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The Economy: Karl Denninger, “Listen Carefully Folks”

Monday, November 14, 2016 7:41
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“Listen Carefully Folks”
by Karl Denninger
“I’m going to make this as clear as I possibly can. If you are dependent in any way of health care being available at all, or if you are dependent in any way on the flow of money from the Federal Government to you then you have somewhere between now and four years from now to become independent of both of those requirements.
The fuse that has been lit for 30 years will soon go inside the box. There is a fiscal bomb in the box and it is large enough to destroy the federal budget and thus the ability of the government to raise funds in the bond market. The detonation will also destroy all state budgets and pension obligations.
Let me make sure you understand this- It will destroy all of these and more:
• Pensions.
• Food stamps.
• Federal and State Unemployment.
• Section 8.
• Medicare.
• Medicaid.
• All other forms of welfare and “social assistance”; indeed, virtually everything other than the lights in the Capitol and a good part of defense will disappear.
All of it. All gone. ”Gone”, in this context, means 50% or more immediate and permanent reductions, and many of them will be completely gone. Not to some of these programs and not over some period of time- to all of them at once. When this happens virtually every organ of government that exists now that you enjoy the peace and protection of, and benefit from, will disappear. All of them will be either severely compromised or cease to exist entirely.
This is not politics. It is arithmetic.
There is nobody- literally nobody- who knows how long the fuse is inside the box, except that it has less than five years to burn. It probably has four years to burn, but there is some risk the rate of burning may accelerate. That burning fuse will go inside the box approximately one year from now. That is when the Trump “honeymoon” ends, just as it has for every previous President. It ends because every Congresscritter starts running for re-election approximately one year from now. This was true for Bush, it was true for Clinton, it was true for Bush Senior, it was true for Obama, it was true for Carter and Ford. It will be true for Trump as well.
Once the fuse goes inside the box you can’t put it out any more through the simple means of taking out a pair of scissors and cutting it just ahead of where it is burning. There is exactly one way to cut that fuse and stop this.
The Federal Government must demand that all monopolist practices in the health industry end immediately under penalty of prosecution using existing federal law found in 15 United States Code Chapter 1. Doing so will collapse the cost of health care. It will thus collapse the demand on federal spending along with state budgets and pension funds. At the same time it will collapse the private costs of health care as well- those that fall on you and your employer.
Socialist medical systems deliver superior results at half of what we spend. Capitalism should easily do better, but it will not do worse. If we were to take half of the current Medicare and Medicaid spending out of budget we would save $700 billion dollars a year. This would eliminate half of last year’s depreciation of your spending power. The same savings applied to the private sector would free up over a trillion dollars a year for other purposes, some of which would go into capital investment and if that resulted in 20% of it flowing back to the government in tax revenue that would bring in another $200 billion in taxes. That is a $900 billion a year swing before you add on the improvements in productivity and business cost, and thus the businesses that would be attracted to the United States from other nations. That’s a low estimate, by the way. The more-likely figure is in the neighborhood of $2 trillion annually between private, public and federal savings.
We have one year, literally, to see this action implemented. Not talked about, not debated, implemented. One year. Not five, not four, one.
We, as a nation, must demand, insist, and do whatever is necessary up to and including calling and honoring a General Strike to enforce that demand. Donald Trump can cause this to happen with the stroke of a pen by appointing an AG who he directs to bring these actions using existing law. This requires no new law from Congress and in fact Congress can’t block it- since it is existing law they would have to amend or repeal said law and Trump can veto any such attempt. Donald Trump the candidate had vague words in his health care “platform” which hinted at doing this. But Trump’s transition web site has removed all such references.
We cannot allow this as a people or a nation. If we fail to act now our nation fiscally dies within five years and we have exactly one year to cut the fuse- or we’re screwed. Until and unless this becomes our national focus as a people irrespective of what other policy measures you may want or oppose I’m out.
It’s that serious folks. I’m going to go enjoy my last four years if you’re going to let the option to cancel self-destruct expire without doing whatever is necessary.”


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