Sunday, July 29, 2012

A Completely Screwed Up System

The following chart from the Congressional Budget Office (CBO) shows who pays federal income taxes in America.


It should come as no surprise that individuals with the highest incomes pay the most in taxes. The top 20% pay 94% of all income taxes according to the CBO. It should also be no surprise that the bottom two rungs (40%) of the income groups pay very little taxes. But it was surprising to me that the bottom 40% actually pay a negative income tax.


How does one pay negative taxes? Tax transfers to low income groups exceed their tax liabilities. Two examples of these transfers are the EITC (Earned Income Tax Credit) and ACTC (Additional Child Tax Credit).  The following chart from the Congressional Research Service (CRS) describes the effective negative tax rate phenomenon.


For those earning up to $26,000, there are no income taxes levied, but those individuals pay FICA (Social Security taxes). The value of the tax credits available to those individuals is greater than their SS taxes. Therefore, the group, ends up with a negative tax rate.

I favor this type of income redistribution. I think high-income groups should end up supporting lower income groups. I have no problem with negative effective tax rates for individuals and households that are at, or below, the poverty line.




The CRS reported:




individuals who were not authorized to work in the United States received $4.2 billion by claiming the refundable portion of the child tax credit—the additional child tax credit (ACTC).


“How is this possible?” How could illegal workers end up receiving federal tax credits? The IRS is encouraging the process.


The IRS issues two kinds of tax identification numbers. A traditional SS# is available for all legal residents. Illegal residents can obtain an ITIN (Individual Tax Identification Number). The use of ITIN has exploded 10-fold over the past decade. In 2010 3.2m people used these numbers to file tax returns and obtain refunds.



The use of ITINs is just one component of the problem. The Social Security Actuary estimated that 75% of illegal workers are using a fraudulently obtained SS# to get work. The IRS/SS knowingly collects this tainted money.


Combining the ITIN data with the 75% estimate by SSA leads to an estimate of 12m taxpayers contributing (and getting refunds) who shouldn’t be in the system at all.  (Note: the Census Bureau put the number of unauthorized aliens at 11.2m in 2010.)


What happens when a cash incentive to have children is made available to people who live in the country? They have babies, of course.  From the CRS:


Do existing laws permit illegal workers to get tax rebates and benefits?

For refundable tax credits like the EITC and ACTA, the answer is a very clear “No!” But that hasn’t stopped the IRS from allowing this to happen.


However, it is completely legal for an illegal worker to obtain Social Security benefits. Illegal workers who have contributed to SS (FICA taxes) for a minimum of 10 years are illegible to receive retirement benefits on the same schedule and terms as an individual who works legally. (Note: I was shocked when I first learned this, but it is true {Link}).


How many undocumented workers are there that might be eligible to get Social Security benefits? Pew answers that:

35% of unauthorized adults have resided in the United States for 15 years or more and that 28% have resided for 10 to 14 years. The report also found that the proportion of unauthorized aliens who have been in the country at least 15 years has more than doubled since 2000.


Based on the Pew numbers, 62% of the 12m unauthorized aliens will be eligible to receive benefits in their lifetimes. These workers have contributed to SS, so the law says they can get monthly checks. But the reality is that a significant percentage in this group is paying negative effective tax rates after taking into consideration the refundable tax credits described above. In the end, the lower 30% of income groups (including undocumented workers) end up “paying” for SS out of one pocket, while getting a similar sized refund check in the other pocket.



What are my points/objectives in writing about this?


-       Our immigration laws (and how they are applied) are completely idiotic.


-       The IRS is facilitating the problem by allowing refunds to be paid to those filing with illegal SS#s (or legally obtained, but fraudulently used ITINs).


-       Stirring the pot on the issue of illegal workers and their rights to receive Social Security benefits. It is now more than two years since the Chief Actuary of the SSN, Stephen Goss, spoke about this matter (Link). This is a political issue. The country deserves an update on how big this problem is before November. The candidates should be asked what they plan to do about it. Illegal workers have contributed as much as $240Bn to SS (10% of all assets).


-       Stimulate a discussion on a very complex and emotive topic.




In my heart I has a soft spot for illegal immigrants. My father came from Europe in 1939.


I know many illegal families. I like them. They are good parents. They are hard workers. They would be happy to pay taxes as regular citizens do. They want to own property, cars and have their children get an education.


But the numbers are too large, and the consequences too significant. In the end, this about the law.


So I don’t know what to do.



  1. Bruce, fascinating. If all the illegal workers here were made legal and paid into social security, would that save SS or would the tax credits swallow up the gains? I’ve often wondered whether making all the illegal workers (who are here now) legal would ultimately fix what is now an inverted triangle. Thanks for the great post.

    • If all the illegal workers here were made legal and paid into social security, would that save SS or would the tax credits swallow up the gains?

