THE LAW OF DIMINISHING RETURNS

Running on Debt: The Last of the Cash-Out Refi’s

  Car company commercials rarely talk about owning a car today.

         U.S. consumers increased their debt in February by a seasonally adjusted $18.1 billion, the most since last August, the Federal Reserve reported Friday. The increase is above January's $12.7 billion pace. Monthly debt rose at a 7.8% pace in February, after a 5.5% pace in the prior month. The increase in consumer credit in February was larger than expected by Wall Street economists.

 As has been the recent trend, the February gain was led by the non-revolving category of debt, such as auto loans, personal loans, and student loans, which jumped $17.6 billion, or 10.9%, the largest percentage gain since July 2011. Credit-card debt increased by a slight $532 million, or 0.75%, in the month. 

     What is never reported, because content is absent in most articles, is that consumers did reduce their debt, but ONLY because their debt was written off.  It wasn't like scores of people somehow managed to pay down their debt and not take on any more at the same time.  People walked on the mortgage obligations, and a lot of consumer debt was written off.  BTW, once mortgage debt is in some form of foreclosure it is no longer counted as debt. 

Now those believing that the economy is steaming along also believe that people taking on more debt means they have confidence they can pay it back. I don’t believe that is the issue. Take automobiles for example.   The deal is the cars get old.  There are few choices.  Buyers look today for the best leasing plan. How much is my monthly payment? We all need transportation.  Car loans today are for 6-7 years if you can qualify. 

What a Third Korean War Would Look Like

The Pentagon estimates a full-scale invasion of North Korea could cost 250,000 American casualties.

     The intensifying war of words between North Korea, the United States and ally South Korea could ignite a major conflict. The likely trigger would be a small clash at sea, in the air, or along the Demilitarized Zone dividing the two Koreas.

What would a war in Korea look like? First, nuclear conflict is unlikely. North Korea is not believed to have any long or medium-ranged nuclear weapons, certainly none that could hit North America. North Korea might be able to strike South Korea with a nuclear device. But then US nuclear weapons would wipe North Korea off the map.

North Korea’s military strategy would be to launch a surprise attack on the south to occupy Seoul and Inchon. The vital US Air Force bases in Japan and eight South Korean air bases would be primary targets. North Korea’s elite 88,000 special forces units are tasked to attack and neutralize these air bases as well as headquarters, communication nodes, and munitions depots of the US and Republic of Korea (ROK) forces. Barrages of North Korean conventional missiles would hit these bases and command hubs, possibly with chemical warheads.

Special North Korean amphibious units would land and strike these targets from the sea. North Korea has 300 old Soviet-era AN-2 biplanes that carry ten commandos each. Invisible to radar because they are made of fabric and hug the earth, the AN-2 would air assault suicide squads into US and ROK airbases.
Other North Korean special forces are tasked with attacking US bases in Okinawa, Japan and as far off as Guam, where the US is installing its new THAAD anti-missile system. North Korea has developed potent electronic warfare capability that would degrade US/South Korean communications and online targets.
Meanwhile, 14,000 North Korean heavy guns and rocket batteries dug into caves behind the DMZ could pour storms of shells or rockets per hour onto US/ROK positions south of the DMZ. North Korea’s 170mm guns and 240mm rockets have a range of 50 and 45 km respectively. Large parts of Seoul would be heavily damaged.

North Korea has about 700,000 soldiers within 150km of the DMZ, with another 400,000 in backup echelons further north. These divisions would fight their way south through South Korea’s ‘Maginot Line,’ seven parallel lines of anti-tank ditches, minefields, and high earth walls surmounted by tanks (South Korea denies it exists).
In spite of intense air attacks by the US and ROK, the North Korean offensive could likely reach at least as far south of Seoul, only an hour’s drive from the DMZ.

