw-away explanation of value, but it had remained lodged in the deepest recesses of Alexia's brain. "People want a story," he'd said. "If there's no story, a collection is just a random bunch of stuff. But if there's a story which weaves them together, then they become strands of gold." The story wasn't the item's provenance; it was the invisible thread added by the collector which bound loosely connected items into a unity, and understanding this had enabled Alexia to assemble and sell various collections for very respectable profits. Thus a small collection of vintage posters built around Conrad Veidtan integral player in the Casablanca storywould offer excellent value to any Casablanca affectionado priced out of vintage posters of the film. Her giddiness at winning the Sunbeam T-20Z toaster had a pecunious root, for the toaster was the linchpin of a carefully assembled "1940s appliance classics" collection which she planned to sell for a handsome profit at the upcoming collectibles extravaganza in Las Vegas. And if she could assemble and sell the Veidt poster collection before the end of the month, she would finally have enough cash for the Mother Lode purchase which could conceivably pay off her mortgage: the huge, uncatalogued assortment of vintage movie posters which lay undisturbed in her friend's attic. Her pal's mother had worked in a theatre prior to marriage and collected the posters in packrat fashion, taking home whatever came off the theater walls. The elderly lady had finally relented to age and entered an assisted care home; now the daughter was selling off her home's extraneous contents to raise cash for her mother's care. Having seen Alexia's Italian film posters on the wall, her friend had offered her the attic collection for a modest price. But Alexia needed to act on the offer within the next three weeks, or her friend would give the posters to a dealer to be auctioned. Alexia had taken a brief look in the attic, and come away with the conviction that the ragtag collection of rolled 60s film posters could be transformed with careful pruning and filling-in into much more valuable series. Auctioned individually, she reckoned the tattered, flyspecked pile might pull in a tidy sum in an auction; but massaged into tasteful stories, their value might jump considerably. If that were possible, the proceeds would be enough to snap the shackles of the mortgage chafing her freedom. While ever-generous Viggy had deeded her his share of the flat, the mortgage still held her in dread bondage. If she could win the auction of the rare Conrad Veidt film poster The Thief of Bagdad, the future looked bright. The auction expired tomorrow at 7 p.m., and Alexia allowed herself a deep breath of contentment. Everything was falling into place; once that poster was hers, she would a mere step away from a truly glorious financial freedom. Next: A Feverish Whirl of Evil Intentions
Part 3: Winner's Euphoria(May 19, 2012)
To read all the segments, visit the "Four Bidding For Love" home page
"A person with a garden and a library has everything"--get your seeds now: largest discount ever from Everlasting Seeds. -
17 May ' 08:08
We Have Reached Peak GovernmentMay 17, 2012 As the foundations that supported an expansive centralized State crumble, the entire centralized State is revealed as unsustainable: we have reached Peak Government. In previous entries this week, I have detailed the profound unsustainability of government pensions and entitlements such as Medicare. These are symptoms are a larger phenomenon: Peak Government, the realization that Central States cannot sustain their current budgets or future promises. Most informed people are familiar with the concept of Peak Oil, but fewer are aware that were also entering the era of Peak Government. The central misconception of Peak Oil -- that its not about running out of oil, its about running out of cheap, easy-to-access oil -- can also be applied to Peak Government: Its not about government disappearing, its about government shrinking
Central government -- the Central State -- has been in the expansion mode for so long that the process of contracting government is completely alien to the nation, to those who work for the State, and to those who are dependent on the State. Thus we have little recent historical experience of Peak Government and few if any conceptual guideposts to help us understand this contraction.
Peak Government is not a reflection of government services or the millions of individuals who work in government; it is a reflection of four key systemic forces that drove State expansion are now either declining or reversing.
The Four Key Drivers of State Expansion
The twin peaks of oil and government are causally linked: central government's great era of expansion has been fueled by abundant, cheap liquid fuels. As economies powered by abundant cheap energy expanded, so did tax revenues.
Demographics also aided Central States expansion: as the population of working-age citizens grew, so did the work force and the taxes paid by workers and enterprises.
The third support of Central State expansion was debt, and more broadly, financialization, which includes debt, leverage, and institutionalized incentives for speculation and misallocation of capital. Not only have Central States benefited from the higher tax revenues generated by speculative bubbles, they now depend on debt to finance their annual spending. In the U.S., roughly one-third of Federal expenditures are borrowed every year. In Japan -- which is further along on this timeline, relative to America -- tax revenues barely cover social security payments and interest on central government debt; all other spending is funded with borrowed money.