      Do you really have to ask this question? Do you think that somehow a group of people who pay a negative income tax — because they earn so little (the average illegal is a low earner) — will magically not be a drain on SS and Medicare later?

    • Maybe not ‘later’

      They would be eligible to file for more lucrative cash benefits like SS disability (which qualifies one for Medicare).

  2. Interesting news report on the subject.

  3. Kreditanstalt says:

    “Legal”? “Illegal”? “Authorized”? “Unauthorized”? “Documented”? “Undocumented”?

    The payouts themselves are creating the problems. If you eliminated all these refunds, baby bonuses and other entitlements the distinction between these labels would be moot.

    Let ANYONE in. And stop labelling them. Problem solved.

  4. Your father went on welfare when he got here? You don’t know what to do? Export yourself!

    You can have open borders and no welfare, or you have to stop illegal immigration. What is so hard about this?

    Immigrants built America ? We are probably subsidizing 40% of Mexican nationals combined in both countries. By doing this we are bailing out a corrupt and immoral society in Mexico. So you don’t know what to do? The obvious answer is to import tens of millions more as immigrants built America like your father.

    Me? I am done with bail outs even if you are in favor of them. Good, decent, honest people live in the SF Bay area. With the recent spike in apartment rentals and house prices, there is a rotation of outgoing retired and lower paid people and an influx of highly paid educated people and poor people, mostly Mexican who provide services for the rich and highly educated. The incomes of the Mexican service workers are subsidized by you there in elitist NY. Thank you very much.

    You don’t know what to do?

  5. About some things you are just absolutely contemptible Krasting.

    Simple question: what are the demographics of the area where you live? Through the magic of the internet, I took a moment to see if I could find out: apparently, the area where you live is 90+% white. So how convenient for you to have a “soft spot” for illegals, when you effectively isolate yourself from the mass of them in a wealthy, white enclave.

    But for most of us this is impossible. So we have to live next to them. Next to e.g. a “barrio”. Send our children to school with them. Do you know what a “barrio” is in America? In California, it’s a sprawling, suburban Hispanic slum. Filled with people who are, on average, 4x as criminal as the Whites they’ve driven out, who pay negative income tax, and whose children have trouble graduating from high school. The question has to be asked: what kind of country will you have if it fills up with such people? Fortunately, you don’t have to go far to find the answer: visit Mexico, or any country in Central or South America for that matter.

    But, anecdotally, you know some likeable immigrants (and who doesn’t?), so it’s all OK. Is that what you want us to believe?

    Let ANYONE in. And stop labelling them. Problem solved.

    That’s right. What ‘problems’ could there possibly be with that idea? Let in every self-selected third world peasant. Everything — all ‘distinctions’ — would then be “moot”. Naive (I’m being nice here) people like you — and naive (“) thinking (“) like yours — will destroy this country even faster than it is being destroyed now.

  6. Any form of centralized redistribution is a net loss of overall prosperity due to the loss of fitness due to the loss of degrees-of-freedom of the free market of individuals.

    OTOH, aggregation of great wealth is form of centralized management of wealth, which also lowers the degrees-of-freedom of the free market.

    But the problem with supporting govt redistribution is that due to the “Iron Law of Political Economics” (google it), this will attract parasites and special interests and it will grow without bound.

    The exists no possible solution. Navigate this natural system individually. This phenomenon of aggregation of mass that moves against the universal trend of entropy (2nd law of thermodynamics) to maximum entropy (maximum possibilities, i.e. the most degrees-of-freedom and the most granular mass) is part of the overall trend. Mass exponentially aggregates and disintegrates even exponentially faster. These logarithmic S curves are every where in nature.

    Accept it. Navigate it. Statists will never fix it. Don’t delude yourself and waste your scarce time on this earth.

  7. Adding to the prior comment I made just above, statists ask why the system is so screwed up and the answer is look in the mirror. Bleeding hearts spending other’s peoples money instead of their own.

    The Bible says very clearly in numerous places that wealth will grow wings and fly away. Our wealth is not our own, but rather to use to do good.

    But that isn’t an advice to appropriate the wealth of others. Each individual must learn from experience the way nature is. Nature does not allow wealth to be overly concentrated. Such a cancer kills the host. And that aggregation of mass disintegrates and we start over again fresh.

    Statists delude themselves into pontificating about being able to eliminate nature. And then they ask why the system is so screwed up. Hahaha. Can they even see the tip of their own nose?

    • What you call a “bleeding heart” is often referred to by others as “human compassion.” If you think that’s a bad thing to have, I’m not sure where to go from there. We didn’t survive as a species without forming groups and taking care of each other.

