Posts Tagged ‘Obama’
by Jim Quinn
of The Burning Platform
Posted on 8th January 2012
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – Strauss & Howe – The Fourth Turning – 1997
IN DECEMBER 2010 I WROTE AN ARTICLE CALLED Will 2012 Be as Critical as 1860?, THAT PONDERED WHAT MIGHT HAPPEN WITH THE 2012 presidential election and the possible scenarios that might play out based on that election. Well, 2012 has arrived and every blogger and mainstream media pundit is making their predictions for 2012. The benefit of delaying my predictions until the first week of 2012 is that I’ve been able to read the wise ponderings of Mike Shedlock, Jesse, Karl Denninger, and some other brilliant truth seeking analysts regarding what might happen during 2012. The passage above from Strauss & Howe was written fifteen years ago and captured the essence of what has happened since 2007 and what will drive all the events over the next decade. Predicting specific events is a futile human endeavour. The world is so complex and individual human beings so impulsive and driven by emotion, that the possible number of particular outcomes is almost infinite.
But, as Strauss and Howe point out, the core elements that created this Crisis and the reaction of generational cohorts to the implications of debt, civic decay and global disorder will drive all the events that will occur in 2012 and for as far as the eye can see. Linear thinkers in mega-corporations, mainstream media and Washington D.C. focus on retaining the status quo, their power and their wealth. They believe an economic recovery can be manufactured through monetary manipulation and Keynesian borrowing and spending. They are blind to the fact that history is cyclical, not linear. In order to have an understanding of what could happen in the coming year, it is essential to keep the big picture in focus. As we enter the fifth year of this twenty year Crisis period, there is absolutely no chance that 2012 will see an improvement in our economy, political atmosphere or world situation. Fourth Turnings never de-intensify. They exhaust themselves after years of chaos, conflict and turmoil. I can guarantee you that 2012 will see increased mayhem, riots, violent protests, recessions, bear markets, and a presidential election that will confound the establishment. All the episodes which will occur in 2012 will have at their core one of the three elements described by Strauss & Howe in 1997: Debt, Civic Decay, or Global Disorder.
Debt – On the Road to Serfdom
The world is awash in debt. Everyone is focused on the PIIGS with their debt to GDP ratios exceeding the Rogoff & Reinhart’s 90% point of no return. But, the supposedly fiscally responsible countries like Germany, France, U.K., and the U.S. have already breached the 90% level. Japan is off the charts, with debt exceeding 200% of GDP. These figures are just for the official government debt. If countries were required to report their debt like a corporation, their unfunded entitlement promises to future generations are four to six times more than their official government debt.
Any critical thinking person can look at the chart above and realize that creating more debt out of thin air to solve a debt problem is foolish, dangerous, and self serving to only bankers and politicians. The debt crisis took decades of terrible choices and bogus promises to produce. The world is now in the midst of a debt driven catastrophe. At best, the excessive levels of sovereign debt will slow economic growth to zero or below in 2012. At worst, interest rates will soar as counties attempt to rollover their debt and rolling defaults across Europe will plunge the continent into a depression. The largest banks in Europe are leveraged 40 to 1, therefore a 3% reduction in their capital will cause bankruptcy. Once you pass 90% debt to GDP, your fate is sealed.
“Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90 percent of GDP are relatively rare and those exceeding 120 percent are extremely rare. Is it because generations of politicians failed to realize that they could have kept spending without risk? Or, more likely, is it because at some point, even advanced economies hit a ceiling where the pressure of rising borrowing costs forces policy makers to increase tax rates and cut government spending, sometimes precipitously, and sometimes in conjunction with inflation and financial repression (which is also a tax)?” – Rogoff & Reinhart
The ECB doubling their balance sheet and funnelling trillions to European banks will not solve anything. The truth that no one wants to acknowledge is the standard of living for every person in Europe, the United States and Japan will decline. The choice is whether the decline happens rapidly by accepting debt default and restructuring or methodically through central bank created inflation that devours the wealth of the middle class. Debt default would result in rich bankers losing vast sums of wealth and politicians accepting the consequences of their false promises. Bankers and politicians will choose inflation. They believe they can control the levers of inflation, but they have proven to be incompetent, hubristic, and myopic. The European Union will not survive 2012 in its current form. Countries are already preparing for the dissolution. Politicians and bankers will lie and print until the day they pull the plug on the doomed Euro experiment.