The fourth dynamic of Central State expansion is the States ontological imperative to expand. The State has only one mode of being, expansion. It has no concept of, or mechanisms for, contraction.
In my book Resistance, Revolution, Liberation: A Model for Positive Change, I explain this ontological imperative in terms of risk and gain. From the Central States point of view, everything outside its control poses a risk. The best way to lower risk is to control everything that can be controlled. Once the potential sources of risk are controlled, then risk can be shifted to others.
Put another way, once the State controls the entire economy and society, it can transfer systemic risk to others: to other nations, to taxpayers, etc.
In effect, the States prime directive is to cut the causal connection between risk and gain so that the State can retain the gain and transfer the risk to others. The separation of risk from gain is called moral hazard, and the key characteristic of moral hazard can be stated very simply: People who are exposed to risk and consequence act very differently than those who are not exposed to risk and consequence.
Every time the Central State guarantees something, it disconnects risk from consequence and institutionalizes moral hazard.
To take but one example of many, when the Central State guarantees mortgages so lenders and originators cannot lose and the borrower cant lose more than his modest 3% down payment, then everyone in the chain is encouraged to pursue risky speculations because the State has disconnected risk from the consequence of a potentially large loss. The risk hasnt vanished; it has simply been transferred to the taxpayers, who absorb the inevitable losses that result when speculation is encouraged.
Separating risk from gain inevitably generates systemic instability. The entire credit-housing bubble can be seen as proof of this dynamic.
All four of the causal factors itemized above are turning against continued expansion:
- The key energy source of global transportation, liquid fuel, is no longer cheap and easy to access.
- The demographics have reversed as the population of State dependents is soaring.
- Debt has expanded to the point that servicing that debt now threatens the financial stability of the State and its currency.
- The States separation of risk and consequence is generating systemic instability.
There are plenty of models of State expansion -- democracy, socialism, communism, theocracy, and so on -- and none for State contraction. This suggests that the down slope of Peak Government will be disorderly and rife with unintended consequences.
The Failure of Separation of Powers
The predominant Western model of governance assumes, incorrectly, that a separation of powers within the State will limit the States appetite for control. But rather than limit the States expansion, the States subsystems -- the institutions of executive power, legislative power and judicial power -- are competing to gain as much control as possible over both the State itself and the nations social and financial systems.
This competition doesnt weaken or limit the State; rather, it lends the State a fearsome competitive advantage, as each institution gains power as the State expands. So even though the competition between the three may appear to limit the power of each, in aggregate this competition only increases the States expansion as each seeks to outdo the others in reach, influence, and power.
Regardless of which institution wins or loses a particular squabble, the State inexorably expands its control and power. And just as inexorably, elites within the State -- systemically protected from the risk created by their policies -- will experience a rising sense of omnipotence as their private power rises in tandem with the States expansion.
These powers also offer State elites a way to radically lower their own risk and dramatically increase their private gain by leveraging the States vast powers to their own private benefit.
In other words, not only does each agency and branch of the State seek to expand its reach and power, so, too, does every individual within the State who can leverage the power of the State to protect his/her own individual gain.
The State as Protector of Private Gain
The Central State is granted unique powers of coercion by its membership (the citizenry) to protect them from the predation of foreign powers, individuals, and subgroups seeking monopoly. The citizens grant the State this extraordinary power to protect their freedom of faith, movement, expression, enterprise and association and to insure that no subgroup can dominate the nation for their private gain.
Granting this power to the State creates a risk that the State itself may become predatory. To counter this potential, the State has the self-limiting mechanisms of a separation of powers such that no one institution or agency can dominate the State and thus the nation.
But as we have seen, the separation of powers has failed to limit the expansion of the State; rather, it has become a competitive advantage, feeding the States expansion. There are no State-based limits on the States concentration of wealth and power.
There is a great irony in this concentration of power in the State: the power is concentrated to protect the citizenry from predation and exploitation, but that concentration becomes an irresistible attractor for all those seeking to increase their private gain via monopoly, cartels, collusion, fraud, and other forms of predation.
The wealth that can be concentrated in private hands is not limited or self-regulated, and so private concentrations of wealth inevitably exceed the ethical threshold of individuals within the State (i.e., their resistance to bribes and self-interest). This structural imbalance leaves the State intrinsically vulnerable to the influence of private wealth. Once this wealth has a foothold of influence within the State, it can then bypass the States internal controls and become the financial equivalent of cancer: a blindly self-interested organism bent solely on growth at the expense of the system as a whole.
Rather than protect the citizens from exploitation, the States primary role becomes protecting the private gains of elites who have taken effective control of the States vast powers.
