Episode-1027- Listener Feedback for 11-26-12 — 35 Comments

  1. Even the Congressional Budget Office admits that the “fiscal cliff of dooom!” would actually be good for our long term growth:

    “CBO projects that the significant tax increases and spending cuts that are due to occur in January will probably cause the economy to fall back into a recession next year, but they will make the economy stronger later in the decade and beyond. In contrast, continuing current policies would lead to faster economic growth in the near term but a weaker economy in later years.”

      • What’s a fairy tale, that our future economic growth is being stolen by runaway debt? That’s what the CBO is saying here and I think it’s a rare glimpse at reality. At this point it’s inevitable that taxes will go up on everyone. That’s the best case scenario — but Jack may be right that the only way out is a total monetary default.

        • @BeninMA, I think he is saying that the CBOs claim the deficit or debt will be reduced is a fairy tail, sadly it is.

        • Jack, it’s not enough, I agree. But I don’t think we can expect to turn things around as long as people keep thinking that a step towards fiscal sanity is tantamount to economic suicide. I know you don’t think it’s possible to avoid a debt spiral, but I disagree.

        • @BeninMA, it isn’t what I “think” it is mathematical certainty. The kind of steps you are talking about could have lengthened the system if done say 30 years ago and held in check. But now what’s done is done, the debt backed money system has been fully exposed and the genie won’t go back in the bottle.

          Please stop believing in this fairytale, consider again if we cut 100% of all discretionary spending we would still have almost 900 million in mandatory spending and another 400 billion in interest payments on the debt. That is 1.3 billion that can’t be cut in anyway. The interest on the debt will be about 800 million in just a few years. No matter what we do that interest is going to double, NO MATTER WHAT.

          The economic endgame is in sight, again this is math. I don’t “believe” that 2+2=4, I don’t think it, it simply is. Math is a law, one that can’t be escaped.

          Things are not going to be “turned around” that isn’t the plan. You can believe what you want but you better prepare for the system to change. It will, when it does the people will get the shaft because the people are to lazy to bother to even understand how the current system works.

          Dude, take a dollar and look at it, that dollar is a certificate for a dollar PLUS interest in debt. Math doesn’t lie, we have reached the end. The interest is in a run away cycle now.

        • Jack, your math is wrong. Rand Paul had a budget that eliminated the deficit without touching defense or entitlements. While his cuts are probably unrealistic, if you throw in defense cuts, entitlement reform and tax increases, it’s not hard to see how we could get to a ballanced budget. I’m not saying this scenario is very likely, just that it’s mathmatically possible and would be the most desireable outcome.

        • @BeninMA,

          No my math is correct. Rand’s budget only looks at ONE SET OF BOOKS it also makes a LOT of revenue assumptions. There are three sets of books. Medicaid, Medicare and Social Security are on a separate set of books, hello! The third set is called the “black books” which were originally for stuff so secret they said they needed a source of funding that would be non public and only published as a single number. Over the years this number grew and what went into it became more public. So the books that were originally for things like building a stealth fighter when no one knew about it now have been used for like lets say, THE ENTIRE WAR IN IRAQ.

          I am sorry man, I wish you were right I really do. The sad fact is such “budgets” completely ignore our largest expenses. Sure let me take about a trillion out of the budget without actually removing it and I can “balance it” too. I am sad to say this but Rand is full of shit. This would be like me saying I could balance your household budget if you let me leave your heath insurance, mortgage payment and electric bill off the balance sheet and not worry about how they are funded.

        • Jack, Rand Paul, Ron Paul and Gary Johnson all had plans to balance total federal spending. They all addressed defense and entitlement spending, whether through tinkering or drastic cuts, and of course all of them are looking at total government spending. If you don’t believe me, here’s CATO’s brief assessment of Rand’s budget:

          And Ron’s:

          The Ryan and Obama budgets will never eliminate the deficit, but that doesn’t mean it is mathematically impossible. I don’t know where you got the idea that the only people serious about dealing with our budget problems are somehow minimizing them. Gary Johnson must have warned of “total monetary collapse” in almost every media appearance and the Pauls’ aren’t exactly shy about stating the truth either.