      • So be as ‘compassionate’ as you like — invite some illegals to live in your house. Then pay for their medical care etc — since they seldom get jobs where that’s part of the deal. Have you ever heard of ‘privatizing profits, socializing costs’? That’s what failure to enforce immigration law is (as is, for that matter, failure to have a reasonable immigration policy) — just a giant scam to privatize profits (e.g. employers who profit from their cheap labor) and socialize the costs.

        Your argument (I’m being kind again) is just a childish appeal to emotion.

      • I wrote “bleeding heart”. The point is that if you want to be compassionate, then go ahead with your money. But when you steal from others, to force them to adhere to YOUR compassions, then you are just a thief.

        Charity should always be an individual decision, because the needs for help are zillion varied things that the individual on the ground close to it can see clearly. We know when to help our neighbor or relatives.

        Whereas, when you institutionalize the theft, then you end up with Nazi result. This is where we are headed.

        Bleeding hearts are not compassionate. They just want to steal.

        For those wealthy scrooges that never are compassionate, don’t worry. Nature always gets them at some point. Didn’t you know that small things grow faster? Saplings quickly grow to Oak trees, but Oak trees don’t grow the moon.

        Subconsciously statists are control freaks and jealous and don’t trust nature and God to take care of it.

        • “For those wealthy scrooges that never are compassionate, don’t worry. Nature always gets them at some point.”
          Have you been watching civilization for the last 2000 years? Nature most certainly hasn’t gotten them yet… Should we just wait another 2000 years for “nature” to take it’s course? That’s a pretty long S curve.

      • Add to my reply that you need to also note that we take care of others in groups that we know personally. This is the maximum degrees-of-freedom in the free market– individual caring close to the varied situations. Imagine a car with no reverse gear, or a bicycle chain with only 3 links. Degrees-of-freedom matters big time! The wisest 10 men in the world couldn’t possibly succeed making decisions for billions. Ludicrous to even suggest otherwise. It boggles my mind that otherwise intelligent people can’t grasp this.

        Also, research the Dunbar number.

  8. “About some things you are just absolutely contemptible Krasting.”

    I’ll second this. Your posts on economics are interesting Bruce, but your posts on social policy are idiotic. You just make it worse by trying so hard to show your soft spot. The government gives money away and you are surprised when people stick out their hands.

    • Glad I was able to piss you off.
      It’s true, I go both ways on economics.
      I believe in markets, but I’m “pink” on a variety of social issues.
      On another site I was labeled “Karl Marx Krasting”.

      As far as politics go, I’ve supported Dems in the past, but I think Obama has done a terrible job.

      • Where is the compassion in stealing from others to appropriate their individual charity to a monolithic incentive to do just one thing?

        And where it the logic?

        Must be some kind of internal emotional switch that shuts off your IQ? Some traumatic experience in childhood?

        Just for once try to explain me how a liberal’s brain works?

        • “try to explain me how a liberal’s brain works?”

          The issue is: you want to apply logic to viewpoints that are not logically based.
          Emotion is the underlying driver. It truly is no more complicated than that.
          Really, that’s the deal.
          Now, try reasoning with it. ;o)

  9. The system is screwed up because we have such a large percentage of our population living in poverty or near poverty. And lawmakers debate whether to raise the minimum wage. Seriously??!! Okay, you mister fat cat congressman or senator (most of whom are millionaires and have no clue), you try living on a $7 an hour job. That’s $14,000 per year. Think you can make that work, Mister Senator? What a freaking joke our system has become.

    Large corporations pay employees $8 an hour (hey, that ABOVE minimum wage), enroll them in a health care program they can’t afford and gives lousy coverage, and the employee collects food stamps and gets state subsidized health care. Company CEO makes his bonus numbers courtesy of the tax payers.

    • You can’t legislate the free market without having the free market go else where. It is called Coase’s Theorem.

      You want to know why the system is so screwed up? Because a majority of the population “thinks” (not thinking!) the way you and Bruce do. I suppose their IQ is just too low, or they just can’t grasp the way nature works, or don’t want to study.

      Actually graduates should work for free!


      Read the comments at the end of the above linked article for a deeper analysis.

      I did and it made me rich! Because I never wanted someone to give me something for nothing (I wanted to give more value than I got in return!), I wanted to gain knowledge and earn everything I got! Rich not only in money, but also in IQ, knowledge, and experience.

      • You can legislate that the highest paid person in a company can make X number of times the lowest paid worker’s salary. Mister CEO, you want a raise, then pay your employees more. I believe they do this in some of the Scandinavian countries.

        I don’t know what the answer is, but I know that rampant greed on the part of CEO’s and other corporate exec’s is ruining what used to be a great country. Can you legislate greed away? Probably not, but you can try. How about legislation that charges the company for the food stamps and the state sponsored medical care that their employees get because the company doesn’t pay them enough? How about legislating not only payment from the company, but also a penalty?