The Death Spiral of an Expansive State
We can now see that the Central State faces an impossible contradiction: to pursue its primary purpose of protecting the citizenry from predation, it is granted powers that enable it to evade its own self-limiting mechanisms. Private concentrations of wealth gain control over the States machinery of governance, and the resulting partnership of private and State elites suppress the mechanisms that were intended to limit private influence over State power.
To enhance their own power, these elites increase the States reach until it dominates the entire political, social, and economic system. This sets up an inherently self-destructive feedback loop in which the States actions to protect its self-serving elites weaken both the State and the nation. The States inefficiencies pressure the nations output, even as the State increases its share of the national income to maintain its self-serving elites and quiet its potentially restive dependents. The more the State expropriates, the less surplus is left for productive investment, and so the nations output continues to decline.
This dynamic creates a positive feedback loop (i.e., a death spiral) of higher taxes and lower investment in productive assets.
Post Peak-Government Living
In Part II: The End of the Free Lunch, we consider what citizens can do to limit their own risk as the Central State contracts.
We explain how the State has unfairly used taxpayer-funded subsidies to erode participation commerce and investment at the local level that in ages past provided transparency into the true value of labor.
Now that the artificial influence of these subsidies is waning as the State can longer longer afford them, reactivating the infrastructure and processes for enterprise at the community level will be critical to transitioning to a sustainable and more resilient economic model. Click here to access Part II of this report (free executive summary; paid enrollment required for full access).
This essay was first published on chrismartenson.com.
Warm the hearts of your family while cooling the planet--plant a garden!: largest discount ever from Everlasting Seeds.
We Have Reached Peak Government(May 17, 2012)Thank you, Anonymous from Canada ($150), for your staggeringly monumental generous contribution to this site--I am greatly honored by your steadfast support and readership. -
16 May ' 11:48
That Which is Unsustainable Will Go Away: Medicare May 16, 2012 Medicare is an example of an unsustainable system that will go away in the decade ahead. Here are the sobering facts about the number of workers and those drawing Social Security, Medicare and Medicaid entitlements in the U.S. While the government claims to have a "trust fund" to pay for Social Security and Medicare, this is illusory propaganda. There are no funds set aside to pay these entitlements--they are "pay as you go" programs funded by current tax revenues. If the tax revenues don't cover the programs' expenses, the Treasury sells bonds, i.e. issues debt to pay the entitlements. Social Security (SSA) has 61 million beneficiaries as of March 2012.
Medicare has 49 million beneficiaries as of November 2011.
Medicaid has over 50 million beneficiaries; another source puts the current number at 58 million.
Kaiser Family Foundation says roughly 7 million "dual-eligibles" who receive both Medicaid and Medicare, so let's use the data point of 50 million Medicaid-only recipients.
We can assume that most people drawing Medicare benefits also draw Social Security, while the 8+ million drawing disability from Social Security are also covered by Medicaid.
However you slice it, there are roughly 60 million people drawing Social Security and Medicare/Medicaid and another 50 million Medicaid recipients for a total of 110 million people drawing significant entitlements.
As I have noted here many times, there are only 115 million full-time jobs in the U.S.
That means the ratio of workers to recipients of significant "pay as you go" entitlements is roughly 1-to-1: 115 million full-time workers and 110 million people drawing Social Security and Medicare/Medicaid.
These programs consume the majority of the Federal budget. The Federal government spends around $3.7 trillion and collects around $2.6 trillion in taxes, so the basic deficit is $1.1 trillion. Off-balance sheet "supplemental appropriations" mean the real deficit is actually considerably higher.
Social Security costs $817 billion, Medicare and Medicaid costs total about $800 billion annually, and program outlays rise every year. The Pentagon/National Security budget is around $690 billion.
As I detailed in The Fraud at the Heart of Social Security (January 17, 2011), the program paid out $707 billion in 2010 and collected $631 billion in taxes, a $76 billion shortfall for 2010. The current program (2012) cost is $817 billion, a leap of $100 billion in a few short years as Baby Boomers flood into the program.
Of the roughly 150 million workers in the U.S., 38 million earn less than $10,000 per year, 50 million earn less that $15,000 a year and 61 million earn less than $20,000 annually. All these numbers are drawn directly from Social Security Administration payroll data.
100 million wage earners, or 2/3 the entire workforce, earn less than $40,000 per year.
Median pay in the U.S. is while the average pay is about $40,000. Since the average American household takes in $63,091 per year, it seems the typical wage is roughly $30,000 a year.
