Posts Tagged ‘social costs’

Tic, toc… tic, toc…

September 9, 2011

As outlined in these pages over the past few years, the hammer is about to strike the 12th hour…

Prospect Of Empty Coffers Looms Large

The gravity of the situation is indicated by the fact that the government [of Greece] has frozen all disbursements apart from salaries and pensions.

If you think only Greece is in such dire straits you have anothing thing coming… can you sing the Jaws-is-lurking tune?

Count down to war ticking inexorably away….


The stuff revolutions are made of (re-post)

December 5, 2010

I am still on the road. But this post from early 2009 is as topical as ever.


The stuff revolutions are made of

By guidoamm

I think it is by now a foregone conclusion that before the end of this year, regardless of what official statistics may show, most countries in the West will have to contend with unemployment in excess of 15% in real terms. It can be argued that at least the USA is already approaching that level and Spain, Greece and Italy aren’t far behind if not alrady at that level too. That in itself is cause for serious concern for governments. As unemployment grows and, necessarily, as the credit market collapses, inflation and demand collapse too engendering lower earnings and therefore lower tax revenue for municipalities, states and the government. As unemployment grows and the ability of governments to raise finance is diminished (rating agencies lowering credit worthyness of sovereign debt), government will have to redirect resources towards maintaining those promises and services the absence of which would more readily indicate that not all is well with the state: i.e. pension payments and any monetary disbursments perceived directly by the public. This of course will drain resources from departments such as the postal service, road works, civil administration, education, forestry services, fire fighting, international aid and so forth. Naturally, this will not be an event but a process whereby services will be gradually curtailed in order to conserve liquidity and pay those direct disbursements to the public. At some point though, something may happen to trigger the anger of the masses. It could be the death of a child because an ambulance did not show up in time or the death of a bunch of passengers on a bus or train due to absence of safety infrastructure or its state of disrepair. The trigger is not what matters; anything will do. What matters is that when unemployment is high, savings are low and prospects hazy, the masses get twitchy and can go on a rampage for any number of reasons. Politicians and administration officials don’t need me to tell them that even in a recession, let alone a depression, maintaining social harmony is a tall order particularly when the shenanigans of the power elite come to light as they inevitably do – that’s because as the tide goes out, you get to see who was swimming naked (think Madoff but count on many more to come out down the road). So, before we get to that stage which, in the current environment, could be as soon as the end of this year, governments will have to do something to shift the attention of the masses and keep them focused on something, or someone, that will be made out to be a threat to their well being. Therefore, unless some very bright government minion comes up with a brilliant solution to kick inflation up the ass and send it soaring again soon, that will be all she wrote folks. War will be upon us sooner than you can imagine.

Curtailing social expenditure…

August 18, 2010

I won’t bore you with more links to past posts. If you are interested in perusing some of numerous previous posts by the same title which should be read along all the posts titled “tic, toc…” you can to a search on this blog.

Countdown to war is still on… but I have a feeling it is accelerating…

Far from me to give any credence to or have respect for their operating model but I happen to agree with Moody’s take on the state of our sovereigns:

Some excerpts (but it is worth reading the entirety of this short article) –

Genuinely adverse debt dynamics were only expected to materialise in 15 to 20 years. The crisis has ‘fast-forwarded’ history, eroding all the time available to adjust, ” said the group’s quarterly Sovereign Monitor.

Guido here: That’s right! Because inflation is inherently an accelerating dynamic. Hence the reason that since 1980 sovereign debt in the USA has progressed by 1200% but GDP only progressed by 100% in the same time period.

Countries that “fail to demonstrate the level of social cohesion required to stabilise debt” will lose their AAA rating. “Intra-generational” conflict between young and old requires careful handling. States that delay pension reform risk spiralling downwards. ”

Guido here: In plain English, the above means that social expenditure must be curtailed and that doing so will inevitably generate social unrest that must be managed (i.e. Greece).

This time the threat lies ahead as the aging crisis drives up pension and health costs on a static tax base. “While the current stock of debt is large, it is dwarfed by the accumulation of future liabilities if policies do not change.”

Guido here: As above. Social expenditure must be curtailed.

All the above results necessarily in things like this (of which you will find dozens of examples in previous posts):

The basic winter fuel payment, made to more than 12 million people, will also be cut by £50 for new recipients and £100 for the oldest.

Curtailing public spending a precursor to war…

July 30, 2010

Today Greece, tomorrow a nation near you.

As governments tax revenue dwindles and as their ability to borrow is progressively hindered by a slowing economy and rising unemployment, the social promises of the past thirty years cannot be met.

As a result public anger will rise and though initially it may be viewed as a localised phenomenon, eventually as more countries succumb to the same dynamic, social unrest will spread across borders and will ortanize too.