        The problem is that we do NOT have a free market. We have a market where many of the costs of doing business are externalized. Those externalized costs need to be addressed. If corporate America won’t do it, then we have to do it with legislation.

        • You can read my comment down the page, where I explained that such legislation leads to genocide eventually. You are socialists are going to create a hell for yourself. Go ahead. I am not going to be in your system fighting you. The free market routes around your cancer and leaves you with complete failure. You will try to extend your power globally with a one world governance. This will result in a horrific outcome. Any way, the Bible anticipates all of this, because it is obviously a function of human nature, that the socialists will legislate stealing and then all the weak people will come with their hand out to support the ever increasing socialism. Then you get to the point where you have Obama and then Bruce asks what went wrong. Then of course, you misdiagnose what went wrong, and you double-down on more of it.

          Just look at government as a percentage of the economy at the Grandfather Economic Report. Socialism is a cancer, it always grows, until the host is dead. There is no counter example in the history of mankind. Yet statists never stop thinking there can be a first time.

          I can explain this with the 2nd law of thermodynamics and degrees-of-freedom, but it is probably over your head.

          There is a free market, and it is leaving you right now. The more disruptive laws you create to try to control the free market, the faster it routes around your cancer. Look at the acceleration of outsourcing. So go ahead and legislate against outsourcing, and watch the US economy implode. Please do it. I am tired of waiting for your cancer to finish killing its host. Could you and Obama please accelerate your laws?

          If stockholders wish to elect board of directors to pay CEOs whatever, that is their perogative if they think it maximizes their capital gains (profits and value of the stock). However, mostly what you have now is corporates own the governance, so it a bunch insider BS theft system. But why? Because the government has grown to 50+% of the economy. People go where the money is. See my example of the Badjao. There is corruption because there is this huge juicy meat sitting there, because it is impossible to create a huge government and not have lots of people trying to game it.

          This is all just Game Theory.

          The way you end corruption and restore the private free markets, is to shrink the cancer (government). But the statist will instead double-down on more of his sloppy nonsense. It is oozing and drooling all over his sloppy face.

    • The good old (dumb) minimum wage canard. Sure, raise minimum wage and everyone makes more, right? Except that then businesses start firing people who don’t perform above the new higher hurdle. Businesses only hire when the benefit exceeds the cost. Raise minimum wage and you eliminate low level jobs. So you’re in favor of unemployment then?

      • Have you tried living on $14,000 a year? No of course not, you’re too smart for that, why would you get a minimum wage job? Well, guess what? Not everyone has an IQ of 120 or 130 or 140. You know where the CENTER of the bell curve on IQ is? 100. That’s right, for everyone who has an IQ of 120 (smart, but not genius), there’s a person with an IQ of 80. What kind of job do you think you can get with an IQ of 80? How about 90? How about anything below 100 (half the population)?

        Why do we have a system that relegates 1/2 of the population to poverty or near poverty?

        There is plenty of wealth in this country and in the world for everyone to live a life free from hunger, free from poverty. I don’t know what the answer is, but I can tell you what it’s not: It’s not the system we have now!

        • See my comment above on the page, where I explained that the problem is the government has grown to 50+% of the economy. Thus the money making opportunities are no longer in the private sector, but in gaming the governance and fascism. We are transforming to the Weimer stage model. We even have the idealized health care direction that was the final straw that brought on the genocide in Germany.

          Mathematically, a system that strives for equality, will eventually kill everyone who is not equal (if the desire for equality is sustained to the bitter end). This is because people are not equal. When you pump the system full of debt in order to give everyone a nice house, and pull demand forward by 30 years (with 30 year mortgages), then the prices of everything in the economy rise. Thus no one can then afford to live on an unequal wage.

          And then you need to expand the government to maintain the unnatural equality. Then fascism is economically incentivized (and certain to result every time in the history of mankind).

          So why are you surprised at the result?

          If you want to help the poor, then stop distorting the free market of diversity by offering equality.

          Paper (debt) is not reality. You can’t fool nature and the free market. Cancers kill their hosts.

          But will you ever learn? I am just wasting my time writing this correct?

        • Oh I have lived on $4000 a year in 1990s, but in a place where the was almost no government and no equality and thus yes it was possible.

        • Pima –

          You are simply too dumb to understand. You ‘wish’ wages would be higher. Businesses won’t pay higher. So there are two choices. Either lower wages and increases jobs or raise wages and increase unemployment. Raising wages and increasing employment isn’t an option.

  10. Have you ever considered the fact that most poverty is due to people being lazy?

    Transfer money from productive investments to lazy people. Nice plan for prosperity you have there. And then you wonder why the system is screwed to Nazi heaven!

    I speak from first-hand experience of living in squalor communities in the 3rd world, and from knowing others who rose from wearing rice sacks for clothes to $millionaires by working 12 hours a day for 50 years in simple agricultural businesses.