        • @BeninMA, do you understand how money works? Do you know how money is created? Do you understand that money equals debt and we exist in a system that requires growth to function and therefore it requires the debt to grow to function.

          Ron Paul could balance the budget both with cuts and but FUNDAMENTALLY changing the system. Both Johnson and Rand mean well but they are at best wrong and at worst full of shit.

          Your problem is you don’t understand the current debt based money system, if you did we would not have this debate going on between us.

          Have you ever watched this video,

          The Rand Paul budget DOES NOT balance the entire budget even on his paper. The Johnson plant likely doesn’t either but I never bothered to look at it. You just don’t get it, the current system is designed to grow debt to the point of implosion, it CAN NOT BE SUSTAINED, it is designed to fail. How do you fail to comprehend this? How can you expect that this nation can eliminate debt or even prevent it from going nuclear when ALL MONEY IS DEBT.

          Cutting spending really? Where will the 800 billion come from to pay the interest on the debt? The 800 billion we will owe in annual interest in about 6 years no matter what we do? Cut the deficit to zero and the interest will still go and blow into infinity at this point.

          Today if you cut a dollar of government spending you whack two from the GDP. Such is the system that your leaders created. If we had 500 Ron Pauls in Congress and a Gary Johnson as president and tried to maintain the current system it WILL STILL FAIL. This is why Ron wants the Fed gone, even he can’t balance the budget at this point under the current system if he had unlimited power to do so.

          It is NOTHING but a fairytale, nothing but a fairytale.

          Here is another way to understand it,

        • Jack, thanks for the link to your video. I understand that the dollar is backed by government debt and the debt itself couldn’t be eliminated without rebasing the currency (under those circumstances, a good problem to have). But that doesn’t change the fact that, even within the current system, a large debt is bad and growing the debt, ie maintaining a deficit, is worse. Since you seem to respect Ron Paul, I’d point out that he thought it was both desirable and possible to stop borrowing under our current system.

          Since dollars are our agreed upon medium of exchange, they’re also our representation of economic value. Increasing the debt means we’re committing our future wealth to our present needs. This can be stopped and reversed without getting to the point where we have to worry about paying off the debt entirely.

          I also think you overstate the importance of the dollar as a debt-backed currency. After all, debt is not the only way to create more dollars. The banking system does this just fine on its own (sometimes too well, as in the housing bubble), prompted in part by the overnight rate set by the Fed.

          Anyway, thanks for the exchange — I’ll check out the links you provided in the video. I’d by lying if I said that I totally understood the workings of our monetary system, so I’m always interested in learning more.

        • @BeninMA, let’s start with this then, you stated,

          “after all, debt is not the only way to create more dollars. The banking system does this just fine on its own (sometimes too well, as in the housing bubble), prompted in part by the overnight rate set by the Fed.”

          This shows how much you don’t understand, you seem to infer here that say if the debt of the government were transferred to the private sector that it would fix the problem.

          So let me make it perfectly clear.

          If the government grows debt to implosion the people and the government are both fucked.


          If the people grow debt to implosion the people and the government are both fucked.

          Put simply for the system to function the money supply (M3) must grow. For the money to grow in volume the value must fall per unit. For this to happen the interest against leverage must grow. If the interest grows indefinitely (which the system requires) the eventual result is catastrophic failure. The system when founded had a lifespan of perhaps 25-500 years. This was dependent on how well it was managed.

          The problem with this system is there is no reverse, only a forward progression toward oblivion. At some point in such a system you hit a point of no return, the event horizon after which nothing can even slow the end result down. The measures you speak of don’t buy a decade, they buy anything from perhaps a few months to a few years. The economy is built on spending of the government. This economy is inflated beyond reason! The power of the free market can fix the long term problem but be it that way or some other scheme the current paradigm will fail and no matter who is in charge the difference in the timeline is best measured in DAYS not years.