The false storyline of debt being paid down in the United States continues to be propagated by the mainstream press and decried by Paul Krugman. The age of austerity storyline gets full play on a daily basis. Total credit market debt in 2000 was $27 trillion. It skyrocket to $42 trillion by 2005 as George Bush and Alan Greenspan encouraged delusional Americans to defeat terrorism by leasing SUVs and live the American dream by putting zero down on a $600,000 McMansion, financing it with a negative amortization no doc loan. Paul Krugman got his wish as a housing bubble replaced the dotcom bubble. Debt accumulation went into hyper-speed in 2006 and 2007 as Wall Street sharks conducted a fraudulent feeding frenzy by peddling their derivatives of mass destruction around the globe. By the end of 2007, total credit market debt reached $51 trillion.
In a world inhabited by sincere sane leaders, willing to level with the citizens and disposed to allow financial institutions that took world crushing risks to fail through an orderly bankruptcy process, debt would have been written off and a sharp short contraction would have occurred. The stockholders, bondholders and executives of the Wall Street banks would have taken the losses they deserved. Instead Wall Street used their undue influence, wealth and power to force their politician puppets to funnel $5 trillion to the bankers that created the crisis while dumping the debt on taxpayers and unborn generations. The Wall Street controlled Federal Reserve provided risk free funding and took toxic mortgage assets off their balance sheets. The result is total credit market debt higher today than it was at the peak of the financial crisis in March 2009.
Our leaders have done the exact opposite of what needed to be done to address this debt crisis. The country is adding $3.7 billion per day to the National Debt. With the debt at $15.2 trillion, we have now surpassed the 100% to GDP mark. The National Debt will be $16.5 trillion when the next president takes office in January 2013. Ben Bernanke has been able to keep short term interest rates near zero and the non-existent U.S. economic growth and European disaster has resulted in keeping long-term rates near record lows. Despite these historic low rates, interest on the National Debt totalled $454 billion in 2011, an all-time high. The effective interest rate was approximately 3%. If rates stay at current levels, interest will be between $400 and $500 billion in 2012. Each 1% increase in rates would cost American taxpayers an additional $150 billion. A rapid increase in rates to the 7% level would ratchet interest expense above $1 trillion and destroy the last remaining vestiges of Bernanke’s credibility. It can’t possibly happen in 2012. Right? The world has total confidence in pieces of paper being produced at a rate of $3.7 billion per day.
Confidence in Ben Bernanke, Barack Obama and the U.S. Congress is all that stands between continued stability and complete chaos. What could go wrong? Debt related issues that will likely rear their head in 2012 are as follows:
- A debt saturated society cannot grow. As debt servicing grows by the day, the economy losses steam. The excessive and increasing debt levels will lead to a renewed recession in 2012 as clearly detailed by ECRI, John Hussman and Hoisington Investment Management.
“Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street.” – ECRI
At present, we observe agreement across a broad ensemble of models, even restricting data to indicators available since 1950 (broader data since 1970 imply virtual certainty of recession). The uniformity of recessionary evidence we observe today has never been seen except during or just prior to other historical recessions.- John Hussman
Negative economic growth will probably be registered in the U.S. during the fourth quarter of 2011, and in subsequent quarters in 2012. Though partially caused by monetary and fiscal actions and excessive indebtedness, this contraction has been further aggravated by three current cyclical developments: a) declining productivity, b) elevated inventory investment, and c) contracting real wage income. In summary, the case for an impending recession rests not only on cyclical precursors evident in productivity, real wages, and inventory investment, but also on the disfunctionality of monetary and fiscal policy. – Van Hoisington
- The onrushing recession will send housing down for the count. With 2.2 million homes already in the foreclosure process and another 13 million homes with negative or near negative equity, the recession will push more people over the edge. As foreclosures rise a self reinforcing loop will develop. Home prices will fall as banks dump houses at lower prices, pushing millions more into a negative equity position. Home prices will fall another 5% to 10% in 2012, with a couple years to go before bottoming.
