Monday, March 8, 2010
Can America Defy the Laws of Math?
If you are a thinking person, you’ve been feeling the stress of cognitive dissonance regarding America’s economy. Even with no training in economics, you know something is very, very wrong. Perhaps you can’t quite lay your finger on it, but you know there’s a bad moon rising, and something’s got to give.
Thus far, you’ve likely rationalized that gut feeling away, and you’ve accomplished this by listening to dozens of experts give dozens of conflicting opinions, and it all swirls together into one big lump of economic-theory nonsense. In the end, you assume “the best and the brightest” are working on the issue, and the problem will ultimately get solved.
The best and the brightest aren’t working on the problem—life-long politicians and bureaucrats are. The people in charge of getting us out of this meltdown are the same people who got us into it. There’s no brilliant guy in the background offering sage advice. In fact, no one in charge has any idea whatsoever what they are doing. No one. But the emperor isn’t the only one who has no clothes—his advisors are naked, too.
If you will take the time to research the decisions made by the President and Congress during the past two years, you will quickly come to the conclusion that America of 2010 is unrecognizable to the America of 2007. Can you even keep track of what’s been nationalized, subsidized, and socialized? Wall Street, Banking, Insurance, the Auto Industry, now Hedge Funds—what’s next? Airlines? Credit Card Companies? Newspapers? Pandora’s Box is open, and the folks in charge seem unwilling to close it, no matter the cost.
Ah, the cost. It’s another area where you’ve been experiencing cognitive dissonance, because you keep wondering how the taxpayer is going to pay down this debt. How can we pay off hundreds of billions of dollars? Well, we could if that was all it was… but there’s more. A lot more: As reported on Bloomberg, the Federal Reserve pledged to create, out of thin air, 7.4 Trillion dollars to bail out the economy. It is one of the biggest financial stories in the history of the world, and… well, did you even know about it? As an added nugget of intrigue, the Fed has stated they won’t reveal who gets that money, or what the Fed gets in return. That’s 7.4 Trillion of your dollars being spent in secret. True to their word, in 2009 the Fed recently placed the initial two trillion, and they aren’t saying where it went.
Question: How can a government in as much debt as ours come up with 7.4 Trillion dollars? Answer: They own the printing presses.
Yes, they will try to “borrow” (and thus “create”) the 7.4 Trillion by selling Treasury Bonds, but it appears that the world is, well, kinda tired of American dollars. They have enough, thanks—and they’re starting to wonder if those dollars are actually worth what they paid for them. Hell, if China owned anymore T-Bills, they would need to invade Taiwan—if for no other reason than a place to store all the paper.
Now, if common sense (and sanity) prevents the rest of the world from buying 7.4 Trillion dollars in T-Bills, plus the 1 Trillion-plus Congress has spent on bailouts, how do we explain where all this paper money is coming from?
Look! Over there! It’s Bigfoot!
That’s right, we can’t. When we run out ways to legitimately “create” money we will simply resort to printing money. And when we begin blatantly and publicly ignoring the very basic laws of economics, China and Japan and Europe and India are going to look at their mountain of T-Bills and say, “These have got to go.”
And then? Game over. The ensuing “run on the dollar” will cause it to collapse, and our consumer economy will fall into a depression. This is a mathematical certainty.
President Bush handled the economic crisis like a moron. President Obama has simply done more of the same, as his “big idea” is to spend a Trillion dollars hiring a few million folks to dig holes, and an equal number to fill them back in. If you’re following the math, that now brings us to 9.4 trillion dollars of “bailout” money. 9.4 Trillion dollars that didn’t exist on the planet earth even six months ago. And that doesn’t even include the budget deficits the White House has seen fit to propose.
Do I have a solution? You bet: What would happen to our economy if the government announced, “We are eliminating all income tax and capitol gains tax until we’ve reached the point of 9.4 trillion in lost tax revenue”? If you guessed the recession would soon be over, step up and collect your prize!
But why won’t they do this? It makes so much sense, right? Instead of taking money out of the economy and inefficiently funneling it back in, just leave it with the American people. We’d then have the money to get our credit cards and cars paid-off, buy a flat-screen, and maybe even have enough available salary to make those pesky mortgage payments. Right?
Wrong. Tax revenues equal money, and money equals power, and you’ll die of old age waiting for a politician to give up power. It is their drug. It is their sex. It is their god.
Prior to discovering Peter Schiff’s website (www.europac.net) and then beginning to research the economy myself, I assumed our leaders would work the situation out. This is America, after all. We’re the greatest nation on the earth. What I now believe is that the foxes are in charge of the henhouse, and foxes eat chickens. It is their nature. And they will continue to eat the chickens until the chickens are gone, even if it means they starve to death later.
So what should you do? First, do your own research. Decide for yourself what you think will happen. If you think nothing is going to happen, then you don’t need to do a thing. But if you think something bad might happen—something life-changing like hyperinflation—then it only stands to reason you should get prepared.
Is it urgent? I cannot say. But consider this: All of America went home for the weekend on a Friday, and Lehman Brothers was a AA-rated investment bank. When business began on Monday, Lehman no longer existed.
Humans are the only species that ignores gut instinct. What is your gut telling you?