Karl Denninger-Only Way Out is Stop Lawlessness Top to Bottom

Karl Deninger’s website:

Text of his last and final entry:

The take-away from this, if you don’t feel like watching the interview, is quite simple: Without the Rule of Law we have nothing, and our nation currently faces a critical fiscal emergency at the federal level just a few years down the road — certainly, during the next President’s term.

There is no way out of that box without taking on the medical monopolies. None.

That’s the math.

2009 / Obamacare was an attempt to “buy more time” along with protecting said monopolies from a market-driven incipient collapse. This was rank public corruption on a grand scale, and it did nothing more than add a small amount of time, much like closing “watertight” doors on the Titanic when the water can cascade over bulkheads (as I expected it would and wrote on at the time) because all it could do is force more people onto a sinking ship. The compound growth nature of federal spending on medical care has remained unaltered; it was not flattened to zero, or even to the expansion of nominal GDP. Worse, the expansion rate for Medicaid, several years after its one-time expansion under Obamacare (in other words the one-time effects are gone), exceeds that of Medicare — so those who claim the cost escalation is due to people getting older are lying through their teeth.

The bigger-picture issue, and the one that threatens to turn this entirely-predicted fiscal catastrophe (one that I’ve talked about for 25 years and written about pretty-much continually for the last 8 right here in The Ticker) into an economic and social disaster never before seen in America (but seen repeatedly in other nations such as Venezuela and Argentina!) is that innovation has effectively collapsed at the same time.

Why?

Because innovation is in the main about entrepreneurship; individuals setting up small businesses and taking “moonshot” risks. The reason the USSR collapsed, and in fact every socialist or communist nation eventually collapses, is that without the dangling gold ring (no, folks, it’s not made out of brass!) you can grab for and keep nobody has an incentive to take such “moonshot” risks with their own capital, whether that capital be intellectual or physical.

Today, if you’re an “entrepreneur”, you can open a coffee shop, a restaurant, or (provided you don’t care about religious convictions) a bakery and your risks can be somewhat quantified.

But the corner coffee shop will never propel the nation forward on innovation.

Consider people like Edison, Bell, Crapper or even Ford. All changed the world. Edison made roughly 1,000 attempts before he hit the right combination for a working electric light. Bell of course took the telegraph and turned it into the telephone. Crapper, well, you know what he invented. And Ford took cars from the realm of bespoke, hand-assembled devices that only the most-wealthy could afford and made them accessible to the common man. These were transformative changes, not incremental ones.

What this nation needs is a lot of people like Edison — or myself — getting out there with projects that are highly innovative and risky. The problem today is that if anyone who is politically or corporately powerful can ignore the law they can and will either step on the inventor or simply steal whatever is created despite such actions being illegal and there’s nothing the person who did the inventing can do about it. At the same time if an inventor tries to do the same thing to those very same big corporate and political people they will go to prison and be bankrupted.

This asymmetry was a material part of why I got out of the Internet business in 1998; in a rapidly-evolving industry when only a few “choke points” develop where such asymmetry exists — and where those who can evade anti-fraud and collusion laws with impunity begin to coalesce and exert that power — anyone without the ability to flaunt the law is at such a severe disadvantage the smart move is to reduce the value you have at the time to money and walk off the playing field. Your only other sane option is to attempt to become large enough that you acquire that same immunity. But at that time this asymmetry was much smaller than it is today. Today it is literally in every line of business, everywhere. For example I have utterly no reason to believe that if I brought to market the software that I have written to automate homes and save energy, a package that contains a fair number of innovative features some of which I’ve never seen in any other product, it would not be immediately stolen by some large corporation (whether in the US or not) and despite the fact that copyright infringement is a criminal offense the best I could do would be to try to sue at a cost of hundreds of thousands of dollars — during which time my business would be destroyed. As a result there is no logical reason for me to package and market that product, and while I have no idea if that is indeed one of those “moonshot” success stories (because it hasn’t happened yet) it is exactly those moonshot attempts, only one of a hundred or so that bears out, that has provided essentially all of the true ground-breaking innovation in this nation over the last two hundred years.

Add to the recent record the insults of this nature since the 2000 tech wreck. The intentional creation of serial bubbles, the intentional and retroactive “pass” given to the illegal Travelers merger and Greenspan by Congress and President Clinton, the intentional refusal to prosecute screamingly-obvious fraud that not only bankrupted millions of Americans but caused others to pay 50, 100% or 200% too much for property that was in fact worth a fraction of its ask during the housing bubble (a distortion that the government has intentionally rebuilt to a large degree in the 7 years since and now is just as much a threat to success as it was in 2006!), the serial nature of violations of the law by myriad large corporations, crimes which for the ordinary person (or not-big-company) would carry hard felony prison time and more. Just look at companies such as Herbalife which recently admitted that its “recruitment” techniques were legally indefensible — why would they have agreed to change said techniques if they were confident they’d win in court? Let me remind you that in 1967 the television series “Dragnet” featured a scheme in which recruitment (rather than retail sales of product) was the primary reason to get involved; the purveyor went to jail after a mathematician established that such schemes can never in fact produce the promised profits for any material percentage of the recruits because the number of people who must be recruited expands exponentially and quickly exceeds the population of the nation (or world.) Here we are nearly 50 years later and guess what’s still making the rounds?