    • what? You have some data to back that up, that poverty is due to people being lazy? That is typical judgmental attitude that people with money have about people who don’t have money, they’re lazy, they just need to work harder. Show me the data that supports that statement.

      • What kind of data do you expect could be collected? How are you going to survey that people are in their predicament because of laziness? I grew up in the inner cities in New Orleans and Baton Rouge, where my sister and I were the only white people in the public schools. I have lived in squalor communities in a nipa hut in the Philippines. I have been all kinds of situations and people up close in experience.

        The greatest improvement in New Orleans came after Bill Clinton eliminated a lot of the welfare. Not all blacks go out of their predicament, but many did. So many more were pushing themselves to get degrees of UNO for example. I saw it with my own eyes when I went back there circa 1996.

        My own family is an example. They have had the option to go abroad and work as domestic helpers and earn 2 to 3x more salary than they do in the Philippines, and to gain international travel so they can broaden their opportunities. But they refuse to do it, because the know there is a “kano” (me) who they can force to support them. They are addicted to durian (a fruit, which is actually a drug) and would rather eat. They want cakes and candies always. I was in the same hell hole in the 1990s, with dysentery and amoebas every few days due to the unsanitary conditions, and I had to work 12 hours a day, 7 days a week writing computer software to get myself out of that. My own mother (in the USA) wouldn’t loan me money, because she prioritized the hip surgery of her dog.

        It is not only that people are lazy. The statist can create full employment by giving every body a spoon and doing massive earth moving projects. But this will result is horrendous poverty.

        During FDR’s New Deal, the workers were commanded to walk on crops to destroy them, so they could be planted again to create more work. China LGUs have been doing the same thing, tearing down new buildings to build them again, because they had to meet the one-party GDP targets.

        I will give you another example. Here in Mindanao there are these Badjao women and kids at every stop light that come to beg for coins. The mothers actually teaching their children and daughters to do this. They choose not to continue their life in the sea, and train to become professional beggars. They do this because it is easier. So what future are they preparing those kids for? I stopped giving to them, when I realized they are choosing that situation because of an economic incentive to be beggars rather than to be productive. There are so many things they can do here to be productive and help support prosperity in this fast growing economy. But the economic incentive is for them to be professional beggars instead.

        The other day a very old lady came strolling by where I eat. I didn’t even wait for her to ask. I gave her money. I asked if she was alone in her house, and she said yes. The Bible says to not let your left hand know what your right hand does on charity, so I have just bragged too much. Real Christians are quite silent, but are quite active in charity.

        Real compassion is to get off your arse there in your western debt-inflated high standard of living and go live amongst the poor and help personally those who are really in need.

        Instead you want to feel good about yourself participating in the theft of wealth and distributing it to failure, because you are too lazy to go do charity.

        Do you know what really caused Hitler’s rise? Read the archives of the late Howard Katz (at Kitco, but I think some from his blog have been erased by his surviving family). It is the perfect socialized heath care that the Germans idolized. It became so expensive after the war reparations, that they had to start killing people. This is where the psychology came from to support the idea of eliminating the weak races and people.

        Katz also documented with data, how FDR made the depression worse. In the initial period after 1929. Americans were eating more butter, etc.. After FDR was finished “helping the poor”, they could not longer eat butter!!

        I just wish you statists had any clue about economics 101. I think one problem is your don’t seem to understand the concept of degrees-of-freedom. Every central action weakens the fitness of the economic system. Every one. I don’t care how well intended it is. This is a fact of math. If you would like for me to explain the math, then invite me to write a guest article. Show some serious interest, then I will take the time to write something well.

        • I’m trying to prevent the “theft of wealth”. It’s stealing when a corporation pays its employees so little that they cannot afford medical or food so the State (read: you and I) pays for it. The CEO and other top corporate execs are stealing from the taxpayers.

          It’s stealing when corporations dump untreated sewage into North Caroline rivers, more than 1,000 times, killing all the fish and all the EPA can do is give them the largest fine ever given to a corporation which turned out to be chump change for the corporation, less than what the CEO gets in compensation in one year.

          What kind of system is it that allows CEO’s of companies to make tens of millions of dollars but the employees of those companies make $8 an hour if they’re lucky and if they live in the US? If they live elsewhere (Asia for example) they make what, 50 cents an hour. THAT is stealing.

          What kind of system is it that uses taxpayer money to bail out banksters who made bad bets and thousands of fraudulent loans? THAT is stealing, but you and I bailed them out instead of sending them to jail

          Where is the “free market” in this kind of system?

          • Go back to a time in the 1800s or so, when the EPA was not in control (and in the back pocket of the fascism), the local people would have torched that polluting corporation. The problem is the governance is too big and too centralized. The locals can do nothing any more. The corporates own it. So your solution is to make the government even bigger with more laws and redistribution schemes, so you give more power to the fascism.

