Bankruptcy Litigation Does Not Generate New Wealth

Litigation is the fantasy fix for those brawling in a shrinking pool of wealth.

As municipal bankruptcies become the New Normal, it's worth noting that litigation does not generate more wealth to distribute, it simply burns existing wealth, leaving less to distribute. Yes, this is stating the obvious, but what's obvious is precisely what's ignored when fantasy attempts to trump reality.

Shrinking tax bases, fewer tax-generating jobs, an expanding (tax-free) informal economy: this is the New Normal for many communities. Every single pension and benefit entitlement promised to someone was based on projections of endlessly rising tax revenues skimmed from an endlessly expanding tax base of businesses and workers.

No public pension plan or benefit package can survive a shrinking tax base and the bursting of asset bubbles. Those locales with rising tax revenues are once again drawing straight-line projections into the future: the new real estate bubble pushing property taxes higher will expand forever, the revenues from stock options will rise forever as the next Facebook is surely just around the corner, and hot sectors such as tourism will continue expanding forever, too.

Every public pension plan's viability is based on the endless expansion of asset bubbles in stocks, bonds and real estate. The bond bubble has been expanding for 30 years, and the recent hiccup hasn't triggered any real worry because The Federal Reserve has promised low interest rates forever. Stocks have been bubbling higher for over four years, and buying every dip has been very profitable. Real estate has soared since early 2012, and pundits are elbowing their way to the podium to declare that the housing market is once again healthy.

Asset bubbles are not evidence of health, they are evidence of boom-bust cycles.The measures that have been undertaken to inflate the current asset bubbles in these three asset classes are extraordinary, and each measure has unintended consequences that have yet to play out.

Every constituency in every municipal bankruptcy believes they're the most deserving, and they believe that litigation will reveal the obvious truth of their claim.

The idea that their claim is no better than any other constituencies' claim is anathema, and of course there are teams of attorneys on hand to support their belief at $300 to $500 per hour (if not more).

Case law in Chapter 9 (local government bankruptcies) is rather thin, as very few municipalities have gone through Chapter 9 proceedings in recent decades. There will be plenty to argue over in terms of legal precedent and other issues. Judges will be careful, knowing that their rulings will likely become precedent for future cases.

Consider for a moment the costs of multiple teams of attorneys billing hundreds of hours of time on cases that could stretch on for years. Millions of dollars will be spent on claims that are already visibly fruitless, as the pool of money available to be divvied up amongst the claimants will be shrinking as legal fees soar and those who might have once considered doing business in the bankrupt city/county decide to pass until the bankruptcy bonfire burns itself out.

We already know the demands of all the claimants: raise taxes on whomever and whatever still generates a taxable income in the bankrupt city/county. Do the claimants think about the incentives and disincentives their demands create? Of course not; they are focused on their sense of entitlement and "what's owed to me."

So anyone with any prospect of earning more income elsewhere decamps from the bankrupt city/county to elsewhere. This further shrinks the tax base and bleeds the most productive (or potentially productive) enterprises and people from the city, leaving less income and vitality for those who choose to remain in the bankrupt community.

Higher taxes and fewer services creates a self-reinforcing feedback loop where those who leave first are better off than those who leave second, and so on.

The only viable long-term strategy for claimants is to focus on doing whatever it takes to help the city/county start generating new wealth. But this is far more difficult than hoping to win some court ruling, and it also requires sacrificing the dearly held belief that fantasy entitlements should be made real by somebody, somewhere.

Which brings us to the ultimate make-us-whole fantasy, the Federal bailout of every bankrupt city, county and state in the nation. Every constituency in every insolvent city, county and state is of course first in line in terms of being deserving of "what's owed to me."

Unfortunately for those counting on the Grand Federal Bailout, the queue at the Federal bailout window is already long: $100+ billion bailout of FHA, which issued hundreds of billions of dollars of mortgages to unqualified buyers; $100+ billion in uncollectible student loans owned or guaranteed by Federal agencies, and of course the $1+ trillion annual deficits needed just to fill the massive feeding troughs of the Status Quo.

Should the "impossible" happen and boom is once again followed by bust (Gasp! Tell me once again that this time it's different!) and pension funds suffer 30% to 40% losses in their bond, stock and real estate portfolios, the fantasy Federal Bailout would require trillions of dollars of freshly borrowed money, on top of the $7 trillion the Federal government has borrowed in the past 4+ years and the $5 trillion it needs to borrow just to fill the Federal feeding troughs for the next four years.

