Truth Before Dishonor

I would rather be right than popular

Cumulonimbus + AgI = ??

Posted by John Hitchcock on 2012/11/15


A dark cloud follows him wherever he goes.
Every cloud has a silver lining.

Farmers obviously need rain for their crops, so there are some who resort to cloud seeding, adding silver iodide to the clouds to try to force rain out of them. But it’s a bad idea to seed a thunderstorm cloud. Cumulonimbus clouds can produce nasty things like hail storms, massive lightning storms, micro-bursts, tornadoes.

And of course, there are those who always bring bad luck with them, like Bad Luck Schleprock, our current President.


 
So, today I am telling you about the seeding of a 3,000 mile wide thunderstorm cloud hanging over the US — and the silver lining that comes with it. It’s painfully schadenfreudig. Painfully schadenfreudig, indeed. (Multiple stacked redundancy intentional.) Barack Obama and the Democrats, very cynically aware that their grand scheme to shove the US headlong into Socialism could cause them to fall out of power, set up a series of Laws and programs that would save most of the very bad results until after the 2012 election. After having blamed Bush for all the Democrat-and-Socialist caused travails, they would have a way of avoiding responsibility for the looming mega-disaster. It works like this:

  • Set up a Socialist system with all the false positives front-loaded and all the negatives back-loaded.
  • Get possibly voted out of office before the negatives hit, so the Socialist-caused negatives would hit when Conservatives were in office.
  • Blame the Conservatives in office for the economic disaster the Socialists caused.
  • Get the Socialists re-elected to complete the evil transformation of the Free Market US into a Socialist state, with the Conservatives forever blemished by the results of Socialist actions.

But a strange thing happened along the way. The Socialists got re-elected by a completely ignorant, envious, slothful, free hand-out seeking crowd. And all the back-loaded disasters will hit while the Socialists are in power. (By the way, did you know that tornadoes are also backloaded? They are on the back end of cumulonimbus clouds, and not up front.)

ObamaCare is one such program. As most of it is set to kick in now that the election is over, total disaster is on the horizon. Businesses, who cannot pay the cost of ObamaCare and stay afloat at the same time, will be laying off massive numbers of workers nationwide. Other businesses will be cutting their low-level employees (the working poor) to under 30 hours a week so those businesses can stay in business. Very little expansion will be happening, if any at all. It’ll be full-on contraction.

A nice little poisonberry in ObamaCare — that “make health care cheaper for all” lie — is a 2.3 percent excise tax on all medical devices, such as crutches, wheelchairs, heart stents, etc, etc. And an excise tax is far worse than a profit tax or income tax. It hits the gross revenue and not the after-expenses cost. For example, suppose it costs a business 5,000 dollars for the raw materials to make a single product. Add in the labor costs, the health insurance costs, the retirement costs, the social security tax, the medicare tax, the property tax for the building itself, the electricity cost, the property insurance cost, the transportation cost, the bookkeeping cost, and all other costs associated with getting the already developed product to market and the final cost to the business is 6,800 dollars. The business sells the product for 7,000 dollars because that’s what the market will bear. The business gets a profit of 200 dollars per sale.

In comes the 2.3 percent excise tax. Another 161 dollars off the top. The new profit for the 7,000 dollar item falls from 200 dollars to a whopping 39 dollars (an effective tax rate of 80.5 percent of the profit). Not enough to make the company a going concern. Kill the Research and Development department of the company — the life-blood of all businesses that want to survive, for if a business is not growing and moving forward it is necessarily dying.

But it doesn’t stop there. No, not at all. That same company also has to pay the new, higher costs involved in providing ObamaCare to all its employees (instead of the less expensive insurance plans which were optional, which fair portions of employees did not opt into). That 39 dollars per product, which used to be 200 dollars per product goes negative. It costs more to produce than it can be sold for.

But, again, it doesn’t stop there. Obama’s declaration that electricity costs must necessarily skyrocket and he’ll bankrupt coal-fired electric plants necessarily means the energy-intensive manufacturing industry will get hit hard with skyrocketing overhead costs. Costs that cannot be reduced merely by laying people off. So instead, the companies will shutter its doors and either go off-shore or cease to exist, providing a double-whammy of forcing the products to become far more expensive than they are now and far more difficult to obtain.