Ask me, as an entrepreneur, to start a business under a set of laws that proscribe a particular set of behaviors and I’m fine with it; nearly all of these laws, in my opinion, are in fact good and fraud is bad. But if you ask me to do so while competitors who are 10, 100, 1,000, 10,000 times my size or have some patron in the political process allowing them to break every one of those laws without a single person going to prison or the company being shut down my response to a request that I take on that risk and innovate becomes this:

Without entrepreneurs — people like myself — there is no innovation.

There is no “next great thing”, in the main.

Oh sure, there are exceptions that occasionally come out of large companies, but the rule still holds: If, as an entrepreneur, you cannot rely on recourse to the law and equal treatment among competitors then your incentive to take highly-speculative “moonshots” with your own capital is greatly diminished or destroyed.

The risk of the breakdown of civil society and rampant, lawless violence is very real as well. I have written countless articles on exactly this point; if someone believes that when the lights come on behind them for speeding that they’re going to be murdered by a cop possessing grossly superior firepower and armor instead of getting a traffic ticket then on a purely-analytical level an entirely-expected outcome when the lights come on is for such a person to shoot first!

Now let me be clear: The person who does the shooting is to blame, of course, for the simple reason that doing so is a naked act of lawless aggression. It thus cannot be excused or condoned.

However, we as a nation and body politic are responsible for cultivating that man’s belief that he’s going to die because he was caught speeding. We specifically cultivated that belief by allowing a cop to fire on an unarmed man in Miami with his hands up and not be immediately arrested on felony assault charges, as just one of myriad examples. The two ladies in the truck in California that had their truck riddled with bullets when Dorner was being sought, yet no charges were brought, is another. Those who say there’s no racial component to this sort of abuse have their head firmly planted up their ass; nobody amasses 50 traffic stops that are legitimate rather than blatant harassment in less than a decade yet still holds a valid driver license, but the guy who was shot in Minnesota indeed had said stops and a valid license, never mind that there is not one jurisdiction in this nation where a person suspected of a serious felony, as the cop’s lawyer has alleged, is pulled over on a “routine” traffic stop protocol — there is an explicit felony protocol for such cases and it exists precisely because if someone believed to have committed an armed robbery in fact did commit the crime they know damn well they’re caught as soon as the lights come on and are going to jail — see above for why that might lead them to shoot first if you give them a tactical advantage. Duh.

But the real problem with our loss of The Rule of Law is not so much in the risk of the breakdown in civil order, and this is belied by simple statistical facts.

Even with the recent political screamfest about cops being shot, even with gangbangers on the street, even with the crime and violence we have today the murder rate has in fact shrunk tremendously over the years; in fact it stands at about half of what it was as recently as 1990 despite all the screaming by media outlets and politicians alike for “more” gun control and “more” monopolies on the use of force. The facts just are; you’re less-likely, statistically, to be murdered today (by anyone, whether you’re a cop or not) than at any time since the 1960s.

No, the real risk when The Rule of Law disappears is the destruction of entrepreneurial reward, and the fact that the people you most want to engage in entrepreneurial activity are precisely those who have the intellectual and analytical firepower to look at the world around them, see this corruption for what it is and properly factor it into their risk:reward calculations. They will, in ever-increasing numbers as the corruption increases, stick up the middle finger rather than innovate and take risk.

Without said entrepreneurs the fiscal mess staring us in the face will, as a matter of mathematical certainty, consume the nation.

THAT is the problem — not cops being shot and the potential outbreak of civil unrest.

You, I and rest of the nation have the power to compel the return of The Rule of Law and prosecution of those who have and do blatantly violate its strictures even though they are currently “shielded” by virtue of being politicians, government employees, or the directors, officers and managers of large corporations. We have the power to demand and enforce cessation of this lawless conduct best described as racketeering through lawful, peaceful and intentional inaction. We can financially strangle those organs of government and thus all dependent on those that refuse to comply. Since a tiny percentage of the population in fact produces virtually all real economic expansion if even a small minority of those people go on a general production strike, a perfectly-lawful act, continuation of the current state of affairs becomes fiscally impossible.

I will consider resuming my regular Ticker activity, or for that matter resuming being an entrepreneur, when I see evidence of said shift in attitudes and actions among the American population.