Every craven, donation-desperate politico in Washington knows that borrowing trillions more on top of the current borrowing of trillions raises the risk of the whole corrupt contraption imploding. So politicos will squeeze out a few alligator tears and declare "I feel your pain" while quietly burying every bailout scheme in committee.

Litigation is the fantasy fix for those brawling in a shrinking pool of wealth. But it's already predictable that any ruling that gives one constituency a resounding victory over other claimants will be overturned; after years of appeal, a deal that could have been reached on Day One of the bankruptcy--i.e. everyone gets less than they set as their absolute minimum--will be imposed.

In the meantime, the pool of wealth that can be siphoned by the claimants shrinks daily, and claimants expecting victory will find the pool has completely dried up by the time they "win." For precedent, please study Jarndyce vs. Jarndyce.

If you think this is "impossible," consider that $755 million has already been spent without any resolution on dividing up the Nortel Networks estate. 

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Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, Tristam W. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

Thank you, Mark J. ($50), for your astonishingly generous contribution to this site -- I am greatly honored by your support and readership.

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What's Up with Inflation?

Purchasing power and exposure to real costs are more realistic measures of inflation than the consumer price index.

That the official rate of inflation doesn't reflect reality is easily intuited by anyone paying college tuition and healthcare out of pocket. The debate over the accuracy of the official consumer price index (CPI) and personal consumption expenditures (PCE--the so-called core rate of inflation) has raged for years, with no resolution in sight.

The CPI calculates inflation based on the prices of a basket of goods and services that are adjusted by hedonics, i.e. improvements that are not reflected in the price of the goods. Housing costs are largely calculated on equivalent rent, i.e. what homeowners reckon they would pay if they were renting their house.

The CPI attempts to measure the relative weight of each component:

Many argue that these weightings skew the CPI lower, as do hedonic adjustments. The motivation for this skew is transparent: since the government increases Social Security benefits and Federal employees' pay annually to keep up with inflation (the cost of living allowance or COLA), a low rate of inflation keeps these increases modest.

Over time, an artificially low CPI/COLA lowers government expenditures (and deficits, provided tax revenues rise at rates above official inflation).

Those claiming the weighting is accurate face a blizzard of legitimate questions. For example, if healthcare is 18% of the U.S. GDP, i.e. 18 cents of every dollar goes to healthcare, then how can a mere 7% wedge of the CPI devoted to healthcare be remotely accurate?

Those claiming that the CPI is more or less accurate point to the inflation rate posted by The Billion Prices Project @MIT as real-world evidence. The Billion Prices Project collects real-world prices from online retailers for thousands of goods. The Project's rate of annual inflation closely tracks the official CPI, though recently it has diverged, climbing above 2.5% annually while the CPI is below 1.5%.

The fatal flaw in The Billion Prices Project is that it does not track the real-world cost of big-ticket services such as healthcare or tuition that dominate household budgets for those who have to pay for these services.

Those claiming the CPI grossly underestimates inflation often compare the current CPI with the CPI methodology of the 1980s. Using the old methodology, inflation is more like 9% rather than 1.5%.

Critics of this comparison claim the old methodologies were flawed and the new method is statistically superior.

Another way to track inflation is via households' actual spending as reflected in their budgets. Intuit collects anonymous spending data from 2 million users of Mint.com and posts the results: Presenting Inflation... the rise in expenses 2011 - 2013 (Zero Hedge). This data suggests the cost of daycare, healthcare insurance, kids' activities and tuition have skyrocketed in the past few years, making a mockery of the official annual inflation rate of 1.5% to 2%.

Chartist Doug Short recently published this graph plotting college tuition, medical care and the cost of a new car. According to the Bureau of Labor Statistics Inflation Calculator, $1 in 1980 = $2.83 in 2013. For example, the average cost of a new car in 1980 was $7,200, so the inflation-adjusted price in 2013 would be $20,376. The actual average price today is around $31,000, so after adjusting for inflation the current average price of a new car is higher than in 1980.

This chart reflects the real increases in cost:

In my analysis, the debate over inflation misses two key points. What really matters is not the rate of inflation, which can be endlessly debated, but the purchasing power of earned income, i.e. wages.