If tax revenue continues to collapse, revolution becomes a distinct possibility.

But it would be most unbecoming to allow revolution to happen anywhere in the West. Revolution is something that happens to banan republics but certainly not in the “civilised” West that purports to be a beacon of morality.

But when simple arithmetics tells you that Greece is only the prologue of what is to come, then what do you do?

Typically, at this juncture with nowhere to turn in order to increase tax revenues, the West engineers large scale conflicts.

Government issues emergency order as fuel shortages strand tourists and disrupt food and medical supplies… […] But hopes of a return to normal were quickly dashed when riot police fired tear gas at thousands of truckers gathered outside the transport ministry this morning.


July 4, 2010

As the debate rages on, both inflationists and deflationists slug it out each poring over reams of data and making the case for their position.

As far as I am concerned, there is only one obvious parameter that cuts through the fog of confusion that reigns in the various monetary/economic measures that can be distorted at will. The one measure that is hard to fudge or distort is this. For as long as tax revenue continues to decline, that is the most glaringly evident sign of deflation. And granted, just like nothing goes straight up or straight down, deflationary pressures too ebb and flow. Nonetheless, the one single metric you can keep your eye on to make heads or tails of what is going on in the economy is tax revenue. For as long as tax revenue declines, it is the clearest sign that the monetary authorities are unable to inject inflation in the monetary system ergo the economy.

If tax revenue is declining, it follows that states are unable to meet their salary and financial obligations. Thus:

U.S. state and local governments employ around twice as many workers as the country’s manufacturing and construction sectors combined, so the switch to layoffs risks swelling already high unemployment in the United States.

“I can confirm that states are now moving to layoffs they had hoped to avoid,” said Philippa Dunne, who polls state leaders for the economic newsletter she co-edits, the Liscio Report. “To me, this is terrible timing because private hiring remains anemic, so piling on state and local layoffs is dangerous.”

The excerpt above is actually interesting on two fronts. First, it highlights one of the inherent consequences of artificial inflation pumping; that is, that in a fiat monetary system inflation gradually overwhelms all economic metrics till it becomes a goal unto itself. Thus along the inflationary trajectory, government progressively becomes the largest actor in the economy. Second, the excerpt provides evidence of waning state revenue which is the sign of declining inflation if not its absence.

Sovereign bankruptcy reason for war

May 22, 2010

Up till today, my posts were generally titled “Curtailing public spending as precursor to war”.

Today, we can graduate to “Sovereign bankruptcy reason for war”.

Courtesy of Economic Policy Journal we now know that the majority of American states are currently insolvent, and that the US Treasury has been conducting a shadow bailout of at least 32 US states. Over 60% of Americans receiving state unemployment benefits are getting these directly from the US government, as 32 states have now borrowed $37.8 billion from Uncle Sam to fund unemployment insurance.”

Prepare to be dazzled by a new impetus in aggressive political posturing overseas and be prepared for tragic events to unfold in coming weeks that will make you believe that evil foreign forces are threatening our way of life. When the inevitable game of sovereign scape goating begins, keep in mind there is nothing left to threaten in our way of life; it’s all been threatened and devastated by our own leaders already.

Think about that when you turn in at night.

It is inevitable… (end of the inflationary cycle)

April 27, 2010

Two Chicago state reps: Bring in the National Guard

For as long as the authorities can induce credit and monetary inflation into the system, the debt load can be expanded thus the state can appear to be able to meet its obligations like social security expenditure or unemployment benefits or interest on its sovereign debt for example. During this period of time, alarmists keep warning that unfunded liabilities will eventually bite the state in the ass. However, the day on which the state gets bitten in the ass is at some unspecified point in the future. And for as long as inflation is running on a positive trend, that day can be postponed.

Inflation can be kept on a positive trajectory by various means. However, inflation is an exponential dynamic thus whatever means are employed to keep it on a positive trend, will necessarily need to be ever more drastic than previous attempts.

Since globally today we are all pretty much on a US$ fiat monetary system based on floating exchange rates, we all have to contend with an inflationary dynamic that is 100 years old; that is since the inception of the modern Dollar in 1913. During this time, inflation has stalled twice; once in the late 20s and once in the late 60s. Both periods were characterized by excessive debts and excessive industrial capacity. However, whereas the crisis of the 20s can be reasonably argued resulted in WWII, the crisis of the 60s resulted in the assimilation of the then major currencies into the US$ (abrogation of Bretton Woods and adoption of floating exchange rates). In turn, inflation was then stoked by assimilating other currencies via globalization.

Today, inflation has hit the wall once again.