          I know you want to believe otherwise, so do I, I just know my desires won’t change the facts on the ground.

        • I believe one of you is talking yearly deficit (which COULD be balanced but likely won’t) and the other about total national debt. A president could balance next year’s budget, but that dosen’t mean that one penny of debt is being paid off.

        • Jack, it sounds like you’re saying that fractional reserve banking is just as bad as our debt-based monetary system. I’d only point out that fractional reserve banking has been with us for more than 500 years now, which makes it hard to imagine that it’s the root of all evil. But I do know some Austrian theorists are against it, so it’s worth considering the possibility — the fact that our capitalist system has always had it doesn’t mean it has to be either necessary or salutary. I just tend to think the problems we’re talking about here are of much more recent origin.

        • @BeninMA, not exactly. Fractional reserve which would allow a bank to loan x vs. y and effectively loan beyond its reserves is a risk but a rapidly self correcting one IF THEY CAN’T BORROW other money loaned into existence for a rate that is guaranteed to be lower then what they can loan it out for at a 9 times to one advantage. Money provided by taxes on the public providing for it, both direct (income, property, etc taxes) and indirect (inflation which is a hidden tax) is used to fund this endless borrowing stream which allows for more lending (monetary creation).

          There is fractional reserve backed by a commodity with an effective cap that requires a genuine increase in underlying value of an economy to truly expand the M3 and there is fractional reserve print on demand based on loan on demand which is what we have now.

          This isn’t complicated, it is actually so simple and so idiotic in the way it functions that the logical mind is repelled. You must suspend logic long enough to understand how insane the system really is. It is hard to do, I fought it for ten years. When you first really get it you want to make it go away, you want to scream this can’t be true but it is true, it is in fact all one hundred percent documented in official Federal Reserve publications.

          Your difficulty in comprehending this isn’t a demerit on your intelligence. In fact the smarter you are the harder it is to accept this reality because accepting the truth is horrible in its ramifications.

        • Jack, My original point was only that the fractional reserve banking system would naturally increase the monetary supply independent of our current debt-based monetary scheme. I agree that this should be self-correcting and not a big problem if you get the other policies right. Of course, the Fed’s policy of expanding the money supply beyond it’s natural rate of expansion has been disastrous (There’s actually a fair amount of consensus among economists on the Fed’s role in causing the housing bubble, by departing from the Taylor Rule when setting interest rates in the early-to-mid 90’s — and of course the stated current policy is to actually encourage inflation.).

          Anyway, I appreciate the insight of someone who has studied this and who I know has a very functional bs meter.

  2. That’s funny at my job we actuly use the last milkman in my county for milk for the coffee. He found the a small nitch, offices with lazy staff and the nostalgic.

  3. Super excited for the Steven Harris battery bank episode! Can’t wait. Also can’t wait to come say hi during the liberty forum. Good show today, Jack.

  4. Glad you liked the Mencken quote. Here’s another one (from the 1920’s):

    “The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.”

  5. I’m looking forward Steve Harris’s Battery episode. I am lucky that my best friend owns a battery store, and he gives me his 2nd SLA’s. I have 6v 200ah behemoths, group 27, group 31 types. Amp hour ratings from 7ah all the way to 200. He gets them back from customers who want a newer battery for their wheel chairs etc because the govt. is paying for it. So he gives them to me, I keep them charged up and use them outside when stacking wood hooked up to this new LED light I got at home depot

    15 watts. I can run it off a small inverter hooked up to a 7ah sla for 7ah

  6. Last line should say “I run it off a small inverter hooked up to a 7ah sla for about 3 hrs”

  7. Great show jack- i’ve been telling people that any politician calling jan 1st a fiscal cliff is admitting they can not & will not ever really reduce our deficits significantly, let alone work on paying down the debt. If THIS is a fiscal cliff, what do they call the 16 trillion debt, the future unpaid liabilities, and the ballooning interest payments? This is a flaw of Keynesian economics.