The Medicare tax is 2.9% of wages, 1.45% each for employer and employee. If the typical worker makes $30,000 a year for 35 years, then lifetime earnings are about $1 million. If we take the $40,000/year average, then that rises to around $1.4 million in lifetime earnings. The 2.9% Medicare tax thus totals about $30,000 to $40,000 in lifetime contributions for the average worker.
The average benefits extracted from the system run from $393,000 to $525,000 (due to the benefits extended to non-working spouses, benefits for never-married people may be somewhat lower). Average annual costs per beneficiary run as high as $18,000, though expenses typically rise significantly in the last year of life.
As I have reported here earlier, a friend's father was in the hospital a few years ago for less than a week for "observation" and a non-invasive gall-stone procedure. Medicare was billed $120,000, or roughly the lifetime contributions of three workers for this modest procedure and a few days in a hospital. My Mom had an office procedure performed on one of her toes and Medicare was billed $12,000. An office procedure (not in surgery) that took a few minutes absorbed 1/3 of my entire lifetime contributions to Medicare.
What we have is a system where the full-time worker to beneficiary is already 1-to-1 and the system pays out 10 times more per person than it collects in taxes. The Medicare system would need about 10 workers for every beneficiary to be sustainable. Right now the ratio is just above 2-to-1. That simply is not sustainable.
Tweaking the payouts doesn't change the basic math: "pay as you go" entitlements are not sustainable when the number of recipients equals the number of full-time workers. Programs that pay out $400,000 per person (many of whom did not work a lifetime) and collect $40,000 per lifetime of full-time work are not sustainable.
Wishing the math were different does not make it different.
For more on this topic, please see:
America's Hidden 8% VAT: Sickcare (May 10, 2012)
How We Do Harm: A Doctor Breaks Ranks About Being Sick in America (print)
Fer crying out loud, does everyone already have their garden in?: largest discount ever from Everlasting Seeds.
That Which is Unsustainable Will Go Away: Medicare (May 16, 2012)Thank you, Timothy W. ($20), for your splendidly generous contribution to this site--I am greatly honored by your support and readership. -
15 May ' 16:57
Important addendum: Correspondent Y.W. provided this actuarial analysis of the numbers I projected:
I have been an avid reader of yours for a while now, and your latest titled "That Which is Unsustainable...." contains what I think is a bit of an error. You wrote that to fund a $120K cash benefit pension, a pension fund would have to sock away $6,000,000 dollars ($6 million X 0.02 = $120 thousand). However, this is only true if the pensioner lives forever, all else being equal. In the real world, the accumulated capital would be slowly drawn down to pay an increasing portion of the cash benefit over time until it was exhausted.
I did a simple annuity calculation under the following conditions- retirement at 55, pension paid at $120K rate for 30 years with a fund growth rate of 2%, and came to a fund value at retirement of $2.74 million dollars. Still a healthy and disturbing sum, but significantly under the stated value of $6 million dollars.
Thank you, Y.W. for this informative and insightful commentary. With this more accurate assessment, the conclusion is still staggering: to fund the senior rank public pension, the city will still need to contribute $90,000 a year, roughly equivalent to the wage of a full-time city worker ($85,000/year average), for 30 years.
Since the median pay in the U.S. is about $26,360 annually, then that means the $2.74 million that must be set aside for each senior-level pension is equivalent to three workers' entire lifetime earnings--35 years X $26,360 = $920,000 X 3 = $2.76 million. Since these workers must pay taxes and fund their own retirements, we can guesstimate that the $2.74 million is equivalent to the entire net lifetime earnings of four workers. The standard-level cash/benefit "defined benefit" pension will require the entire net lifetime earnings of two workers.
Even reducing the total contributions by half still leaves an impossible sum of total contributions to be made: to make the promised cash/benefit payouts, every city/county must set aside the equivalent of between 5 and 10 years of the entire general fund budget.
This does not even touch on two other sobering realities: the number of public employees who are in the "pension pipeline" and who will be retiring within the next decade is exploding as the Baby Boomers exit the workforce, while at the same time the public workforce is being reduced to align with dwindling permanent-recession tax revenues. Both of these trends further exacerbate the structural misalignment of promises made, low yields, fiscal limits on how much can be contributed annually and the current size of pension funds.
-
14 May ' 21:58
That Which is Unsustainable Will Go Away: Pensions May 15, 2012Publicly funded pensions and Medicare are two examples of unsustainable systems that will go away in the decade ahead. Today we look at pensions, tomorrow we examine Medicare.One of the few things we know with certainty is that which is unsustainable will go away and be replaced by another more sustainable arrangement. Whether we like it or not, or are willing to accept reality or not, unsustainable public pensions will go away. What makes "defined benefit" pensions unsustainable? 1) Promised cash/benefits packages that are not aligned with the fiscal realities of what can be contributed annually to the pension funds 2) "New Normal" low yields on low-risk investments and 3) skyrocketing costs of healthcare benefits.