            You are correct, that statism results in no free market. The free market leaves that cancerous host and moves to greener pastures. So you propose to accelerate the cancer then.

            You think the government is there to help you. That is your basic illogic. The larger the government, the more fascism. Got it?

          • You want to stop stealing, yet if I go create a software with my hard work that allows me to pay myself 100x the salary of the guy doing errands for me, then you want to legislate stealing from me and giving it to the errand boy. Did the errand boy work 12 hours a day, 7 days a week destroying his vision in front a computer for 25 years?

            Statists are thieves but they somehow rationalize to themselves, that they are not. Then they wonder why they end up with a system of corporate thievery. You create this huge apparatus for stealing, and you expect criminals to not gravitate towards it. Then you expect you can double-down on more laws and make the apparatus even larger to stop the criminals. The larger the meal, the more energy the fox has to raid the hen house.

            You deny basic realities of economic opportunity cost.

  11. The explosion of ITIN # issuance, legally, that has not been considered is the supporting family members, who come on H1 Visa (H4 visa holders), do not get social security #s (as they cannot work legally)

    but to get tax benefits like standard deduction etc., on the principal H1 income, the tax payee would get ITIN numbers for his / her family members, in lieu of social security #s whilst filing the tax return (most of these come under the “married filing jointly category)

  12. Plan for Solyndra is out. Plan sponsor is interesting. If you want a copy let me know.

  13. pimaCanyon, here the message of hope.

    It is beautiful. I love it. I love what God created.

    If energy were ever entirely free (no cost), then nothing could exist, especially not love nor any free will. No cost, implies boundless. Boundless means no limit to power. Unlimited power means everyone is equal. Equality means no contrast, no possible differences, no diversity, no life, nothing. Zilch.

    God is boundless. God is very lonely by himself. He has to validate that he exists. So he created free will, opportunity costs, etc. Equality equals death.

    I wish someone could understand and explain to others better than I have the patience to do.

    Why did God create us? Because God wants to be loved. That is all he asks. But he knows that we have to have opportunity cost and free will,
    otherwise there is no Game. Everything would be just perfect.

    You see perfection is not love. Love is challenge. Love is differences. Love is diversity.

    Technology, knowledge and travel will increase, because diversity is always increasing.

    But never will it be boundless. We will always be trending to greater and greater love. Greater challenges.

    That is the beauty of it. God designed the perfect system, that never ends. Know we know what infinity is. It is unlimited possibilities.

    By the way, this is exactly what the 2nd law of thermodynamics says. It says (Wikipedia it) that entropy trends forever to maximum. Entropy is the # of independent possibilities (i.e. the diversity).

    So God’s system and plan is very evident even to science.

    So the world govt will never last long. Don’t worry. God’s system can’t be stopped.

    We are more likely to see technological advances on electronic travel (not physically moving our bodies) and on mobility (e.g. smartphones) and other informational gains. Because these are more efficient to achieve faster, than physical breakthrough on energy. Remember information is a form of energy. I have written something very detailed on that else where.

    I have tied this all of this into a complete theory of the universe and explain everything from Quantum Mechanics to Relativity with one theory.

    The difficulty is explaining this. Haven’t really taken the time to pull into a coherent book.

    P.S. gold has another property that makes it money, it is a store of information:


    • What is energy?

      Jason with your deeply abstract mind, what is energy in the most general sense?

      Energy is the ability to transform the organization of matter.

      When matter becomes highly concentrated in one area, then the
      degrees-of-freedom are reduced. Wikipedia explains that the potential energy is the degrees-of-freedom. Kinetic energy is the release (use) of potential energy.

      The very very fundamental Second Law of Thermodynamics (from the 1800s) that governs every process in the universe, says that the organization of matter is always trending to the most degrees-of-freedom. (that is my restatement that is definitionally equivalent to the way it is stated originally)

      Information is also a form of matter. So thus informational potential energy exists, and it is much more efficient to tap than physical
      potential energy. I could go deeper into that, but not now.

      So therefor you can see that boundless (no cost) potential energy would mean infinite degrees-of-freedom. It would mean that nothing exists, because no matter could be aggregated into any form. Once matter is perceived, it has some form and some finite degrees-of-freedom.

      Hope that explains why free energy is incompatible with perception and existence.

      • Jason wrote:

        I replied.


        Btw, this really explains the desperation of the elite to try to stop us from making gains, and they are willing to bring the whole middle east into war to try to keep the oil price up.

        There are other reasons too:

        1. EFFICIENCY/TECHNOLOGICAL SHIFT: Our use of oil is becoming more efficient, especially as higher prices (in the interim as the fraud peaks) stimulate us to strive for more efficiency, as world growth shifts to the densely populated Asia where mass transit will be more heavily used, smaller cars are used and/or more people per car, and the world shifts more to the internet and virtual travel/work, etc..

