Blog Archives

Solutions Abound–on the Local Level

Those looking for centralized solutions to healthcare, jobs and other “macro-problems” will suffer inevitable disappointment. The era in which further centralization provided the “solution” has passed: additional centralization (Medicare for All, No Child Left Behind, federal job training, Universal Basic Income, central banking “free money for financiers”, etc.) have all entered Diminishing Returns.

The systemic costs of centralization–corruption, cronyism, soaring prices, declining quality, over-reach, insider rackets, regulatory capture by corporations and oligarchs– are soaring as the benefits of centralization plummet.

ObamaCare was the penultimate flowering of centralization: every self-serving healthcare cartel and racket had a say in the centralized sausage-making, and the results were entirely predictable: highly profitable to the healthcare cartels and rackets, and soaring costs that rendered the program unaffordable.

ObamaCare institutionalized staggering distortions, profiteering and injustices, as those who didn’t qualify for a subsidy were ripped off to pay for all the skims and scams: meds that went from $3 to $600 overnight, etc.

All the sound and fury around a centralized one-size-fits-all “solution” signifies nothing–the solution is decentralized and local, not federal.

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Will Tax Cuts and More Federal Borrowing/Spending Fix What’s Broken?

Not to rain on the new administration’s parade, but one question needs to be asked of any new administration: will tax cuts and more federal borrowing/ spending fix what’s broken in the U.S./global economy?

The short answer: if tax cuts and more federal borrowing/ spending were the cure for what ails the economy, we’d have reached Paradise long ago. Stripped of partisan politics and rah-rah, tax cuts and more federal borrowing/ spending–on infrastructure, education, defense, healthcare, you name it–have been the de facto status quo policies of both parties for the past 70 years.

Despite decades of these centralized, standard-issue Keynesian “fixes,” the economy’s structural ills are only getting worse. I outlined five of the most critical issues in What Have the “Experts” Gotten Right? In the Real Economy, They’re 0 for 5 (December 20, 2016).

Ultimately, two dynamics will dominate everything else: the paid work/earnings of non-elites and the transition from wasteful, debt-funded “growth” to a sustainable “Degrowth” economy.

45 years of Keynesian “stimulus”–tax cuts and federal borrowing/ spending–haven’t stemmed the decline of labor’s share of the economy (GDP). As these charts reveal, if labor’s share of the economy was still at 50% rather than 42%, households with earnings from work would be getting an astounding $1.35 trillion more per year.

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Solutions Start with Innovation and Transparency

Innovation is selectively restrained in systems controlled by vested interests.

Just as everyone supports “solutions” until the solutions crush their share of the swag, everybody supports innovation and transparency (IT) until IT disrupts their share of the swag. Then they scramble to hide the ugly truths and suppress the spread of threatening innovation.

This parallel rejection of swag-crushing solutions and innovation/transparency by vested interests is not coincidental: innovation and transparency are the heart of real solutions.

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You Want a Solution? Try Not to Get Hurt When It Collapses, Then Start Over

Once the deadwood piles high enough, the random lightning strike ignites a fire so fast-moving and so hot that it cannot be suppressed, and the entire financial system burns to the ground.

In discussing our broken healthcare system with a 22-year college graduate, I opined that Obamacare hadn’t fixed anything that was broken. She observed that real reform was impossible due to vested interests and the only real solution was to “start over.”

Exactly.

People constantly ask me for solutions to our all-too visible ills. You want solutions? Here’s the solution for every systemic, structural problem we face: Avoid getting hurt when it collapses, then start over.

Over the nine years I’ve been writing this blog, I’ve offered dozens of systemic solutions, and have reprinted dozens more submitted by readers. For example:

Boomers, Prepare to Fall on Your Swords (June 2005)

The “Impossible” Healthcare Solution: Go Back to Cash (July 29, 2009)

Want to Reduce Income/Wealth Inequality? Abolish the Engine of Inequality, the Federal Reserve (January 28, 2014)

Nobody likes these solutions because they disrupt everyone’s place at the feeding trough. People get deeply offended when their place at the trough and their complicity in a corrupt, inefficient, wasteful, fraudulent and unsustainable system are challenged.