This is easily illustrated with basic math. Recall that defined pensions are not "pay as you go" plans like Social Security, where the taxes paid by today's workers fund the benefits distributed to today's retirees; "defined benefit" pensions are supposed to be paid out of a pension fund which generates returns sufficient to pay the retirees' benefits.
In a typical small coastal city (112,000 residents) in California, senior police officers receive annual pensions in excess of $100,000. Generous benefits (healthcare coverage, etc.) for life add another $20,000 or so a year, so the annual payout is roughly $120,000 a year per retiree.
Less senior city employees receive pensions and medical benefits around half that amount, or $60,000 a year.
These pensions are not out of line with what other cities on the Left and Right coasts have promised their employees.
The city has 1,637 full-time employees and 518 part-time employees. The average full-time wage (not including benefits and pension contributions) is $85,726. The estimated median household income for the city is $60,625.
Assuming the pension funds are managed conservatively, how much money would have to be set aside to fund a single pension/benefits payout of $120,000 a year and one of $60,000?
The yield on 10-year Treasury bonds is less than 2%, about in line with the average dividend on stocks.
That means that a conservatively managed portfolio of stocks and bonds now yields around 2%. At this rate, a pension fund would need $6 million in cash to fund the $120,000/year cash/benefit payout--$6 M X .02 = $120,000. The fund would need $3 million in cash to fund the $60,000/year cash/benefit payout.
If the senior police officer worked 30 years, then the city would need to contribute about $200,000 a year to assemble the $6 million in cash. That's $16,700 per month for 30 years. The $60,000/year cash/benefit pension would require "only" $8,350 to be contributed every month for 30 years.
(Yes, the interest earned on the early years of contributions would reduce the total contributions needed to reach the $6 million total, but in the real world cities stopped contributing to their pension funds during the "good years" of high returns, and pension funds assets decline in market downturns, wiping out years of gains in a few months. Assumptions and projections do not track reality.)
To fund 100 senior retirees and 200 less-senior retirees, the city pension fund would need $1.2 billion, roughly equal to 10 years of the city's entire general-fund annual budget. To fund 600 retirees, the fund would need $2.4 billion.
Recall that the Federal Reserve has implicitly promised to hold interest rates to near-zero indefinitely. The 2% annual yield is not an aberration, it is the New Normal.
Those pension funds that attempt to increase their yield by gambling on stocks, derivatives, real estate, etc. will blow up when these risky markets decline/implode, as all risky markets do over time.
Please "do the math" on your own city, county and state's pension promises, the skyrocketing cost of the promised medical/healthcare benefits, the yield pension funds can safely earn in the real world, and the total assets currently in the pension funds. There is no way to make the math work such that the pensions and benefits promised can be paid in the real world.
Wishing the math were different does not make it different. We can play around with yields and payouts, but adjusting the margins doesn't change the basic reality that the promised pensions are structurally underfunded in a 2% yield world.
Tomorrow we examine the unsustainability of Medicare.
That Which is Unsustainable Will Go Away: Pensions (May 15, 2012)Thank you, Mike B. ($100), for your outrageously generous contribution to this site--I am greatly honored by your support and readership. -
13 May ' 10:09
A Crazy Idea That Might Just Work: Greece's New Currency, the U.S. Dollar May 14, 2012There is an undeniable internal logic to the crazy idea that Greece should jettison the euro and accept the U.S. dollar as its national currency.Before you dismiss my crazy idea out of hand, hear me out. It might not be as crazy as it seems on first blush. I have a straightforward three-point plan to set Greece on a sustainable, positive pathway. But before we can understand how the plan resolves Greece's no-win situation (yet another Kobayashi Maru scenario), we first need to understand very clearly why the euro currency failed.
I have covered this many times before:
Why The European Union Is Doomed (March 28, 2011) Why the Eurozone and the Euro Are Both Doomed (June 23, 2011) Three More Reasons the Eurozone Is Doomed (September 22, 2011) Yet Another Reason Why the Euro Is Doomed (October 17, 2011)
If we had to distill the dynamic down to a single paragraph, it would be this: By accepting the "strong currency" euro that was supported by promises of fiscal prudence, Greece and the other weaker economies of Europe artificially raised market willingness to lend them money and lowered the interest rate they would pay. At the same time, the euro also lowered the cost of goods from Germany by eliminating the market arbitrage of currencies.
I know this may sound complicated, but we can grasp the core dynamics using household analogies.