  8. In missouri we can shoot them as long as they are inside my property lines. My neighbors know I’m well armed my wife and I carry our guns out every Saturday when we go shooting. I don’t want to shoot them.

    Your right, I don’t stealth anything. When the police were called about my chickens clucking I pulled out the 972 page ordinace book for the town I live in and used simple math to prove my chicken coop was 150 feet from any neighbors home. Fuck you with your own laws!! I remembering asking the police “… so what’s the problem sir?! I followed the law?!”

  9. So what is your daily rate Jack? What would it take to get you out to our property to do some consulting? I mean, besides the beer and shooting at our range? 🙂

  10. Regarding the milkman and productivity increases killing jobs, it’s amazing how many people take that mindset & view productivity enhancements as threats to existing jobs rather than opportunities to create entirely new industries, not to mention the new jobs that will come with them.

    Evolve or die, it’s that simple – always has been.

    Those of us in the software industry with half a brain know that writing purely mainframe software is 99.9% dead, and the days of writing purely desktop/laptop software are numbered. If you’re in this biz and you’re not already doing or at least learning how to do development for phones & tablets, you need to wake the hell up before you go the way of the milkman.

    • Regarding productivity — it would be great if most increases in productivity were true increases in productivity, but they are not. Most are the replacement of human labor with machine labor. Machine labor comes with much higher resource and fuel demands than human labor — the only thing that has made it APPEAR cheaper is the availability of millions of years of accumulated sunlight that make it possible to create all of the complexity necessary to build those machines in a centralized production facility. As fossil fuels (especially oil) become less available at a cheap price, then the replacement of human labor by machines will gradually begin to reverse.

        • Jack, your view on human progress is one of the details on which I probably disagree with you more often than not. “Progress” is often more of an effect of increased energy flows enabling greater complexity, not the other way around. There is a reason that many of the advances discovered by Roman civilization were lost until up into the 18th century in some instances (complex gear trains) and never recovered in others (their methods for making concrete). When the centralization made possible by the increased energy flows achieved by plundering the rest of the Mediterranean basin and beyond was no longer possible, the ability of society to maintain much of the “progress” collapsed into a dark age. The same kind of cycle can be demonstrated in countless empires throughout history (see Tainter for more discussion on this).

          My views here aren’t about drinking any kind of “green kool-aid”. Rather they’re more from exploring sources like E.F. Schumacher and John Michael Greer. If you check those out (specific sources cited in my reply to Insidious, below) you might gain a better understanding of this perspective and that it’s not just some kind of irrational reaction against industrialism.

      • @Christopher –
        A purpose made machine (backhoe) will perform a given task more efficiently than a general purpose machine (human), even figuring in the difference in caloric expenditure. And of course even a human powered machine (bicycle), increases the productivity of the expended energy.

        I’m kind of surprised that you would make this statement as your link is to a permaculture site.. permaculture increases farming productivity, period. Not due to fossil fuel inputs, but simply by applying observations. Obviously grass farmers (Salatin, Greg Judy..) are also using applied observation to massively increase productivity, without fossil fuel reliance.

        • @Insidious — I think that your examples actually help to support my point, because they all refer primarily to the more efficient application of human labor through relatively simple machines. That is not something that I have any issue with, because it is a pretty constant trend throughout human history — at least up until around 300 years ago in England with the arrival of Newcombe’s steam pump to allow greater access to coal beneath the earth. Then it was the application of that coal power that really allowed the industrial revolution to take off.

          Permaculture is a much more efficient system in terms of productivity per acre. However, it does require MORE labor per acre than modern farming. Farming is probably the most glaring example of this efficiency paradox at work. While machinery certainly helped to reduce the number of people involved in farming from 90%+ to around 50%, it was the application of fossil fuels that allowed us to get to our current point where less than 2% of the population works in farming. This “efficiency gain” has actually been a net loss, because it has encouraged us to move away from a relatively diffuse but highly flexible and wholly renewable source of power (human labor accentuated by simpler machines) to a concentrated but finite source of power (fossil fuels). And most analyses don’t even take into account the vast supply, transport, and training chains that are only possible through the level of social complexity allowed by increased use of fossil fuels.