And furthermore, all these solutions are impossible.

As a result, my work draws untold numbers of negative and derogatory comments and commentaries, “Charles is f**king crazy” being one of the kinder ones.

A relative handful of insiders who refuse to drink their institution’s KoolAid are courageous enough to call it like it is, and these few confirm that the key sectors and institutions of our society and economy are hopelessly corrupt, inefficient, wasteful, fraudulent and unsustainable.

Healthcare: broken. Medicare: broke and broken. Higher education: broken.Welfare: broken. Corporate subsidies/welfare: broken. Taxation: broken. War on drugs: broken. The legal system (tort, criminal justice, patents, etc. etc. etc.): broken. Defense procurement: broken. National security state (to anyone who’s glanced at the U.S. Constitution): broken. The Imperial Presidency: broken. Congress (i.e. lobbyists and campaign contributions): broken. The financial system: broken.

Do I have to go on? Every major system is fundamentally broken, yet we persist in claiming it isn’t broken and only needs a few policy tweaks because our self-interest is served by keeping our place at the feeding trough intact, never mind the consequences.

We’re collectively horrified and frightened by the notion that the whole travesty of a mockery of a sham is precariously perched on a financial house of cards and so we desperately attempt to marginalize the informed critics, whistleblowers and truth-tellers.

So let me ask you one question: did silencing the informed critic ever solve any fundamental problem? The answer is no: the only possible way to avoid collapse is to listen to the informed critics and whistleblowers. This is a scale-invariant truth: it’s the same for marriages, families, communities, enterprises, institutions, nations and empires.

I welcome informed criticism, because we learn from failure and fair criticism. I receive thousands of emails every year and do my best to read each one and respond to as many as my over-scheduled workload allows (alas, very few).

The critiques I’ve received fall into a few camps:

1. The Complexity Excuse: All large complex bureaucracies are inefficient, wasteful and corrupted by vested interests and powerful constituencies–it’s the nature of the organization. As a result, there’s nothing to be done; real reform is impossible. The rules will always be complex and therefore open to being gamed by insiders and monied Elites.

The implicit conclusion: we are powerless, so let go of all ideas of reform. Just enjoy your life and quit tilting at windmills.

Fine, but let’s not forget that whatever is unsustainable will collapse and vanish from this Earth. To say that large centralized bureaucracies are intrinsically inefficient, wasteful and corrupt suggests an obvious solution: the only real solution is to get rid of all centralized bureaucracies entirely.

That is of course “impossible” until the financial firestorm burns down the forest loaded with deadwood, and suddenly all sorts of things that were “impossible” are not just possible but painfully obvious.

2. The Self-Serving Excuse: This is the best possible system, given the alternatives.Those toiling inside these institutions are naturally drawn to defend them as the “best possible system” because to question their role in a broken system is to question their identity, security, self-image as a good person and their role in perpetuating a broken system.

As immortalized by the insider’s insider, Larry Summers: Insiders also understand one unbreakable rule: They don’t criticize other insiders.

Larry Summers to Elizabeth Warren in 2009: “Insiders Don’t Criticize Other Insiders”(Liberty Blitzkrieg)

What is so incredible about the quote above is that it essentially proves correct everything I and many others have been saying about how “things work” in America these days. The statements above describe a petty, childish oligarchy of arrogant fools. This small club of people call all the shots and do not listen to “outside” ideas whatsoever. This is why nothing changes. This is why the same people are recycled through positions of power over and over again no matter how badly they screw up and how many millions of lives they ruin. This is why there is a two-tiered justice system in which the rich and connected never go to jail, while the average citizen can have his home raided by police for a parody Twitter account. This is why the 0.01% have been able to loot all of the nation’s wealth while median inflation adjusted wages have been declining for 40 years.The reason is because the “status quo” in America consists of a deranged, immoral, arrogant, selfish fraternity of inept children who protect each other at the expense of everyone and everything else. Until the status quo gets the boot, this nation will continue to decline. Forget reforms, the entire status quo needs to be tossed aside once and for all. The insiders must be turned into outsiders.