- The recession will result in companies laying off more workers. It won’t be as dramatic as 2008-2009 because companies have already shed 6 million jobs. The working age population will increase by 1.7 million, the number of people employed will go up by 1 million, but the official unemployment rate will drop to 7% as the BLS reveals that 10 million people decided to relax and leave the workforce. Surely I jest. The government manipulated unemployment rate will rise above 9%, while the real rate will surpass 25%.
- The American people rationally increased their savings rate to 6.2% in the 2nd Quarter of 2009. When you are over-indebted and the country heads into recession, spending less and saving more is a sane option. Consumer expenditures accounted for 69% of GDP in 2007, prior to the economic collapse. The “recovery” of 2010-2011 has been driven by Ben’s zero interest rate policy, the resumption of easy credit peddling by the Wall Street banks, and consumers convinced that going further into hock to attain the American dream is rational. Consumer spending as a percentage of GDP has actually risen to 71% and the savings rate has plunged to 3.6%. The 20% drop in gas prices since April bottomed in December. This decline temporarily boosted consumer spending, but prices are on the rise again. With the State and local governments reducing spending, do the Wall Street Ivy League economists really believe consumers will increase their consumption to 73% of GDP and reduce their savings rate to 1%? If you open your local newspaper you will see the master plan. Car dealers are offering 0% financing with nothing down for 60 months. The GMAC/Ditech/Ally Bank zombie lives as subprime auto loans are back. The “strong” auto sales are a debt financed illusion. Ashley Furniture is offering 0% financing for 50 months with no payments through Wells Fargo Bank. When the Federal Reserve provides the Wall Street banks with 0% funding, banks are willing to take big risks knowing that Uncle Ben and the naive American taxpayer will be there to bail them out when it blows up again.
- With recession a certainty as fiscal stimulus wears off, home prices fall, employment stagnates, and consumer spending grinds to a halt, what will happen to the stock market? The Wall Street shills paraded on CNBC and interviewed by the multi-millionaire talking head twits assure you that stocks are undervalued and the market will surely be up 10% to 15% by 2013. It’s a mortal lock, just as it has been for the last twelve years, with the S&P 500 at the same level as January 1999. The fact is the stock market drops 30% on average during a recession. The talking heads declare that corporate profits are at record levels and will continue higher. Not bloody likely. Corporate profit margins are at an all-time peak about 50% above their historical norms. Profits always revert to their mean. These profits are not sustainable as they were generated by firing millions of workers, zero interest rates for banks, fraudulent accounting by the banks, and trillions in handouts from the middle class taxpayers to corporate America.
In a true free market excess profits will draw more competitors and profits will fall due to competition. When corporate profits exceed the mean by such a large amount, you can conclude that crony capitalism has replaced the free market. Government bureaucrats have been picking the winners (Wall Street, War Industry, Big Media, Big Healthcare) and the American people are the losers. Corporate oligarchs prefer no competition so they can reap obscene risk free profits and reward themselves with king-like compensation. Mean reversion will eventually be a bitch. Real S&P earnings have reached the 2007 historic peak. To believe they will soar higher as we enter a recession takes the same kind of faith shown by Americans buying a $600,000 McMansion in Stockton with no money down in 2005. The result will be the same. Do you ever wonder how corporations are doing so well while the average American sinks further into debt, despair and poverty?