The willingness of lenders to lend and the rate of interest they charge is based on economic fundamentals: the balance sheet of assets and liabilities, and cash flow: how much income goes to pay liabilities and how much is left over as surplus to spend or invest.
Households and nations with weak balance sheets (i.e. liabilities exceed assets) and weak cash flow balances (i.e. much of the nation's income is already committed to entitlements and liabilities, so relatively little is left to fund future borrowing) will find it difficult to borrow a lot, and the rate of interest they will pay will be high.
Nations have another mechanism to differentiate between strong and weak balance sheets: national currencies. Countries with weak cash flow and risky balance sheets will have weak currencies, as people price the risk into the currency.
In effect, Greece was like the poorer brother who suddenly got the wealthier sibling's credit card. In this sense, the euro was a scam, because it stripped the market of the pricing mechanism that we call currencies. By pricing all money the same regardless of national balance sheets and cash flows, then weaker countries got the credit card of their stronger brethren.
Predictably, these nations over-borrowed. When presented with the opportunity to borrow huge sums at low rates of interest, it is "rational" to accept the opportunity.
Who benefited from this elimination of market pricing via currencies? Germany and the banks. In pre-euro days, it took a lot of Greek drachmas to buy expensive goods from Germany. After the euro was introduced, German goods became cheaper in terms of hours worked and interest rates paid.
German exports to the rest of Europe have been strong, and these exports within Europe are the backbone of the German economy. (Exports are roughly 40% of the German economy, the highest in the world for major economies. Exports make up about 10% to 15% of the economies of Japan and the U.S.)
The pool of apparently creditworthy borrowers expanded greatly, and the banks promptly began lending vast sums to both the public and private sectors of these fundamentally weaker nations.
You can't fool Mother Nature with artificial games for long, and now reality has trumped artifice: the nations with weak balance sheets and cash flows cannot support the monumental debts they acquired during the decade of the euro-scam.
If you eliminate the market's ability to price risk and credit, the market breaks down. That is the eurozone in a nutshell.
The no-win situation is clear: if it wants to continue using the euro, Greece must pay its debt and interest in euros. Its economy simply isn't large enough or productive enough to do this, so that's simply not possible. Wishing it were possible doesn't make it possible.
As a result, the weaker, over-indebted nations are in death-spirals of higher taxes and higher debt servicing costs. Each bleeds vitality and trust from the economy, driving it deeper into fatal contraction.
These nations are also in political death spirals. I spoke at length with a well-informed young Greek friend who has lived in both Germany and the U.S., so he is well-acquainted with the perspectives of Germans and Americans.
He reports that the Greek people are profoundly divided on the question of whether to stay in the eurozone or risk leaving it. He said that even within the various political parties, there are two camps. In his opinion, the odds of either camp surrendering their deeply held beliefs and fears is very very low. Those who want to stay in the euro are terrified that a return to the drachma would wipe out the nation's savings and further reduce the already diminished incomes of households: in effect, the middle class would be wiped out.
Others see a deeply sinister master plan in all this: pushing Greece back to the drachma would immediately render the nation poorer and make its assets very cheap to foreign Elites, who would rush in and snap up Greek assets at fire-sale prices. Greeks would lose their country.
This is indeed part of the dynamic when nations radically devalue their currency: if a villa in Greece was 300,000 euros before the return to the drachma, it might be only 100,000 euros when the drachma is re-instated. Priced in euros, the whole of Greece would "go on sale".
I hope you can see that there are two parallel no-win situations here, a financial one and a political one. This is the scenario on a national scale, and there is no exit if you stay within the rules of the game: euro or drachma, etc.
Here's my "crazy idea that's so crazy it might just work": Greece should switch to the U.S. dollar as its currency while renouncing all debt denominated in euros. I don't mean a "haircut," I mean billiard-ball bald: 100% of all debt denominated in euros would be renounced. Not one euro will be repaid.
The reason is that the banks (lenders) knew darn well that Greece remained a weak economy, and eliminating the currency arbitrage by accepting the euro did not magically strengthen Greece's financial fundamentals. It was all a scam that the banks exploited, including the European Central Bank, and so they will have to accept the losses now that the scam has collapsed.
Nobody put a gun to the head of lenders who fronted Greece stupendous sums of money at low rates of interest. It was their gamble and they lost. End of story.
Whatever else you can say about the U.S. dollar, it retains global trust as a medium of exchange and a transparent store of value. Your $100 bill is good in Laos, Bolivia, Russia, China and everywhere else. Its value fluctuates because the market is free to set the risk of holding dollars.
