First off, my agenda is our survival--yours and mine. Seriously. My observations tell me that the government, academics and the media are the reason for the economic mis-education of American voters and similarly in other countries. They have accomplished it like this:
- Academia sold the Government on an economic doctrine (e.g. monetary policy 1913 & later added Keynesianism after WWII) and trains new economists (or engineers in my case) in the same economic philosophy
- The Government hires academics as employees and many others (80%+) as consultants and research grants.
- The media also hires academics to write columns or put on a retainer as subject matter experts to translate economics for the public
- The media interviews The Fed Chairman or a surrogate from the Fed board or academia.
- The public is indoctrinated into the government's doctrine and the circle is completed. The majority have swallowed the blue pill. I'm hoping the readers of this forum have taken the red pill ("embracing the sometimes painful truth of reality"). =)
Without going into the philosophies of the various economics in CaptainPanic's excellent list in my already long post, let's follow the dollar. It should fit in with this forum, because it involves mathematics. First let's stipulate that both political doctrines have participated in getting us to this crisis point over forty years. Second, let's stipulate that Presidents are at best cheerleaders as far as tax and spend are concerned. Article I, Section 7 of the U.S. constitution says: "All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills." The President may recommend tax increases or decreases or veto Congress' proposals. But Congress can ignore a President's veto or recommendations. Therefore,
ignore any
academics or
media blaming Presidents for tax increases or Presidents saying they won't increase (or will decrease) taxes. So, the people need to control Congress. Third, let's stipulate that all Americans (and the world) are in the same ship of state. What happens to the dollar happens to all of us. Fourth, let's stipulate that if the government
confiscated (not tax) every penny owned by every millionaire or billionaire in the US, it would only pay one-tenth of the US's total indebtedness.
The behind the scenes facilitator for this crisis since its inception in 1913 is The Federal Reserve System of the US (The Fed). Despite the name it's a
private banking cartel. In fact one of the share holders is the Queen of England, but that's another story. It creates money by
printing dollars and loaning them to its affiliate banks. This creates inflation of the money supply, which causes prices to rise and allows governments to deficit spend. Looking at the Bureau of Labor Statistics's own data (bls.gov) the dollar has lost 95% of it's value since 1913 and 82% since 1971. The Minneapolis Fed's data (
www.minneapolisfed.org) shows the CPI virtually flat from 1800 until a bump up about 1914 (WWI), back down, and up again for WWII, where it kept increasing, then it really took off in 1971 creating the hockey stick (exponential like) we see today. Nixon took the US off the gold standard in 1971. Prior to that, The Fed had to have enough gold or silver on hand to cover any amount that the citizens might want to trade their silver or gold certificates for. Therefore, The Fed can't inflate
certificate money beyond its current inventory of physical gold or silver. For the same reason, the government can't deficit spend. This forces the government to 'live within its means' just as individuals and corporations must do. There's nothing magical about gold or silver. They are limited in availability, have commercial uses, and unless prevented by governments can be traded for goods and services worldwide. (I fear we'll need to use this barter ability in the near future.)
The US debt is indicative of a government consuming too many resources. European governments consume about 49% of their country's GDP. The US federal government currently consumes about 25% of GDP. Even the CBO projects it to grow to 43% by 2050. State and local governments currently consume 10% to 15%. So, the US will have a larger government than any European government today except Ireland. The chronically high unemployment rates and slow economic growth in most of Europe portend what's in store for the US if it stays on its current trajectory.
How can the government continue to borrow without revenues (a.k.a. taxes) to service that debt? Or how can the government do what an individual or corporation can't do without going bankrupt? There's no free lunch.
Since the US dollar is the world's reserve currency (for now) other countries have been willing to lend us money cheaply. As our creditor countries realize the reality of the situation, they will raise their interest rates and the US will be in Greece's situation. More of the US budget will be spent to service the increased interest rate. Somewhere in this process the US could decide to default on its debts, which will make those holding US Treasury debt instruments upset. We've already seen from the debt ceiling issue in 2011 that there's no political will for the US to default. So, The Fed will create more fiat money creating more debt. All of this will ramp up exponentially and we'll be in hyperinflation. The average inflation rate over the last forty years is about 3.4%, but ln(2)/ln(1+.034) = 21 years. The loan amount will double in 21 years. But that's without an increasing deficit interest, which will make the curve an exponential. People and corporations can't pay suppliers. Suppliers won't accept the worthless fiat money, so, water, food, and gas stop flowing.
How bad will it get before an enlightened majority controls Congress to allow
sound money and produce a
balanced budget? Or will the majority let it get much worse and collapse on its own? All our futures depend on getting this right.
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iNow, on 7 February 2012 - 03:54 PM, said:
MultiQuote