The brilliant John Hussman captures the gist of an investor’s dilemma in his latest article:
“With 10-year Treasury yields below 2%, 30-year yields below 3%, corporate bond yields below 4%, and S&P 500 projected 10-year total returns below 5%, we presently have one of the worst menus of prospective return that long-term investors have ever faced. The outcome of this situation will not be surprisingly pleasant for any sustained period of time, but promises to be difficult, volatile, and unrewarding. The proper response is to accept risk in proportion to the compensation available for taking that risk. Presently, that compensation is very thin. This will change, and much better opportunities to accept risk will emerge. The key is for investors to avoid the allure of excessive short-term speculation in a market that promises – bends to its knees, stares straight into investors’ eyes, and promises – to treat them terribly over the long-term.”
“The fact that we’re here today to debate raising America’s debt limit is a sign of leadership failure. Leadership means ‘The buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.”
– Senator Barack Obama, 2006
by Greg Hunter’s USAWatchdog.com
Posted July 27, 2011
Today is August 1st. Further developments have come forth since this article was written, but it is still relevant to this unfolding drama – or is it a non-drama, as some have opined? – Aurick
WATCHING THE DEBT NEGOTIATIONS IS LIKE WATCHING TWO STUBBORN PEOPLE headed over a waterfall. Both are too blockheaded to steer the boat towards land on the left or the right. So, both go over the edge and will see how long the other can hold his breath. Both, of course, drown in this story, right along with the rest of the country. Yesterday, Speaker Boehner said he wanted to call the President’s bluff and not give him a “blank check.” The President, on the other hand, has said (many times) he’s going to veto any plan that doesn’t raise the debt ceiling past the 2012 presidential election.
I know many think there is going to be a last minute deal before the August 2nd deadline, but I just don’t see it. If the Republican bill from the House makes it past the Democrat-controlled Senate and there is only an increase in the debt ceiling to make it for 6 months or so—veto here we come. Or maybe, there is no bill that can get through Congress, and nothing even makes it to the President’s desk by the August 2nd deadline.
I eventually see a debt deal getting done, but not until after the August 2nd. That’s when the Treasury says it will exhaust its borrowing limit. In this scenario, both parties hope the other side will take it on the chin and be hurt worse in the eyes of voters. I don’t know who will come out on top if this happens, but big time damage to the U.S. economy will be done. Forget about default on the U.S. Treasury debt. That is simply not going to happen, at least not anytime soon. America has the money to pay the interest on its Treasuries. It is the credit rating of the United States that will take a beating.
In the latest report from Shadowstats.com, economist John Williams said, “If I were to script a scenario as to how the United States quickly could debase the U.S. dollar with maximum impact, impairing the dollar’s reserve status and dwindling global credibility, and accelerating the movement towards a U.S. hyperinflation, it would be extremely difficult to come up with a more destructive course of action than what already is taking place in Washington, D.C. The chances of a U.S. debt default remain nil, but risk of a U.S. sovereign credit rating downgrade—though small—is increasing. . .”
If the debt of the United States is downgraded, other debt will also be downgraded. As credit ratings go down, interest rates do the opposite. U.S. consumers would start paying more for things like credit cards, mortgages and car loans. Hundreds of municipalities would also pay higher borrowing costs for their debt. These are just a few of the interest rate wild cards. This would put a huge drag on an economy that is already on the skids. The dollar would also take a pounding because nervous investors would start to dump dollars and Treasuries.
The Shadowstats.com report goes on to say, “The administration claims the U.S. will default if the debt ceiling is not raised by August 2nd. There are those who suggest there is more time beyond that, if only the government selectively pays its bills, giving priority to interest and debt payments. With other government obligations not paid as due, though, that circumstance likely would trigger the rating downgrades and intensify dollar dumping and abandonment.”
Paul Craig Roberts, former Assistant Treasury Secretary in the Reagan Administration, agrees with the Shadowstat.com analysis. In a recent essay, Roberts said, “The US dollar could plummet in exchange value and lose its role as world reserve currency. The US would no longer be able to pay its oil bill in its own currency, and as its balance of payments is heavily in the red, the US has no foreign currencies with which to pay its oil import bill. Or its manufactured goods import bill, or any other bill. We are talking about a crisis beyond anything the world has ever seen. Does anyone think that President Obama is going to just sit there while the power of the US collapses? He doesn’t have to do so. There are presidential directives and executive orders in place, put there by George W. Bush himself, that President Obama can invoke to declare a national emergency, suspend the debt ceiling limit, and continue to issue Treasury debt. This is exactly what would happen. The consequences would be that the power of the purse would transfer from Congress to the President.” (Click here for the complete Paul Craig Roberts post.)