Small businesses will collapse. The middle class will become working poor. The working poor will become the unemployable destitute. Products the middle class used to be able to afford will become luxury items. Items that were luxuries for the working poor will become nothing but unreachable pipe-dreams. Inflation will go into hyper-drive. Interest rates will climb, making the cost of borrowing prohibitive. And deficit spending, which has been kept artificially low (yeah, I said it), will explode.

How is 1.2 trillion dollars (or more) in deficit spending “artificially low”? That’s a good question. And I have a good answer for that. Two words: “debt” and “service”. Debt service.

Historical view of the Prime Rate from Forecast Chart.com (8 percent line added).

Above is a chart showing the historic levels for the Prime Rate, from Forecast Chart.com. I added a red line at 8 percent for reference. Below is a chart showing the historic levels for the Discount Rate, from a 2009 article on Apin Talisayon’s Weblog (data obtained from the Financial Forecast Center). I added a red line at 6 percent for reference.

US Discount Rate From 1950 as found on Apin Talisayon’s Weblog (6 percent red line added).

From Apin Talisayon:

As I said, central banks had recently been dropping interest rates, and so we cannot use the abnormally low prevailing interest rates (0.5%). I plotted the historical data of discount rates set by the US Federal Reserve since January 1950 from the Financial Forecast Center[.]

As you can see in the above two charts, the Prime Rate and the Discount Rate differ in levels, but mirror each other. And they’re not only at historic lows; they’re far below historic norms. That means the future necessarily will provide much higher rates on borrowing than today. And the Federal Government’s debt service costs absolutely must skyrocket. Couple that with the US credit rating crumbling — and will continue to crumble — and the interest on the debt will become astronomical. Even a fairly normal rate of 6 percent with our current 16,000,000,000,000 dollar deficit means 960 BILLION DOLLARS in interest payments alone. By 2015, our national debt will be 20 TRILLION DOLLARS and the interest on that debt will be 1.2 TRILLION DOLLARS. That’s before paying for roads, bridges, high speed trains to nowhere, free birth control pills for Sandra Fluck (phonetic spelling), free abortion pills for Sandra Fluck (phonetic spelling), free ObamaPhones, free health care, free foodstamps, free college tuition, free housing for the poor and forever pregnant single mothers, free Big Bird, free NPR propaganda, bailing out California, Illinois, Maryland, New York, free cowboy poetry, and oh yeah, paying for our national defense.

1.2 TRILLION DOLLARS SPENT TO PAY FOR ALREADY SPENT MONEY WE DIDN’T HAVE BEFORE PAYING FOR ANY CURRENT PROGRAMS AND EXPENSES!!!

The Socialist who ascended the throne in DC, along with the Socialists in the US Senate who have adamantly refused to produce a Federal Budget since April, 2009, in direct violation of Federal Law and the US Constitution, have successfully Cloward-Pivened the most prosperous nation in the history of the world. The most prosperous nation this world has ever seen has been successfully brought to financial ruin by the Leftists in power who have no use for a document that is “over 100 years old”. The aim? Destroy the Free Market and implement Socialism worldwide.

The silver lining? Conservatives have not been responsible for any of it. Conservatives have not been in charge for any of it. I know, little solace for the loss of a once great and mighty and FREE nation. Will there be anything left to save by 2016? And will there be any conceivable way to save it and return to prosperity from the Abyss of Destitution Obama and the Socialist Democrats have created? Or will it already be too late? I, for one, am not looking forward to the disaster these next 10 years will provide us. (UPDATE: Nice Deb performed her Karnac impression and answered my questions before seeing them. Go to her site to read her answers.)

RELATED
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Economics 101: Schadenfreude!
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2013: A Century Of Progress
Gee, why do you think the Obama administration waited until after November 6th to mail these letters?

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8 Responses to “Cumulonimbus + AgI = ??”

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