Instead of fruitlessly arguing over hedonic adjustments and the weighting of components, we should ask: how many hours of labor (at the average hourly rate for full-time workers) does it take to buy a loaf of bread, a new car, a gallon of gasoline, a new TV, a new house, college tuition and fees, etc., and compare that to how many hours of labor it took to buy all those goods and services in the past.

This methodology eliminates hedonics (i.e. the computer you buy today is much faster than the one you bought 10 years ago), as this adjustment plays no part in the actual costs of manufacture or the consumer's decision: we don't have a choice to buy a computer with 1990-era specs, so the hedonic adjustment is merely a tool for gaming the CPI.

We should also recognize that the experience of inflation differs in each economic class. Government employees who pay a small percentage of their real healthcare insurance costs (or none at all) will experience little of the actual inflation in healthcare costs; it's the government agencies that are exposed to the real costs of healthcare insurance, which is why municipalities and agencies exposed to the skyrocketing costs of healthcare insurance are under financial pressure.

A retiree is naturally focused on the out-of-pocket share of medication costs; the soaring cost of college tuition is so remote it might as well be occurring on Mars.

Consider this real-world example. Let's say a household earning $60,000 a year (median household income is around $50,000) is suddenly exposed to the real cost of rising healthcare insurance. Maybe the primary wage earner lost the job that provided health coverage and now has to pay the full costs out of pocket as a contract worker.

In any event, their healthcare insurance now costs $500 more per month than it did last year. (By happenstance, this is how much my own healthcare insurance costs have risen since 2008.) This $500/month means the household is paying $6,000 or 10% of its gross income more for the same coverage it received last year. The household's annual rate of inflation just from healthcare costs is 12%, since net income is closer to $50,000 and the $6,000 in extra spending isn't buying any new good or service.

Let's say the household is paying $500 more per month for healthcare insurance than it was five years ago. That works out to an annual rate of 2.4% just from healthcare insurance inflation alone. Any other increases in costs would push that rate higher.

In other words, those households with zero exposure to college tuition and the full costs of daycare, medical care and healthcare insurance may well experience low inflation, while the household paying the full costs of daycare, college tuition and healthcare insurance will experience soaring inflation.

If we analyze inflation by purchasing power (which declines as real income stagnates and prices rise) and by exposure to real costs, we find the incomes of the upper 5% have typically outpaced CPI inflation, so the purchasing power of the high-income family has not suffered (unless of course they have no healthcare insurance and they have to pay the full real costs of a medical crisis. In that case they might be bankrupt.)

Households that receive multiple government subsidies and direct payments have little exposure to healthcare, since they are covered by Medicaid, and modest exposure to housing if they receive Section 8 benefits. Retirees on Medicare also have limited exposure to the real-world costs of their care paid by the government.

If we analyze inflation by these two metrics, we find the middle class is increasingly exposed to skyrocketing real-world prices. Pundits in the top 5% have the luxury of pontificating on the accuracy of the CPI while those protected by government subsidies and coverage have the luxury of wondering what all the fuss is about. Only those 100% exposed to the real costs experience the full fury of actual inflation. 

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Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, Timothy T. ($5/month), for your wondrously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Stephen L. ($25), for your superbly generous contribution to this site -- I am greatly honored by your steadfast support and readership.

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Earn 25,000 Points To Nowhere

25,000 free award miles sounds like a lot until you read the fine print restrictions.

You've probably received numerous pitches from credit card companies promising you 25,000 airline award miles for signing up. These free miles-points are supposedly good on major airlines everywhere.

But the fine print suggests skepticism is in order. First, there is a lot more fine print than meets your initial glance. Second, it seems you don't really own these free points, they belong to the credit card company and can be revoked if the company decides you've gamed the system in some way they didn't anticipate. Third, exactly how one goes about exchanging the 25,000 points for a free awards-miles ticket on a major carrier is unspecified.

I did finally locate a list of airlines that accept these non-airline-specific credit card points. Most appear to be regional airlines with somewhat obscure ports of call:

Pamir Air: Flying non-stop service from Murgab to Kandahar. The company website helpfully states that "Infidels are promised safe passage from the aircraft to the luggage area, but precautions are advised beyond that point." Passengers caught on board with alcohol will be issued a surplus World War II parachute and ejected over the Hindu Kush.