Ultimately, all fiat currencies are simply physical measures of trust. People know the U.S. has plentiful problems of its own, but they also know the problems are well-known and transparent to all, so the market can price risk in the dollar. They also know the U.S. isn't going away tomorrow, and that there are enough dollars floating around the globe that there will always be someone who will accept the dollars in trade for tangible goods at a transparent price.
The problem with returning to the drachma is the risk of the transfer is unknown, and so the risk will be transferred to the drachma. By making the process into two steps--exit euro for the dollar, then later, exit the dollar for the drachma--much of the risk and distrust is removed from the initial step of exiting the euro.
Here's the beauty of Greece accepting the dollar: since Greece cannot print dollars, then everyone will know the currency cannot be depreciated by the Greek state. If Greece can print drachmas in unlimited quantities, then the drachma will quickly lose whatever value it begins with. In contrast, regardless of the policies of the state or central bank of Greece, the dollar will still have the same value day to day.
All euros in accounts would convert to dollars.
This will immediately restore trust and trade, both domestically and internationally, as everyone will know the U.S. dollar will retain its value everywhere.
Does Greece need U.S. approval to take the dollar as its interim currency? No--the dollar is ubiquitous and in sufficient quantity that there are enough physical dollars floating around the world to serve as the currency for a small nation such as Greece. It would help if the U.S. accepted Greece's choice, but American acceptance would be optional.
The third critical step in my plan is that Greece must reach a political consensus on taxation and governance. Everyone knows that tax avoidance has undermined the Greek state's finances, and the people of a democracy have to reach a consensus themselves: it cannot be imposed by bureaucrats from afar.
Greece desperately needs a visionary politician to emerge who can clearly state Greece's choices in taxation and governance: the State needs enough income to do what the people want it to do, and so everyone is going to have to pay taxes. Those who evade will have to be shunned/coerced by public opinion into compliance, for the national good. The institutions of taxation will have to restore trust in their fairness and transparency.
Greece must have a transparent national dialog on taxation and governance, and reach a consensus via the democratic process. Without this step, then it won't matter what currency Greece uses, it will slip further into a death-spiral of dysfunction.
So here is the 3-point plan:
1. Renounce all debts denominated in the euro, i.e. a 100% writedown.
2. Accept the U.S. dollar as the national currency of Greece.
3. Engage in a transparent national dialog and reach a consensus about taxation and the role of the state in the Greek society and economy.
We might add a fourth point: renounce scams and kicking problems down the road rather than addressing them directly, sweeping dysfunction under the rug, etc.
There is a compelling internal logic to my crazy plan: when trust in national currencies and institutions is lost, then the black market becomes the trustworthy place to engage in trade. The world's favorite black market currency is of course the U.S. dollar. In this sense, for Greece to officially accept the U.S. dollar as its currency is simply a recognition of the natural progression from a currency that is no longer viable to one that is. New Max Keiser: On the Edge with Charles Hugh Smith. I was sharper in the "live in Paris" interview but Max is always worth watching:
"Renouncing debt would be the way forward and eventually that will happen everywhere--either the currencies will go to zero, what people call hyperinflation, or the debt will be defaulted on." Planting a garden is one way of revolutionizing your life and health: largest discount ever from Everlasting Seeds.
A Crazy Idea That Might Just Work: Greece's New Currency, the U.S. Dollar (May 14, 2012)Thank you, Albert B. ($20), for your outrageously generous contribution to this site--I am greatly honored by your continuing support and readership. Part 2: The Winning Bid and the Room of Doom (fiction)(May 12, 2012)
-
12 May ' 10:28
Part 2: The Winning Bid and the Room of Doom May 12, 2012Part 2 of the serialized novel Four Bidding For Love. After considering her many other wins, Ross concluded GreenDollGal would bid just over a round numbersomething 89 cents more. You have to draw the line in the sand somewhere, he told himself unhappily; he simply didn't have enough cash in his account to go higher than about the equivalent of two months rent. A sharp staccato knock sounded on his door and he recognized his neighbor Kylie's signature signal. "Come in," he boomed, and Kylie entered, looking very pretty in a white tennis skirt and blouse, and immediately shushed him. "Not so loud," she hissed. "Or Vonda will hear us." Nodding in chagrined agreement, Ross motioned to Kylie to close his door. Vonda lived upstairs and was always home; elderly and wrenchingly bored, she left her door ajar to monitor all the residents' comings and goings. Even though she kept her television or opera recordings on all