The Clock Is Running (Out)

Karl Denninger
Market Ticker
Jul 3, 2010

Oh boy...

Debra Rousey of Gainesville, Georgia, says that she received an unemployment check of $194 last week, half the usual amount she receives, along with a letter announcing that this check would be her last. She is now in a complete panic over what to do next.

Welcome to a thing called "reality."

"I'm desperate and devastated," she told HuffPost. "I didn't get any warning. I was barely making ends meet on $330 a week, trying to diaper my grandchild and put food on the table for the four people I support. What do I do now? How am I going to make rent next month? I keep thinking, 'If I end up in a cardboard box, can I find one big enough for everybody, or do I have to send my son to live with someone else?'"

Ok, let's think here. Four people you support? One is a grandchild (where's Dad - if not Mom?); who are the other four?

Since Rousey, 45, was laid off from her job as a branch manager for Suntrust bank in November, she says she has been "frantically looking" for a job -- everything from entry-level marketing positions to a fry cook job at McDonalds -- but hasn't had an interview in months. As of tomorrow, she will be one of nearly 1.7 million people whose unemployment benefits have prematurely expired while Congress sits on legislation that would renew those benefits.

How long did you have that job and how much did you save of your income during that time? Little - or zero? It sounds like it. This situation, incidentally, is why that's a bad idea.

Rousey is currently pursuing a master's degree in adult education through an online program, and her son, 17, and her 25-year-old daughter are also full-time students. She said all three of them are desperate for work.

How is the school being paid for? And the 25-year old - how long has she been in school?

"They cut off my Internet and cable about five minutes ago, and my landlord is already calling," she said. "I don't have time to wait for Congress to extend these benefits. I'm drowning fast."

Oh, I see. And in November, when you lost your job, the Internet and Cable (which is likely $100 a month or so) was not something you cut off proactively to conserve funds? Why not?

Got a cell phone? What's the monthly nut on that?

Diapers are expensive in packages. Cloth ones are cheaper. Yes, they're less convenient - a lot less convenient. I remember buying the packages of Pampers for my daughter. If I had been broke, cloth it would be.

What's your electric bill? Did the AC get cut off in November too, or has it been blasting away all spring and summer? Was your heat set at "Jimmy Carter" levels over the winter months, or was it a nice toasty 72F inside?

November -> June is six months during which the standard 26 weeks of unemployment (that you do pay into via taxes and premiums that are assessed on your employer) ran.

The rest is a handout.

Over those six months this individual appears to have made no adjustments of materiality to compensate for the fact that she lost her income. Now she's in a panic and is looking for someone to blame.

Notice that nowhere in that article is even the first hint of accepting responsibility for not cutting back on significant discretionary purchases when the job was lost and attempting to stretch every dollar as far as it could possibly go.

I empathize with this woman's dilemma, but here's the problem: We (the government, the people) don't have the money to keep doing this.

Yes, I also recognize that we squandered an awful lot of money, but those funds are gone. Take it out on whoever you'd like for those acts. I did my level damndest to stop it, and failed. We gave money to GM, we gave money to Chrysler, we gave money to AIG, we gave money to foreign banks. Both republican and democrat administrations did this, including President Barack Obama who, I remind everyone voted for TARP along with a number of other pork-laden bills.

Nearly three years ago I recommended that the government fund and put aside $200 billion in actual cash to provide emergency shelter and food for up to 25% of the population for as long as 12-24 months. I was entirely serious, although I'm sure that many Congressmen and women who got my faxed letter perceived me to be absolutely insane. My recommendation was to be prepared to provide "three hots and a cot" on closed military bases or unused parts of active facilities for this purpose. These would not be "luxury accommodations" or even trailers - we're talking literally "three hots, a cot, hot water to shower with and flush toilets." That's all.

The simple fact of the matter is that huge swaths of Americans literally have saved nothing. They have been goaded into borrowing amounts that in some cases exceed their annual earnings. Most of these people are literally one hiccup in their income stream away from utter destitution.

Yes, much of it (if not all of it) is their own fault. They have saved nothing. They run $100 cable TV and Internet bills, and another $100 for "smart" cellphone service - each and every month. They have their financed car(s) on which they must maintain full coverage insurance (instead of a "moving jalopy" that is paid for, worth little, and on which one only needs liability insurance at 1/4 the cost.) They're entitled to a 75 degree house in the winter or summer, even if it generates a $300 electric bill. They believe they're entitled to student loans to go to college (instead of refusing to attend until the colleges get costs in check) further damaging their economic futures.

This state of affairs did not come about in an afternoon and it can't be fixed in one either. We cannot allow people to starve, but we also cannot continue to fund handouts as we have. The money simply is not there.

We need to figure out how to live in a nation with a forty percent smaller GDP than we now have. Yes, 40%. That means you, I, everyone else. The "living large" game is over. All Ponzi Schemes ultimately collapse - they do not go quietly into the night. The collapse is brutal, it's quick, it's efficient and it's devastating to anyone caught in it.

Every time.

These are facts, not fantasies.

If you are not prepared today, you need to become so by tomorrow.

Incidentally, yesterday would have been better.

There are some things we can do to help though, and they don't cost much money at all.

One of them is to kick out the 20 million+ illegal invaders who are consuming resources of all sorts - including taking jobs that Americans could be doing. The non-institutional working-age population (of legal residents and citizens) has gone from 230.6 million in 2007 to 237.5 million now. The number employed has gone from 144.2 million to 139.5. That's 11.5 million citizens out of work but ready, willing and able.

So tell me why we have 20 million illegal invaders in our nation again? Sure, some of them have jobs. But every one of those jobs is one that an American could be doing. It is an outrage that we allow our nation to be overrun with illegal Mexican invaders while our citizens are out of work and days or weeks away from being evicted and living under a highway overpass.

People tell me we can't deport 'em all. My retort is that we don't have to. Drive a bus with armed security to every chicken plant and strawberry field in America. Pick 'em up, fingerprint 'em electronically, bus 'em to the border. Make clear that if they get caught again in the United States they'll do five years at hard labor, no possibility of early release, before being deported again. Third time, 10 years. And so on.

It'll be a week before they all leave on their own, except the gang bangers, of which there are many. Those we'll have to actually go round up the hard way.

There's your employment problem.

Who was it that gave a speech yesterday exhorting us to "understand" all those illegal invaders in our country, let them keep the jobs that Americans could be doing, and not kick them out again?

That would be President Obama, I think...

Hmmm...

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Jul 2, 2010
Karl Denninger

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