        I remember you once thought that suburban spread must increase (as if you might be implying equal spread out), but I replied saying that the “spokes-and-hubs” net work topology organization of flow of anything is the most efficient, e.g. the internet, interstate, and airplane traffic are so organized:

        en.wikipedia . org/wiki/Spoke-hub_distribution_paradigm
        orgnet . com/decisions.html (see image)
        science.howstuffworks . com/transport/flight/modern/airline3.htm
        en.wikipedia . org/wiki/Network_topology#Star

        The multifurcating tree is the most efficient method of distribution:

        en.wikipedia . org/wiki/Phylogenetic_tree#Bifurcating_tree

        2. REBALANCING TO SAVERS: Gold must go up due to the implosion of the fiat system, and such an implosion will eliminate the debt-based equality where everyone had the same quality of life in the west (pulling demand forward 30 years with 30 year mortgages, etc). Thus many people in the west will not drive as much (because they did not save and are not equal to those who did). This is an extension of my point that equality is not possible (and attempt to sustain it results in genocide, see my prior comments about socialism history).

    • Equality and Norway

      Here is an example of the point I was making about equality.

      And watch what happens as Norway’s oil revenues plummet (recently a strike, and in general declining fields and relatively lower oil/gold ratio in the future, as Jason pointed out):


  14. The article below shows what is wrong with the system. I’m for cutting government spending at the federal level for starters and abolishing the income tax. I’ve always hated the idea of a progressive income tax system. There is no real incentive to work knowing parasites won’t ever be pulling their weight.

    In Entitlement America, The Head Of A Household Of Four Making Minimum Wage Has More Disposable Income Than A Family Making $60,000 A Year


  15. China’s PMI Declines Again!

    Oh you think only China kills babies? Fact is there are 40 million abortions per year in the world total. Demographic payback is going to be beaaccchh.

    Good thing I loaded up on FXI puts yesterday at 12 cents! It is my #1 holding of puts! Summers is projecting it to fall to $20 at least initially so if so, I am looking at $8 x 100/0.12 = 6400% potential gain (64x my investment). I doubt I will hold and get that. Be happy with a double or triple.

    Here is the bad news, and notice 10 of 11 things are imploding (same as what I wrote before and expected on the recent HSBC PMI below):


    And China can’t stimulate broadly! Here is why:

    zerohedge . com/news/why-another-major-china-stimulus-package-not-coming

    China is already seeing the very tiny stimulus they did, feed right back into housing bubble and inflation:

    bloomberg . com/news/2012-08-01/china-home-prices-rise-in-market-turning-point-soufun-says.html

    China is toast! They can’t print without creating riots. And they can’t not print, without having riots!

    Hasta la vista communists! And all those people who believe China (and communists) are something positive and good.

    (yeah the poor in China will continue to gain over the long-term, because that is the natural order of things, but we are talking about high finance here and debt)

    My prior comments on China

    Recently I had commented (and can’t find my comments) on where China was trying to cherry pick industries to stimulate and I pointed out that this was a sign of their desperation, because smaller things can’t grow that fast to overcome the decay of the larger economy. Besides, the 10 wisest men couldn’t make correct choices for a billion people– centralized decision making always results in failure (and is especially not efficient or fast enough).

    Quotes of my prior comments posted in another forum…

    [QUOTE][B]China BS, Europe accelerating downward[/B]

    1. China is expanding production slightly to deal with a backlog, because they have been contracting production and employment so severely that they overshot a bit. But new orders are still contracting to, so companies are accelerating layoffs, thus this blip up in production is just to deal with backlogs and is not a real change in direction:

    zerohedge . com/news/chinas-schrodinger-economy-continues-contract-and-expand-same-time[/QUOTE]

    [QUOTE][B]Gordon Chang’s bearish view on China[/B]

    Very revealing video:

    caseyresearch . com/cdd/gordon-chang-big-trouble-ahead-china

    Remember also that the electricity reporting is now lies too. The truth is huge stockpiles of coal piling up.

    The put options on FXI were much cheaper yesterday, and I loaded up. Ready to make a lot of money. Luckily I had most of the cash in my brokerage account and was ready.[/QUOTE]

    [QUOTE][B]Some people still have China delusion, because they don’t look at the data & math[/B]

    P.S. I took some profits on my China (FXE) puts today also.

    > Important read for a China bear. Exactly as I
    > have been saying for a long time. He is contradicting Casey here.

    Thanks for forwarding that:

    caseyresearch . com/cdd/china-metals-and-your-money

    It confirms what Casey and I know to be true. China has gone too fast and will have a correction.