day, she retained an uncanny ability to detect Kylie's presence; hearing her young neighbor's voice or door squeak open, she would scurry downstairs with an alarmingly spiderlike rapidity. For unlike the boarding house's other residents, Kylie tolerated her questions and curiosity and oft-repeated stories; and as a result, she had to be careful lest Vonda sense her and clamber down to regale her with questions about boyfriends and stale tales of her own distant youth. Kylie Hyppolite was undoubtedly one of the most loathsome creatures on the planet: a slim, inordinately pretty young woman of mixed bloodRoss guessed North African and French, with a dollop of Irish or perhaps Scots for added zestwho could eat anything she wished in whatever quantity she wished without gaining an ounce. Even more galling, she could touch her toes without effort, and endured frequent bouts of unemployment with annoying grace. "Even your depressions are too damn cheerful," he'd groused when she'd come by the previous week to whine very self-effacingly about losing her low-paying position in a non-profit organization. Her major in Social Responsibility for Business guaranteed a grand choice between unemployment or abysmal positions in non-profit groups funded by family fortunes whose patriarchs had mysteriously acquired their immense wealth without the aid of majors in Social Responsibility. Her sporadic employment left her with just enough for a room in the creaky boarding house and a rust-bucket Dodge Neon with a leaky radiator. Taking a seat on a low pile of twine-bound Commentary magazines, she'd heaved a huge sigh. "The grant fell through, so I'm laid off." "Again," Ross had commented. "What you need is a good solid work injury, like me. Next job, throw yourself down a long flight of steps before they fire you." Ignoring his well-intentioned but unhelpful advice, Kylie had loosened her dark wavy locks from the hairclip, and shook her lustrous flouncy hair over her sun-bronzed shoulders. "I'm 25, and going absolutely nowhere," she'd moaned, and Ross had given her an unsympathetic look. "Gosh, you're 25, well-educated and beautiful. I feel so incredibly sorry for you." "Let's get drunk," she'd announced, as if it were a task requiring uncommon stamina. "Let's drive all night, go fishing first thing in the morning, and then get drunk again." "Or maybe we can just fumble around in the dark somewhere in the high Sierra, trying to re-start your car," he'd replied tartly. "Look, why not do what most laid-off depressed people do, which is curl up on your bed to watch TV and eat huge bags of tortilla chips?" "There's never anything on," she'd said, and then brightened. "Here's my latest plan: tennis. Guys smooze on the golf course, but I can't afford golf. Tennis is free at the city park. Maybe I'll meet an executive on the tennis court who will hire me." Judging by her little white tennis outfit, Kylie had evidently followed her plan, with unknown results. Though he usually welcomed his vivacious neighbor's company, Ross did not welcome even her charming distractions and he announced, "I'm in a very important auction. One minute to go." Acting on an intuition, Ross suddenly raised his bid by 59 cents and poised his finger above the mouse button. "This is going to be close," he muttered grimly, and Kylie kneeled beside him to gaze at the screen. She smelled good, and despite his best efforts Ross could not help shooting a glance down at her. Though he generally managed not to stare at her long brown legs or other shapely assets, her kneeling beside him was more than any man could be expected to bear. Shaking free of her compelling attractions, he refocused on the clock and refreshed the bid screen one last time: no change. At that moment his hugely hirsute pal Dewey pushed his great greasy jumpsuit-clad bulk through the half-open front door and asked, "Hey. Did you win that Canadian hand axe I wanted?" "Shut up!" Ross barked as he pressed the mouse button, and then held his breath as the final seconds ticked away. "Jeez, nice greeting," Dewey said in a hurt tone. "Your timing is impeccably horrible," Ross declared peevishly. "I was in the last seconds of a very important auction." Dewey shook his immense Rasputin-like black beard and tangled pirates' locks and asked excitedly, "Is it for that axe?" Rather than reply Ross issued a great, heartrending roar of pure agony. In a muted voice of stunned disbelief he said, "She got it. For two lousy rotten cents more." Bowing his head in perplexed despondency, he murmured hollowly, "How could she know to bid two cents more?" Before either of his startled friends could voice a word of comfort he shouted angrily, "It isn't fair!" and pounded his desk with such force that Kylie leaped to her feet in surprise. Lowering his head and rocking back and forth like a child bereft, Ross moaned, "How can you win when you're bidding against a clairvoyant?" Neither Kylie nor Dewey had a response to such a self-evident statement, and they exchanged "what to do?" shrugs as Ross continued his broken sobbing and infantile rocking. When a man reaches his breaking point, it is a dismal sight indeed; each friend mumbled a brief consolation before exiting with visible relief from the overstuffed Room of Doom. Next Weekend: Winner's Euphoria A garden is fun!: largest discount ever from Everlasting Seeds.
Search the Site