Kutch Airlines: Routes connect Bhuj, Patan and Kota. "Kutch Airlines proudly operates DC-3 aircraft built in the most excellent year of production, 1940. Our aircraft are older than our pilots but superbly maintained."

Kutch Airlines claims a spotless safety record and notes that "all our aircraft are perfectly able to fly with one engine disabled, and land on unpaved roads, desert flats and football fields."

Due to "innovations in seating," Kutch Air DC-3s seat 63, rather more than the original 21 seats in the original 1935 DC-3 configuration.

Passengers are advised that "baksheesh to pilots and flight attendants is welcomed, and may improve seating arrangements."

Burkhara Air. Flying non-stop between Burkhara and Samarkand, Burkhara Air operates surplus Soviet-era aircraft of various models. Larger aircraft are equipped with first class cabins served by a variety of in-flight vendors and live entertainment. Seats in the cabin without vendors and live entertainment carry an additional fee.

The rear cabin in specially configured aircraft is reserved for live goats and chickens.

Emergency equipment includes AK-47s for each passenger should an aircraft make an emergency landing in Afghanistan. Safety equipment includes wood for bonfires and rope for descending from inaccessible mountains.

Passengers are advised that there are no restrictions on mobile phone usage during flights, as there is little coverage beyond the city limits.

I don't know about you, but I think I'll pass on these "25,000 miles to nowhere" offers.


The credit card offers are real; the fanciful regional airlines are fictional. 

---

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, Adam E. ($5/month), for your exceptionally generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Brenda W. ($50), for your magnificently generous contribution to this site -- I am greatly honored by your support and readership.

Read more...

Want to Steal My Mobile Phone? I Didn't Think So

Hardware is getting so cheap that it's hardly worth stealing.

Want to steal my mobile phone?

I didn't think so. You may think the point of this post is that some old guys are too dumb or poor or Neo-Luddite to have smart phones, but you'd be wrong (not about some old guys being Neo-Luddites when it comes to smart phones, but about the intent of the post).

Or maybe you're guessing that the post is about the remarkable durability of ancient technology (i.e. this Nokia phone). Once again you'd be wrong (not about the durability of this phone, but about the intent of the post).

The point is that hardware is getting so cheap, it's hardly worth stealing. The value of this phone has been reduced to the few calls you could make before the account is closed, not because it's been thrashed but because dumb phones are essentially free now.

The cost of a low-end but fully functional PC chipset is $25. Fully functional Android-powered tablets are $40 in China. How long will it take before some manufacturer assembles a low-cost smart phone chipset with a cheap, low-rez screen running Android and sells it for $40?

Thieves snatch iPhones out of teens' hands because they cost $500 and have a high street value. Once smart phones with most of the same capabilities as iPhones and Galaxy phones are available for next to nothing, the street value of all but the highest-end phones will be near-zero.

Consider flat-screen televisions. Yes, they're still expensive if you want a 2-meter screen, but if you're OK with a slightly less than 1-meter (32-inch) screen, they're about $200.

Is it really worth breaking into somebody's house for a TV that's worth $25 at the swap meet? That's why smash-and-grab thieves stick to jewelry, laptops and cameras.

The price of cameras and tablets are dropping fast, too, and perhaps the days of sub-$200 low-performance but fully functional laptops is closer than most imagine. The form-factor is maybe $25, the chipset $25, the keyboard $5, and the screen maybe $40, and the speaker/camera a few bucks.

The abundance and low cost of stuff is reducing the street value of hardware and many goods to next to nothing. Value of particle-board furniture: near-zero. Value of rusty cheap bicycle: near zero. Value of dumb phones: near zero. Value of surplus clothing: near-zero.

Unless the household contains real jewelry, burglars will find precious little worth stealing in the average household once low-cost tablets, cameras and laptops sell for $10 at the swap meets.

Throw in the risk of being caught on camera by cheap security systems and being pursued by a cheap privately operated drone, and much of the thievery game starts losing its appeal.

White-collar crime where the thieves are skimming millions remains lucrative, of course, and the risks of getting prosecuted are near-zero. But that's another post.... 

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Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, Ray C. ($5/month), for your supremely generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, John S. ($50), for your monumentally generous contribution to this site -- I am greatly honored by your support and readership.

Read more...