US retaliation would be ferocious. US and ROK warplanes would quickly attain air superiority over the entire peninsula. North Korea’s 70 airbases would be obliterated and its obsolescent air force quickly neutralized. The North Korean surface fleets would share a similar fate. US warplanes would pound North Korea’s command and control, communications, rail lines, bridges and factories not buried underground.
During the 1950-53 Korean War, US B-29 heavy bombers literally flattened North Korea. That’s why North Korea reacted so furiously when US B-52 heavy bombers and B-2 Stealth bombers skirted its borders late last month, triggering off this latest crisis. The B-2 can deliver the fearsome ‘MOAB’ 30,000 lb. bomb called “the Mother of All Bombs” designed to destroy deep underground command HQ’s (read Kim Jon-un’s bunker) and underground nuclear facilities.

Since the 1950’s, the North Koreans have buried much of their military-industrial complex and continue to train their ground forces in small unit, off-the-road tactics. The North also has a militia of 1.6 million to defend key targets and factories.

 Unless the US uses tactical nuclear weapons, it will be difficult to defeat North Korea. Doing so means invading North Korea, a risky operation that might invite Chinese intervention, as it did in 1950. Moreover, US ground and air forces are bogged down in Afghanistan and the Mideast, their equipment is run down, and the US Treasury out of money.

The Law of Diminishing Returns

No strategy can be considered viable that steals from the future to support the present.

     Human societies exist to solve problems. As these societies solved problems - food production, security, and public works - they became increasingly complex. Complexity carries with it overhead costs, such as administration, maintaining an army, tax collection, infrastructure maintenance, etc.

As the society confronts new problems additional complexity is required to solve them. Eventually a point is reached where the overhead costs that are generated result in diminishing returns in terms of effectiveness. The society wastefully expends its resources trying to maintain its bloated condition until it finally collapses into smaller, simpler, more efficient, smaller and more resilient parts that might be more innovative and adaptive, and hence survive better.

That the Bush-Cheney regime ran the nation into bankruptcy with their elective war in Iraq that cost a trillion dollars that could have been better used to restore our failing infrastructure and our failed schools, tells us all we need to know: the federal government has collapsed, and the Republic as a whole is next unless there is draconian public engagement and mandated electoral reform.

Americans are clearly "resistant" to the now unaffordable higher costs and lower results of the federal mismanagement of the nation, best depicted by the grotesquely inept and even inhuman lack of effectiveness with respect to New Orleans and the Katrina hurricane.

Military expenditures and arms races suck the health out of nations, yet we know from history that the physics of time and space make any extended dominance of distant cultures and places impossible when relying solely on the force of arms. At some point one of three options will need to be pursued by any nation vulnerable to collapse:
 (1) absorption by a foreign power
 (2) economic support by such a power or by an international financing agency
 (3) payment by the support population of whatever costs are needed to continue complexity.

 We should have elevated and recognized people instead of sovereign states, as the latter have been too easily corrupted, allowing the global elite to loot every commonwealth.

WGM

Quick History Lesson

ABOUT DEMOCRACY

Shakespeare did not care for democracy. To him people were too dumb and uneducated. ‘They will welcome any dictator that fills their stomachs and entertains them.’

 The corollary today is even more specific: free cable and Big Macs will do the job.

John Stuart Mill said that liberty was the belief that every individual should be free to live his life without constraint as long as no harm was done to someone else. The state could only interfere when the individual was doing concrete harm to someone else. Now the state is allowing the intentional harming and incarcerating of individuals.

The Decline and fall of the Roman Empire is a sad, long commentary on the history of a nation (Rome) that gave up political liberty to become a super-power. We have done much the same thing and will suffer the same consequences.

What has destroyed every previous civilization has been the tendency to an

unequal distribution of wealth and power.

Henry George

The Reagan ‘Restoration’ was used to run the American economy into the ground in new ways, largely by using deficit spending to benefit the super rich and the military-security complex.  We sent some of America’s best jobs off-shore in order to boost share prices and executive compensation here in America.

The financial sector was recklessly deregulated. The oversight that we rely upon for justice and fairness, food, health and safety, have been neglected for decades.Americans, for the most part, will never know what happened, because we no longer have a free and responsible press.

"If you want to determine who rules over you in society, simply find out who you are not allowed to criticize." – Voltaire

 "It is the absolute right of the State to supervise the formation of public opinion.""If you tell a lie big enough and keep repeating it, people will eventually come to believe it."

"The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State."

Dr. Joseph Goebbels, German Minister of Propaganda

WGM