I think, by now, both parties are calculating how bad the fallout will be and which party gets the blame if a debt ceiling deal is not done by the August 2nd deadline. Could the Republicans really not want the economy to get much better until after the 2012 election? On the other hand, maybe the Democrats know the economy stinks and figure it won’t get much better anyway come election time. Might the President veto a bill he hates and blame a plunging economy and government shutdown on the Republicans? Bill Clinton did a similar thing in the mid-90’s, remember? Although, the stakes this time around are exponentially higher.
It wouldn’t be hard to sell a “national emergency” to the public if the stock market sold off a couple of thousand points and gasoline prices went to 8 bucks a gallon—would it? Whether or not you like Barack Obama, never underestimate the power of the President. Wouldn’t it be strange if a debt deal finally got done on August 15, 201l? That’ll be exactly 40 years to the day President Richard Nixon took America off the gold standard.
from The Daily Bell
Posted July 28, 2011
Debt-limit debate wearing on Americans … As an Aug. 2 deadline draws closer and Washington’s political brinkmanship only intensifies, Americans are discussing the potential consequences of failing to raise the debt ceiling, which authorizes the federal government’s borrowing to meet expenses that tax collections aren’t sufficient to cover. … The president and the Republican speaker of the House, John Boehner of Ohio, both have appealed to the public and accused the other side of refusing to come to a deal. – USA Today
Dominant Social Theme:
We must all pull together to get through this. Let the wise men lead.
The debate over the debt ceiling is anything but trivial for the powers-that-be. Political pundits on both sides of the dialectic, along with their media confidants, would like us to believe that there is a real reason for us all to be concerned over the “acceptable level” of debt. Don’t worry about the fact that America is already the largest debtor nation in the world. Don’t worry that the Fed handed out more than $16 TRILLION in bailouts … just a couple of trillion more and all will be well.
Well, we have another take on the matter. It seems to us that to debate whether or not further “credit” should be extended is to miss the point. The real point is the fraudulent base on which the Federal Reserve System is built – in other words, the US dollar itself – and how it is eroding living standards and individual freedom.
We wrote about this just the other day in an article titled, GAO: Fed Issued $US16 Trillion During 2008 Crisis!
For nearly 100 years now, the money elite have had their way with the American people and citizens of most other nations who’ve been harnessed in the dollar noose due to its oil-imposed reserve status. And as central banks (creators) and commercial banks (distributors) were hoisted upon unknowing populations – dumbed down via a broad, yet tightly controlled international media network – the process of wealth redistribution was firmly entrenched.
Nowhere has this poisonous system been more effective at draining the lifeblood (productivity) from a nation, than in the United States. The US Constitution has been turned into an artifact of ridicule; the rights of an individual have taken a backseat to the “rights” of the State. And what a State it is.
We all now face a global catastrophe, we are told, if the US legislators cannot agree on the need to raise the debt ceiling. We are told that the world will stop turning and all will face a horrible new future.
On Monday night, during his Presidential address to the nation, Barack Obama warned, “We can’t allow the American people to become collateral damage to Washington’s political warfare.”
Really Mr. Obama? And just how rosy is the current picture for most who are willing to face reality? Are Americans not already collateral damage?
Today, in America and the West in general, it is virtually impossible for people to get by without both spouses working – often more than one job each. The family unit has been sabotaged and instead of communal bonds bringing families closer together we have a dog-eat-dog society where even close family members are stepping over each other to survive. All the while, people are working HALF their lives to pay money into a system based on a fraudulent premise: That someone out there can do a better job of taking care of you, than you. And naturally, Mr. Obama believes he, and the system of regulatory democracy he leads, can do that.