How Incremental Increases Can Lead to Systemic Collapse

Healthcare insurance illustrates how incremental increases can lead to systemic collapse.

My father's paystubs from the 1940s, 50s and 60s shed light on the way seemingly modest incremental increases can lead to systemic collapse. My father used his G.I. Bill education benefits to attend college after the end of World War II in 1945, but left to join Sears, Roebuck and Company in 1947. He worked for Sears until the mid-1960s.

I think we can safely assume Sears was a typical corporate employer of the day. It was known at the time for a generous profit-sharing program and well-regarded management training program to recruit management from within the ranks.

My father's paystub from June 1947 was handwritten. There is a box for "hospital group insurance" but there was no deduction made. The stub indicates my father worked 40 hours that week and earned $36 gross income. After deductions of $4.40 for income tax, 36 cents for unemployment insurance, etc., his net pay was $30.88.

Since he was unmarried, I assume he'd opted out of the hospital group insurance.

By 1951, he was married and had one child, and his July 1951 paystub shows 88 hours worked (working Saturdays was typical in retail), earning a gross pay of $166.40 and a $3 deduction for hospital group insurance. How much Sears paid (if any) of this policy premium is unknown. The $3 works out to 1.8% of his gross pay.

My second sister was born less than a year later in March 1952. Here are the total costs of her birth at one of the finest hospitals on the West Coast, The Santa Monica Hospital:

And here are the obstetrical rates:

Having a baby cost $30, which is today's dollars is $264. A private deluxe room cost $23 or $203 in today's dollars. According to the Bureau of Labor Statistic'sinflation calculator, $1 in 1952 is $8.81 in 2013 dollars.

I first published these documents in The "Impossible" Healthcare Solution: Go Back to Cash (July 29, 2009).

To the best of my knowledge, my father's employer-managed hospital group insurance did not cover childbirth. These expenses were paid in cash, as were all doctor's visits and medications. The hospital group insurance helped pay for accidents and illnesses serious enough to land someone in the hospital.

By the early 1960s, my Dad was earning $825 per month and the hospital group insurance deduction was $5.20. For context, his Group Life Insurance deduction was twice as much, $11. His net pay after taxes, the group insurance deductions and profit-sharing was $672.

Even if Sears was contributing more than 50% of the hospital group insurance, the total sum paid by employer and employee was 2% of gross wages. (By this time there were four kids, so the insurance covered a family of six.)

As an employer myself in the mid-1980s, we paid the total cost of our employees' healthcare insurance, though Hawaii state law only required that we pay 50%. The cost for single workers was around $45/month and for families of four around $150/month. Gross pay for employees ranged between $1100 and $1700 per month.

In 2013 dollars, that is equivalent to $97/month and $325/month.

As a self-employed non-poverty level household, we pay 100% of healthcare insurance costs ourselves. For a stripped-down plan with no dental, eyewear or medication coverage (all those must be paid in cash), the monthly cost is $1,136 for two people. Yes, there is an age differential, but our younger friends with one child pay roughly the same per month. Ironically, perhaps, this works out to nearly 20% of our income--the same percentage healthcare consumes of the American GDP (healthcare is 18% of the $16 trillion economy.)

Five years ago, our monthly healthcare insurance was $635. This near-doubling of healthcare insurance costs is not unique to us; we are not outliers, we are merely one data point among millions seeing these kinds of increases.

Last time I paid nearly $400 for a small tube of medication (a cream that's been off-patent for years) at the pharmacy, the pharmacist muttered under her breath that "you have to be rich or poor so the government pays for everything."

The notion that employers should pay for employees' group healthcare insurance was not reached by careful consideration of future consequences or alternatives.The idea arose when group healthcare insurance was a trivial cost. Now that it has incrementally risen by roughly ten-fold, it is no longer trivial. It is hollowing out what's left of the middle and is on track to bankrupt the nation.

This is how incremental increases can lead to systemic collapse.


Note to readers: my workload the next three weeks is off the scale so my ability to respond to email will be near-zero. Blog postings may be sporadic as well. Your patience and understanding are greatly appreciated. 

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Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, Stephen L. ($5/month), for your supremely generous subscription to this site -- I am greatly honored by your steadfast support and readership.

Thank you, William W. ($50), for your monumentally generous contribution to this site -- I am greatly honored by your support and readership.

Read more...