The US Constitution is supposed to be the “supreme law of our land.”
As long as we have a patently lawless (and anti-American racist, and dictatorial) regime in WashDC,
many of the “little infidels” will go lawless, too.

“,,, a fish rots from its head....”

The Rule Of Law*
by Karl Deninger
http://market-ticker.org/akcs-www?post=231471

Seriously folks?

You don’t understand why The Ticker has faded to black?

REALLY?

Let me start with this: Why do drug dealers shoot each other on street corners?

Answer: Joe the drug dealer cannot call the cops and tell them that Jack the drug dealer ripped him off and sold him a bag of oregano instead of weed. Joe also can’t sue Jack. Thus, when the threshold of his tolerance is crossed Joe has only the use of direct force available to him because he has no recourse to the law to settle his dispute with Jack.

The FIRST foundation of civil society is The Rule of Law. Without it there is literally nothing other than the Law of the Jungle, commonly known as “he who has the biggest teeth (or the most guns) and is willing to use them first wins.”

Let me remind you that Han Solo, who is widely regarded through the Star Wars series as a hero, shot first at Mos Eisley. George Lucas edited that in the second release of the film (and later had to put it back after fan outrage) but it is a fact that Han shot first in the original theatrical release. Why did Han shoot first and kill Greedo? Because he knew there was no Rule of Law and he had no recourse to the law, which incidentally was later proved to be an exactly correct expectation when he was made an ornament in Jabba’s castle.

Now I want you to stop reading, go get an adult beverage or a cup of coffee, and think long and hard before you continue reading about the above.

Why?

BECAUSE THE ABOVE IS THE ISSUE THAT, IF WE FAIL TO ADDRESS IT IN THE PRESENT TENSE, RUNS THE RISK OF RESULTING IN AN IRREVOCABLE SERIES OF EVENTS IN THIS COUNTRY UP TO AND INCLUDING POSSIBLE CIVIL WAR.

(more at the link.)

The law is only as good as those who enforce it.

yes, and

“Our Constitution was made only for a moral and religious people”. It is wholly inadequate to the government of any other.” – John Adams

(also: ““Democracy… while it lasts is more bloody than either aristocracy or monarchy. Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There is never a democracy that did not commit suicide.”

– John Adams again)

“Did you really think that we want those laws to be observed?” said Dr. Ferris. “We want them broken. You’d better get it straight that it’s not a bunch of boy scouts you’re up against - then you’ll know that this is not the age for beautiful gestures. We’re after power and we mean it. You fellows were pikers, but we know the real trick, and you’d better get wise to it. There’s no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Who wants a nation of law-abiding citizens? What’s there in that for anyone? But just pass the kind of laws that can neither be observed nor enforced nor objectively interpreted - and you create a nation of law-breakers - and then you cash in on guilt. Now, that’s the system, Mr. Rearden, that’s the game, and once you understand it, you’ll be much easier to deal with.”-—Atlas Shrugged

There is always lawless at the bottom. Sandwaich the middle between a lawlees top and bottom and you get Zimbabwe in short order.

I posted as much long ago. We have always had corruption at the bottom and some at the top but for most of America 90% give or take lived “normal, moral lives” and enjoyed the Blessings of Liberty. Over the last 3 decades and accelerating under Zero this has diminished to almost zero.

I suspect that the primary reason Hillary! was not prosecuted is that the the FBI and DoJ would have had investigate everyone who sent Hillary! an email containing classified material or who received such an email from her, and prosecute most of them.
This would have decapitated the State Department and possibly the Obama Admininstration.
Of course, in my opinion, this would have been a GOOD thing...

Karl was a huge obama supporter in 2008.

#11 Obama fooled a lot of people with his lying rhetoric, that was aided and abetted by greedy to be bailed out banks and a lying corrupt media.

Trump faces the same problem with a lying bigoted media cabal and thieving banksters that likes a status quo of PC, open borders, and dividing the sheep with their perpetual race card.

Did not know that! Thanks!

that is what I recall...Karl D supported the muzzie homo....

like Robert McNamara coming out after his time in Govt against the war that he himself helped to unfold...

I'd like to kick KD in the shins or other places...he deserves no respect after not even having a clue about the muzzie....

So how would such a civil war be prosecuted?

Shoot everybody wearing a suit?

Seems a little awkward.

I suspect that the primary reason Hillary! was not prosecuted is that the the FBI and DoJ would have had investigate everyone who sent Hillary! an email containing classified material or who received such an email from her, and prosecute most of them.
This would have decapitated the State Department and possibly the Obama Admininstration.
Of course, in my opinion, this would have been a GOOD thing...

I very much agree.

No he wasn’t. He contributed to mcLame.