So why do people sit back and watch this “accident in motion” rather than just realize that the whole gig is up and it is time to face the music? Everyone is complicit in this – the people themselves who blindly gave up their individuality for false security, and the subversive group of monetary elite focused on consolidating their globalist agenda and generaly enslaving the “lower order.” Of course, the former group has been losing for a long time now, but perhaps it is now the latter group who will face some rather uncomfortable times ahead.
However, as long as the greater majority refuses to have the courage to take responsibility for their own destinies, then there will continue to be those who will use fear-based dominant social themes to consolidate power.
To extend further debt to a disfuntionally bankrupt system will do nothing more than delay the inevitable. It will not fix the unfixable. People are waking up, thanks to the Internet Reformation, and taking human action – one person at a time. This is the bell of liberty that is tolling and it is ringing louder and louder as more and more choose to face reality.
Just look at the powerful increase in purchasing power (value) of gold and silver over the past several years to get a pretty good idea as to how rapidly the fiat money scam is unwinding. And this trend is NOT likely to change anytime soon. How can it? Why would it? We still have the majority of people debating in what “form” the debt ceiling package should exist. The majority, well, they just don’t get the point – at least not yet. So the struggle will continue, the debt ceiling will go up, and the dying dollar will continue to devalue.
The Internet Reformation is leading all who wish to see the truth. And for them, the debt ceiling debate means rather little and neither do Obama’s fear-based threats. As Dr. Machan says in his editorial today, Americans just need to say NO.
“You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out.” – Andrew Jackson
by James Howard Kunstler
Posted July 18, 2011
GOING BROKE FAST IS A VERY COMPELLING PROBLEM. For ordinary people it tends to induce chicken-with-no-head syndrome – a mad burst of pointless locomotion ending in sudden collapse. If the US debt ceiling is raised – which I think is a 90 percent bet – there will be a sigh of relief that resounds from the lobster pounds of Penobscot Bay to the parking lots of Silicon Valley… and poor dissolving America will still be stuck in its essential predicament of being broke. So a lot of pointless locomotion will continue in the form of positioning among a troop of clown candidates for the dumbshow of the 2012 election. I wonder lately whether that election will actually happen.
Europe is arguably worse off money-wise, more broke, flimsier, crapped out, crippled, and paralyzed. Sad, because in outward appearance Europe is – how shall I put this? – better turned out than America. Europe is a fit, silver-haired gentleman in a sleek Italian suit and a pair of Michael Toschi swing lace wingtips, holding a serious-looking Chiarugi leather briefcase. America is pear-shaped blob of semi-formed male flesh, in ankle-length cargo shorts, a black T-shirt featuring skull motifs, tattoos randomly assigned (as if by lottery) to visible flesh, a Sluggo buzz-cut, and a low-rider sports cap designed to make your head look flat. In other words, he lacks a certain savoir-faire compared to his European cousin.
But both are broke. Neither has any idea what he will do next – though, for the American, it will probably involve the ingestion of melted cheese or drugs (or both). When the European collapses, a certain air of delicacy will attend his demise; the expired American will go up in flames in a trailer and they’ll have to sort out his remains from the melted goop of his dwelling-place with a front-end loader.
This is the way the world ends for the OECD (Organisation for Economic Co-operation and Development), the nations that affected to be developed and civilized. This phase of globalism is certainly not the end of history, but it is looking like the end of accounting tricks, and possibly democracy, which has discredited itself with accounting tricks. At a certain point in time, the sickening recognition sets in that appearances are not the same as reality – and then, all of a sudden, you’re in a political maelstrom.
Citizens of the various lands will discover that the money being argued over, shifted around from column A to column B, assigned to this or that actuarial table or budget line or account or obligation or vault or “structured vehicle”- that money is just… not… there. There’s no money. It was pretend money. From now on, none of you will get paid. Imagine a world where nobody gets paid.