3. The same Elites have been running the country for X number of years. This is a variation on the Complexity Excuse and it leads to the same implicit conclusion: we are powerless, so let go of all ideas of reform. Just enjoy your life and quit tilting at windmills.

You want solutions, but you don’t want anything to actually change? Sorry, you can’t have it both ways. Let’s jettison all the distracting complexity–the 2,000-page laws, the 40,000-page tax code (or is it 80,000 pages? Does it really matter beyond 1,000 pages?), the arcane financial games that keep the whole fraud afloat (Quantitative Easing, reverse repos, credit default swaps, shadow banking, rehypothecation, etc.)–and distill the choices down to their essence:

1. Embrace your place at the feeding trough of the Status Quo and put your faith in its sustainability, regardless of its inevitable warts. Denounce critics and defend the Status Quo with some variation of the three primary justifications/excuses.

2. Position yourself to avoid getting hurt when the unsustainable mess collapses in a heap of financial over-reach and fraud.

Interestingly, nobody actually believes a few policy tweaks will reform/fix what’s broken. Virtually none of the thousands of emails I receive present a few policy tweaks as credible “fixes.”

We all know the system is broken and the proposed policy tweaks aren’t fixing anything, but human nature being what it is, we hope our place at the feeding trough will somehow survive unscathed as the financially unsustainable house of cards collapses around us.

In essence, we all know the system is broken and can’t be reformed, but we play along with the illusion out of self-interest.

There is a peculiar self-referential quality to our predicament. The only way to enable meaningful reform is to listen closely to informed critics, whistleblowers and truth-tellers.

But we choose to crucify whistleblowers, mock and denigrate informed critics and marginalize/demonize truth-tellers as threats to our place at the feeding trough.

So meaningful reform is impossible–even if vested interests woke up to the fact that their favored place at the trough is precarious.

This entire dynamic has been articulately laid out by Thomas Homer-Dixon in his seminal book The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization: I highly recommend this work and another long-view book that illuminates the dynamics of our impending financial implosion, The Great Wave: Price Revolutions and the Rhythm of History by David Hackett Fischer.

You want solutions? Just do nothing, and the whole rotten financial contraption will collapse, very likely within the next decade. I prefer the analogy of the forest fire: The Yellowstone Analogy and The Crisis of Neoliberal Capitalism (May 18, 2009).

Vested interests are threatened by the losses generated by small financial fires, so these are systemically suppressed. As a result, the fallen deadwood piles ever higher, creating more fuel for the next random lightning strike to ignite.

Once the deadwood piles high enough, the random lightning strike ignites a fire so fast-moving and so hot that it cannot be suppressed, and the entire financial system burns to the ground.

So go ahead and keep defending the Status Quo as the best system possible, or believe Elites will keep suppressing fires forever because they’re so powerful, or whatever excuse, rationalization or justification you prefer. It won’t matter, because the firestorm won’t respond to words, beliefs, ideological certainties, reassurances or official pronouncements. It will do what fires do, which is burn all available fuel until there’s no fuel left to consume.

As I noted last week in A Reader Asks: How to Find Shelter from the Coming Storms?,Centralized systems such as governments and global corporations are either bankrupt and don’t yet know it or are bankrupt and are well aware of it but loathe to let the rest of the world catch on.

If you want to believe this is the best possible system and it’s sustainable, be my guest. 

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Want to Fix Income/Wealth Inequality? Here’s How

There is nothing fancy about these three solutions.

I have covered rising income/wealth inequality for many years in dozens of entries. Since Thomas Piketty’s new book has catapulted the topic into the media spotlight, it’s a good time to list solutions that go deeper than Piketty’s proposed global wealth tax–a proposal he characterizes as utopian.

Every solution is utopian, because the Financial Aristocracy and their central bank cronies have democracy by the throat. There is no legislative way to change the Status Quo when political power is for sale to the highest bidder, and central banks are issuing nearly-free money to the financial oligarchy that owns the political machinery.

But listing solutions is still important, because it reveals just how far from democracy, rule of law and free-market capitalism we have fallen.

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