Our Douchebag Government – Midyear Debt Update


By Karl Denninger

Keep up the lying, legislators, about how it’s all “those other guys” fault…..

Yesterday gave me the opportunity to update this chart with an extrapolated forward number for this year through the first six months.

Yeah, tell me it’s all the Republicans’ fault.  Or all the Democrats’.


Our government refuses to deal with the facts – there is no recovery in the private economy, there has been no recovery, private final demand collapsed in 2008 and has not come back one iota and the Feral Government is LYING – on both sides of the aisle.

You want a stock market crash and economic collapse Mr. Grayson?  Mr. Reid?  Ms. Pelosi?  Mr. McCain?  Mr. Hoyer?  Mr. Issa?  Mr/Ms (Pick a name)?

You’re going to get one and the longer you keep this crap up the worse it’s going to be.

Want to argue with me?  Go ahead and try – argue with the math.  I double-dog-dare you.  Tell me how we can keep doing what we’re doing, and for how long.  How long we can borrow and spend 10, 11, 12% of GDP on an annual basis before those who fund our national credit card say this:

Are you in Congress and the White House so damned arrogant as to think that this can’t or won’t happen?  What are you going to threaten people with?  6,000 nuclear weapons?  For what?  Refusing to fund an ever-spiraling higher Ponzi Scheme?  For how long will that game work?  Can such a threat be effective beyond the mathematical limits of capacity, even if the leaders of said nations want to continue doing so? 


Here’s reality folks: We’ve written checks for 30 years with our political mouths we cannot cash with our producing fingers.  We’ve papered over this with fraud in virtually every nook and cranny of public and private life.  We have allowed producers to depart for lands where effective slavery exists for labor, refusing to enact parity tariffs to put a stop to it.  We have allowed blatant and outrageous theft of our producers’ intellectual property and conferred upon these nations “most-favored nation” trading status.  We have blown serial bubbles in the stock and housing markets and would love to blow another one in “carbon trading”, but all three were and are frauds without foundation in reality – or sustainability. 

Jeff Immelt, GE’s Chief Executive, came out today against the Chinese – and Obama:

He warned that the world’s largest manufacturing company was exploring better prospects elsewhere in resource-rich countries, which did not want to be “colonised” by Chinese investors. “I really worry about China,” Mr Immelt told an audience of top Italian executives in Rome, accusing the Chinese government of becoming increasingly protectionist. “I am not sure that in the end they want any of us to win, or any of us to be successful.”

Of course they don’t.  You slept with Satan and you woke up with a sore butt.  Who’s fault is this, exactly?  A government that’s communist, a workforce that operates under effective slave conditions, a population that has license to steal anything intellectual from anyone without recourse or the rule of law, indeed, a government that has stolen military secrets and warhead designs – when they couldn’t just buy them (as they did during Clinton’s term.)  Suddenly Mr. Immelt shows outrage and shock when the snake does what a snake does – and it was very visibly a snake before he got involved over there? 

Who’s responsible for intentionally sticking one’s hand on a lit BBQ?

There is no “lack of clarity” in the economy.  What has been done is transparent to anyone who cares to look.  The Federal Debt picture is published each and every day and it is clear, convincing, and irrefutable.  The same bluff was run in both Iceland and Greece, and got called twice by the market.  Europe has recognized this and has pledged to stop playing Ponzi (whether they’ll actually do it until cities burn at the hand of angry mobs is another matter, but at least they’re claiming intent.)  We, on the other hand, keep pressing for more and more Ponzi.

I don’t care if people want to talk about austerity – and implement it – or not.  I don’t care if people want cradle-to-grave medical care with the “best” we can offer.  I don’t care if people want to be able to have $100/month cell phones while unemployed, or 99 weeks of unemployment so they don’t have to save for their own tough times, or $40,000 annual tuition and fee costs at universities to learn about “woman’s studies” or “primary education.”

None of what I want, you want, or the government wants has a thing to do with the mathematics of the situation we have before us today and the instabilities we built into the economy over the last 30 years.

In 2000 we had to accept a 10% contraction in GDP, along with a reduction in debt levels in the system to 150-175% of GDP, to get back to some reasonable resemblance of parity.

In 2007 the contraction we had to accept was 20%.

Today, it’s approaching forty percent, and the commensurate reduction in debt in the system – in total – is about 60%.

This means the federal government must shrink in size by that same 60%.

As I said a couple of weeks ago, get the BBQ sauce and pick several sacred cows, because we must size the Federal Government to roughly 15% of a $10 trillion economy, or $1.5 trillion in total.  Here’s the pie chart you need to reduce by sixty percent:

Go ahead and tell me how you’re going to do it.  Or tell me, if you wish, that you’re NOT going to do it, and then extrapolate to how long our creditors will permit that situation to persist, because it is not under our control – it is under theirs.

We are in the beginning stages of a global asset market collapse.

When did the stock market take off?  At the same time the debt Ponzi took off.  The debt Ponzi is now collapsing.  What’s going to keep the stock market from losing all of the “gains” it put on during those years?  Yes, all the way back to early 1980s levels.

Go ahead – make the case that it won’t happen when the leverage capacity disappears – and it is disappearing.  The “establishment” folks know damn well this is in the cards, which is why they’re scrambling to lie, lie and lie some more lest you figure it out and hold them to account.  They’re well-aware that while most of the time the “elites” manage to do just fine there are historical exceptions when extreme imbalances are cranked too far and the arrogance of the elites continues beyond all reason.  Hold a seance and ask Marie Antionette’s ghost about the consequences of such actions and how quickly they can appear.

What you saw in 2008 was the opening act.  2009 and early 2010 was the intermission – the eye of the hurricane when everyone came outside and marveled at the pretty blue sky.

The back half of this Cat 5 storm is far worse as instead of an offshore wind this time we’ll get the onshore wind and a 30′ high storm surge. The wind is starting to pick up.

We either act right now or our choices will be made for us.

Now go watch the pretty Fireworks over the 4th of July weekend – and consider what it’s going to feel like when those start going off in your face in the coming weeks and months.

“Here it comes”

The Market-Ticker