Europe has run the money string to its bitter end and now it just remains to be seen how each country blows up and where the dust settles. Greece and Portugal may just shrug and retire on an economy based on goat-cheese and olives. Ireland will get drunk and pass out for at least a century. Spain sinks back into an age-old catatonic daze, having gone broke spectacularly once before. Italy strings up Mr. Berlusconi on a lamp-post and breaks up into 112 warring city-states. France elects DSK, whose first act is to declare war on the City of New York. Religious wars leave England in embers. And Germany becomes the world’s first “green” police state.
It’s conceivable to me that Barack Obama may be the last president – for a while. He was a decent fellow but, in the end, ineffectual, and of course he got no help from the legislative branch, including especially colleagues in his own party, a most remarkable class of maundering chickenshits and grifters. Our money problems will not go away and after a while this land will not be governable by familiar means.
In case you haven’t noticed, the rule of law is already AWOL in many sectors of our national life, most particularly money matters, but before long on every street-corner, every highway strip, plus every GMO cornfield, and brownfield. The two parties are unreformable and the Tea Party is the stooge of one of the two parties, and there is no other party of earnest, decisive, and sane individuals anywhere near the horizon. So some kind of convulsion is in the cards and it will be the unfortunate duty of some dutiful officer to step in and set an agenda based on something other than bluster, fakery, and pocket pool.
While there’s a good chance the US debt ceiling will be extended, it seems to me that meanwhile we have crossed an invisible line into a place where untoward things happen.
by Dr. Ron Paul
Posted July 19, 2011
THE DEBT CEILING DEBATE IS PROVIDING PLENTY OF OPPORTUNITY for political theater in Washington. Proponents of raising the debt ceiling are throwing around the usual scare tactics and misinformation in order to intimidate opponents into accepting more debt and taxes. It is important to distinguish the truth from the propaganda.
First of all, politicians need to understand that without real change default is inevitable. In fact, default happens every day through monetary policy tricks. Every time the Federal Reserve engages in more quantitative easing and devalues the dollar, it is defaulting on the American people by eroding their purchasing power and inflating their savings away. The dollar has lost nearly 50% of its value against gold since 2008. The Fed claims inflation is 2% or less over the past few years; however economists who compile alternate data show a 9% inflation rate if calculated more traditionally. Alarmingly, the administration is talking about changing the methodology of the CPI calculation yet again to hide the damage of the government’s policies. Changing the CPI will also enable the government to avoid giving seniors a COLA (cost of living adjustment) on their social security checks, and raise taxes via the hidden means of “bracket creep.” This is a default. Just because it is a default on the people and not the banks and foreign holders of our debt does not mean it doesn’t count.
Politicians also need to acknowledge that our debt is unsustainable. For decades our government has been spending and promising far more than it collects in taxes. But the problem is not that the people are not taxed enough. The government has managed to run up $61.6 trillion in unfunded liabilities, which works out to $528,000 per household. A tax policy that would aim to extract even half that amount of money from American families would be unimaginably draconian, and not unlike attempting to squeeze blood from a turnip. This is, unequivocally, a spending problem brought about by a dramatically inflated view of the proper role of government in a free society.
Perhaps the most abhorrent bit of chicanery has been the threat that if a deal is not reached to increase the debt by August 2nd, social security checks may not go out. In reality, the Chief Actuary of Social Security confirmed last week that current Social Security tax receipts are more than enough to cover current outlays. The only reason those checks would not go out would be if the administration decided to spend those designated funds elsewhere. It is very telling that the administration would rather frighten seniors dependent on social security checks than alarm their big banking friends, who have already received $5.3 trillion in bailouts, stimulus and quantitative easing. This instance of trying to blackmail Congress into tax increases by threatening social security demonstrates how scary it is to be completely dependent on government promises and why many young people today would jump at the chance to opt out of Social Security altogether.
We are headed for rough economic times either way, but the longer we put it off, the greater the pain will be when the system implodes. We need to stop adding more programs and entitlements to the problem. We need to stop expensive bombing campaigns against people on the other side of the globe and bring our troops home. We need to stop allowing secretive banking cartels to endlessly enslave us through monetary policy trickery. And we need to drastically rethink government’s role in our lives so we can get it out of the way and get back to work.