          What I’m saying here is not a new idea. For a much better explanation than I can provide I recommend “Small is Beautiful: Economics as if People Mattered” by E.F. Schumacher and “The Wealth of Nature” by John Michael Greer.

      • To define terms:

        Productivity is a measure of the efficiency of production. Productivity is a ratio of production output to what is required to produce it (inputs). – Wikipedia

        The DOLLAR cost of an input is immaterial to a systems measure of productivity. So, fossil fuel windfalls (‘cheap’ energy) do not result in higher productivity, they result in CHEAPER production.

        (not shouting, just can’t get italic tags to work)

        So, standardizing a measure of energy, and measuring inputs and outputs of a grass fed beef operation to a feed lot operation, you find that the grass fed beef farm is more productive (better input to output ratio).

        This is true in the short term, and even more true in the long term as feed lots are EXTRACTIVE in that they’re depleting the soil used to grow the grains.

        Grass fed ruminants are increasing the wealth of the system. Grain fed ruminants are spending the wealth of the system. (soil nutrients)

        So.. more productive, but not necessarily cheaper in DOLLARS. (not even going to get into ‘externalization of costs’)

        So yes, humans will use cheaper forms of energy before using more expensive forms of energy (just like nature). And yes, human energy may be cheaper than fossil fuel energy in the future. But this does not mean that human energy will be cheaper than ALL forms of energy in the future.

        For example, solar energy, can easily and cheaply be used as a direct heat source (solar gain) or an indirect heat source (wood). Gravity can be easily harnessed to pump water uphill, or produce electricity (hydro). Wind can be used to produce motive power (sailboats).

        • Hey Insidious — I pretty much agree with everything that you posted above. My issue is not with machines in the broader sense (I work as an engineer after all), but with the idea that inputs of massive amounts of fossil fuels in favor of human labor somehow constitute a gain in efficiency, when they are in reality much LESS efficient in the terms as you’ve defined them. Our socio-economic tendency is to measure efficiency precisely in terms of dollars rather than units of work produced.

          And don’t sweat the caps — I knew where you were coming from….

        • Windfall often results in waste as our sense of how ‘valuable’ something is, and therefore how we treat it, seems to be proportional to the ‘cost’ we paid to gain it.

          Fossil fuels have, and continue to be, used in stupidly wasteful ways (transportation, ‘conditioning’ grossly inefficient structures). Often for a monetary short term benefit (chop down rain forest and ship wood to US, transportation is cheap!).

          So I think in your original post, what you were saying is..
          ‘Increases in PRODUCTION VOLUME are not increases in PRODUCTIVITY’. =)

          Cheap energy allows profitable inefficient production. Increases in the volume of production are not increase in productivity. And short term increase in productivity at the expense of long term productivity.. just plain stupid (drag netting the oceans, chopping down old growth forests, ‘traditional’ agriculture.. )

          so yes, we agree.. 😉

    • Automation and mechanization reduce the number of ‘human machines’ needed to perform tasks (‘jobs’). If, in your ‘work’, you perform tasks that can performed more cheaply, or more efficiently, by a machine.. at some point that work will go away.

      Mass manufacturing was designed to turn human beings into interchangeable cogs performing limited repetitive tasks. So it makes sense that those cogs can be easily replaced with machines.

      A better question.. why do you (or anyone else) want a ‘job’? Why does anyone need a job?

      Yes I understand we are taught: Job -> Money -> Stuff we need.

      But its often much quicker (and more satisfying) to skip the Job -> Money part and go straight to meeting our own needs (gardening for example).

      There will always be a market for meeting other peoples needs (entrepreneurship).. but the supply of ‘jobs’ will continue to shrink.