Unless someone somewhere comes up with a brilliant idea to kick-start the inflationary cycle, this time around the resolution will likely take the form of a global conflict.

The reasoning for this dark prediction is as follows. Fiat money is predicated on inflation. In the absence of inflation, fiat money has no reason for being and the ability of the state to spend liberally (on social, scientific or military ventures for example) is hindered. Thus inflation is the conditio-sine-qua-non of opting for a fiat monetary system.

That being the case, the state has a vested interest in maintaining inflation on a positive trajectory. But, inflation is exponential in nature thus it is necessarily limited. The rub is that the point at which the state can no longer induce inflation is the point at which social costs are rising but tax revenue is declining. Since this is also the point at which the state can no longer expand debt (the Fed has been the single largest buyer of its own sovereign debt in the past year… yup! That’s: the Fed issued and purchased its own sovereign paper albeit through primary dealers to whom it gives money free of charge anyway), declining tax revenue and rising social costs spell sovereign bankruptcy.

At the social level, that is an explosive juncture. The end of the inflationary cycle, is sure to bring civil unrest and, eventually, revolution.

The trouble is that whereas in the late 60s we had room for maneuver and we could feed the US$ monetary pyramid from the bottom by assimilating new currencies, this time around, in the absence of any other currency of significance that we can bring in on the US$ fiat monetary system, the options are few and well defined.

In order to be able to restart the inflationary dynamic we must absolutely write-down debt and deplete industrial and commercial capacity. Nothing else will do.

But, of course, the moral beacons that our leaders are, rather than coming out and telling it like it is our governments are feverishly at work to build straw men in the form of “foreign evils”. Thus the dark prediction that rather than face the music and admitting the limits of the Western monetary (ergo socio/economic) models, they will throw us into a global conflict. And this one, as I never tire to reiterate, is a conflict that is just around a corner – 2013/2015

In terms of building straw men, nothing would be better suited than another false flag event. In this regard, I’ve come across this today:

You may think Gordon Duff is hysterical and delusional but history is on his side. When our governments need something to happen, they will make it happen by hook or by crook – look up the Opium Wars, Pearl Harbor, Bay of Tonkin, My Lai as well as, very likely, much more recent events…

Curtailing public services as precursor to war… the sequel continues… (Los Angeles)

April 10, 2010


April 6 (Bloomberg) — Los Angeles Mayor Antonio Villaraigosa called for shutting down “nonessential” city services two days a week, after Controller Wendy Greuel said the municipality’s cash may run out next month. The plan would target services that don’t generate revenue, …”

Shutting down non essential servicers; ok. However, what they should be really doing is shutting down those services that even though generate revenue, cost more than revenue. Those are the services that are killing the budget.

Anyway, along with Walmart slashing prices on consumer goods:

… the inescapable conclusion is that state tax revenue is reduced further still. So individual states are going to need to cut a lot more services.

Add to that the fact that property taxes constitute a significant chunk of state tax revenues. But property tax rates are assessed only every 3 years or so. Now, considering that since the peak in 2007 on average real estate values have dropped at least 30% across the US, this is one more shoe that is about to drop with regards to state tax revenues and, in turn, for federal tax revenue.

Tic, toc… tic, toc… tic, toc…

tic, toc… tic, toc…

December 14, 2009

Food stamps

Curtailing social expenditure a precursor to war… (Ireland)

December 10, 2009

The massive €4bn (£3.6bn) cost-cutting package designed to steady the country’s perilous finances is expected to slash social welfare, including unemployment and child benefit payments. Swingeing cuts to public sector pay as well as health and education spending will also spark controversy.

Ireland is stealing a march on what the rest of the EU, UK and USA have to do too. The difference is that the EU, UK and USA still think they can overcome the inevitable and, in the process, are making a bad situation worse.

If you read the article you will also notice Ireland is attempting to sugar coat the austerity measures by introducing car scrappage legislation. That, of course, is just a bunch of crock. It is not by reviving car sales that you can put a country back on its feet. And, anyway, by inducing a rise in car sales by offering incentives today, they are only taking away from future vehicle sales.

We have reached the limit of the expansion of inflation. Traditional inflation goosing tools are now having the opposite effect on the economy and the monetary system.

When enough countries will start cutting social expenditure and the political and power elites will inevitably be implicated in many more scandals to come, revolution will break out. Will it be Greece first? Will it be Ukraine? Maybe Spain or… Ireland? That does not matter.

Even if politicians don’t understand what is happening, they can feel the winds of change shifting. Before any Western country of import will declare bankruptcy, they’ll engineer a war. This one will be a real war. This one will be a war where people in the West will be mobilized and sent to the front or sent to work for the war industry whilst austerity measures such as fuel and food rationing are implemented at home.