Tuesday, January 29, 2013 at 3:00AM Kyle sees a chance that there will be no growth this year. I think there will be modest growth in the 1% range. But if inflation were calculated correctly, then the growth would be negative.
Economics Friday, January 25, 2013 at 3:00AM 
This looks like fun, but it won't be. I have been warning for some time that the US was facing a crisis because of debt service. The "buzz" on this is starting to reach the mainstream. I read an article on interest paid by the US government on Investor's Business Daily recommended by a Texas congressman. Right now the percentage of the budget spent on interest is under the danger point—18 %. The non-partisan (as you are always supposed to say) Congressional Budget Office, has estimated that it will be 20% in 2020. This assumes the US will have revenue growth due to economic growth, and that interest rates will remain low for the foreseeable future.
I have already predicted low interest rates and modest growth for a few years, a little breathing space. This is why I am guardedly pessimistic. We still have time to get our house in order. But based on the latest rhetoric from Obama this is almost a forlorn hope. The unwillingness of Republicans to cut their own sacred cows is part of the problem as well.
Interest rates are not just low; interest rates are not just as low as they have been in recent memory; interest rates are as low as they have ever been in recorded history. Look at this list of interest rates to see what I mean.
I am not out on a limb when I say that these rates cannot last. They were over ten times higher in the 80's. That would mean that interest rates would consume 200% of the budget in a few years if rates get that high.
Let’s say interest rates are double the projections, not at all out of the question. This would mean that interest on the US debt would consume 40% of the budget in 2020. Based on the fact the budget borrows 40% of every dollar it spends, this would mean that paying interest on the debt would consume 2/3 of all tax revenues.
Do I have to point out that this cannot happen?
So look for more of the same from the educated idiots in power. Things will continue on as they are. It will look fine on the surface, until the dry rot causes the structure to collapse. I do not expect the whole building to fall over, but the US will have to live with a rotten floor for some time. But the floor can be repaired.
Are you ready for the great stagflation of the next decade? If not, get ready. You have some time as the sucker's rally takes place over the next few years.
Tuesday, January 22, 2013 at 3:00AM I have been told that I am pessimistic. Guilty as charged. I still think that things can get better, but the path to this better future is filled with rocks and a sheer cliff on one side. Thus I refer to myself as guardedly pessimistic. I obviously did not invent this term, yet when you search this term my blog gets top billing.
I ran across a quote from I, Cladius, the PBS miniseries I religiously watched in the 70's. The quote sums up why I am pessimistic. I learned a lot from the series, like the health benefits of farting and belching. I also learned of the strong relationship between the Imperial family and the Jewish aristocracy of the time, like King Herod's family. The corruption of Rome was portrayed accurately and in horrific detail.
The quote is from Livia, grandmother of the hero of the series and wife of Emperor Augustus, an all around blackguard.
And it’s no use arguing with you republicans. You refuse to see that one can no more reintroduce republican government at this stage than one can reimpose primitive feelings of chastity on modern wives and husbands. It’s like trying to turn the shadow back on the sundial: it can’t be done.
While it took 400 years for Rome to fall, it did fall. Can the sundial be turned back? Can the sundial be turned back to renewed unquestioned US international dominance? Absolutely. Will it? Should it?
I doubt it. History has moved on.
Economics Saturday, January 19, 2013 at 3:00AM 
If you think I am pessimistic, you should read this article from Forbes:
The Trustees of the Medicare program have released their annual report on the solvency of the program. They calculate that the program is “expected to remain solvent until 2024, the same as last year’s estimate.” But what that headline obfuscates is that Obamacare’s tax increases and spending cuts are counted towards the program’s alleged “deficit-neutrality,” Medicare is to go bankrupt in 2016. And if you listen to Medicare’s own actuary, Richard Foster, the program’s bankruptcy could come even sooner than that.
What? Three years? Can this be right?
Exercise will reduce future medical expenses. I am not ready yet. I think it was in the early 80's that I understood that I would be on my own when I was older—no help from the government. At the time philosophically this made sense to me, and it still does. I have tried to be ready for this, but I have not yet finished my preparations. Are you ready? Do you really expect the government to cut you a check every month until you die? Even a great skeptic like me expected a few years of senior welfare. Instead I think we will have señor welfare where large number of seniors with moderate means go to southern countries and pay cash for their health care—saving about 80% of the cost. For me this would be Russia.
My wife was recently charged $1000 for antacid at the hospital. This was after the insurance paid their part.
What can't go on, won't go on. Are you ready for the coming crisis? I do not know how or when it will start, but it will come eventually. I have been saying 3 to 7 years if the current trends continue. I have been guardedly pessimistic and hope for a series of mini reforms to keep the wolf from the door. But it looks to me like the wolf is already in the house and in bed pretending to be grandma.
If you are my age, I am 58, be sure to treat your children with respect—they do have that spare bedroom now that your grandchild has left. That bed might look pretty good in a few years.
When will it break?