    LJ (Casey’s friend) makes a few errors here. For example, he says consumer demand is growing. Fact is, that as a % of GDP, it is falling. It may be growing nominally (what he sees with his eyes), but that is not what determines whether there will be a correction. The % of GDP share
    determines the balance and whether there will be a rebalancing.

    Secondly, China can’t stimulate, because it was cause consumer share of GDP to fall even more, pricing its poor out of survival.

    Third, the PMI survey shows that layoffs are accelerating.

    Fourth, China did not pay from savings, they have a debt problem that is as bad as Spain. China is lying and hiding with its official data. But others have figured out what is really going on there.

    I never said copper is going to 0. I said the bearish H&S points to $2.50 on this correction.

    After that of course there will be global QE3, and all prices will go up again. But it “ain’t gonna be purty” what happens to the poor who can’t afford the increasing prices.[/QUOTE]

    [QUOTE][B]Don’t forget the chart I had showed on China rolling over[/B]

    zerohedge . com/news/houston-we-have-contraction
    zerohedge . com/sites/default/files/images/user3303/imageroot/2012/06/20120702_PMI_0.png

    So is most of the rest of the world:
    zerohedge . com/news/june-global-pmi-summary-euro-area-slowdown-beginning-impact-rest-world[/QUOTE]

    [QUOTE][B]Ross Betty vs. Doug Casey on China[/B]

    youtube . com/watch?v=OXRDWfHq44Y#t=396s

    It is clear that Betty is not aware that China has a huge overcapacity, e.g. the 400% overconsumption of concrete per capita.[/QUOTE]

    [QUOTE][B]There is too much capacity in China[/B]

    Again please review the charts at this link I had sent previously:

    marketoracle . co . uk/Article35604.html

    China’s consumption share of GDP has dropped from 50% to 30%, while fixed investments have increased from 30% to 50%.

    This has caused China per capital use of concrete to be 400% higher than normal sustainable economies. This shows how extremely leveraged to fixed capital debt fueled investment China is– even more than Western

    This means China has been building entire ghost cities. They have 10 times more office and residential space than can be utilized. The people aren’t paid enough to afford these high class developments.

    So China can’t stimulate more, because there is nothing that any developer will want to build.

    Besides the price deflation spiral has begun in China, and once this starts, no one wants to buy and everybody wants to sell.

    The LGUs were knocking down brand new buildings and rebuilding them, just to raise the GDP.

    That can’t go on, because it was causing inflation and the people couldn’t even afford to survive:

    youtube . com/watch?v=pngdQo205fM#t=48s (WATCH THIS!)

    money.cnn . com/2012/05/02/markets/chanos-china-bear/index.htm

    Legendary short seller (Enron) Jim Chanos was warning about this for China 2 years ago:

    youtube . com/watch?v=E4DceU-6ALc

    And now also explains that Brazil is a huge bubble that is collapsing:

    brazilianbubble . com/jim-chanos-is-short-petrobras-because-its-a-giant-atm-machine-for-the-government/

    forbes . com/sites/kenrapoza/2012/07/12/brazil-to-grow-less-than-u-s-in-2012/

    China and Brazil are basically corrupt government debt bubbles, and extremely leveraged to exports.[/QUOTE]

    [QUOTE][B]Why I am short Europe, China, Brazil[/B]

    Professor M. Pettis is very highly respected and has been correct thus far on China:

    financialsense . com/contributors/michael-pettis/the-unacceptable-behavior-of-the-market[/QUOTE]

    • Asian stocks decline, but China is up

      China’s PMI showed that inputs are declining (as well as employment and 10 of 11 metrics), but the one metric still barely expanding is outputs (production).

      The rest of Asia exports to China and thus is down, while China’s stock market was up. If the market is too stupid to see that China’s output being barely up is just a blip, then we may get one more buying opportunity on FXI puts on Wednesday market in USA.


      [QUOTE]“China-related stocks are terrible today,” said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “Given that the Chinese economy hasn’t bottomed yet, next quarter’s earnings could be even worse and share prices will keep sliding. It’s difficult to see a recovery by the end of this year.”[/QUOTE]

      [QUOTE]“The market just doesn’t have any real appreciation for how the slowdown is impacting economies here,” said Sean Darby, Hong Kong-based chief global equity strategist at Jefferies Group Inc. “It’s going to get worse. Equities are trading now almost on hot air because really the earnings numbers will be coming down very sharply.”
      Companies related to China fell. Fanuc lost 3.7 percent to 11,760 yen. Cnooc Ltd., the Chinese offshore oil producer that’s bidding for Canada’s Nexen Inc., retreated 1.8 percent to HK$15.44 in Hong Kong.
      South Korean shares dropped as data showed the nation’s inflation rate moderated to a 12-year low and exports slid 8.8 percent in July from a year earlier, the steepest decline since September 2009.[/QUOTE]


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