U.S. Economy; A House of Cards:
Good Morning Middle America, your King of Simple News is on the air.
U.S. NEWS: Yesterday, July 28, 2008, the Whitehouse announced that our annual budget deficit would exceed $500 Billon and at the same time downgraded the economic outlook through 2009.
Our ceiling for the National Debt is now $10.6 Trillion and government will need it all to get through the next year. In my opinion, it won’t be enough.
When you run a business that began with a mathematically flawed business plan, the day comes that it is impossible to go on. So what does that have to do with the National Debt? Government is nothing more than a big business whose income is derived from fleecing the peons, formerly referred to as the Middle Class citizens.
Let’s look at government with a little Mikeronomics today. The sizeable National Debt of the United States is justified by comparing it to the GDP (Gross Domestic Product). Last count was that our debt was approximately 37% of GDP, which according to the residents at the state mental hospital, is an acceptable level.
Of course, there is the unfunded debt of such things as Medicaid, Medicare, Social Security and other promises, which adds another $59 Trillion and raises the debt level to 61% of our GDP. The vote was split on the acceptability of this figure, with the criminally insane unit approving.
General Motors had the same sort of plan as our federal government, so long as the income for auto sales was somewhat higher than the cost of doing business, no one was sweating the small stuff. Of course, no one was considering the present snafu when auto sales would dip somewhere below the cost of doing business, in fact, $8.6 Billion below the cost of doing business in 2006 alone and still counting.
The problem is that the debt doesn’t go down when business slows up, unless of course, you are a homeowner that is being bailed out by Congress in which the laws of consequences are being reversed; bad behavior is rewarded, good behavior is punished.
GDP measures all output of goods and services for a given year, including all government spending! Uh-oh. So tax collection to our government is the same as vehicle sales to GM and with unemployment continuing to climb, tax collection could be an issue for some years to come. Yet the National Debt continues to climb at a record rate.
Our government’s plan was for growth in GDP (and population) was to remain constant for at least long enough for those currently involved with unselfish service to their country to retire. The plan for growth of the magnitude necessary to service the debt was never mathematically possible.
America has operated on the false footings of ever expanding credit, inflation, and the expansion of phantom monetary capital for 35 years and we are about to pay the piper handsomely for all of the free music. Or should I say, that our children are about to pay the piper?
In my book, “The Biggest Lie Ever Believed,” I wrote that most baby boomers thought that they were going to get out with all of their trappings by passing the debt batons to their children. And I agreed that temporarily, that certainly appeared to be true.
“Appeared” was the key word in the above statement. If you are a boomer, suit up, you’re going in the game. There is only one possibility left for our government to artificially increase GDP and that is with inflation. For those in or near retirement, additional inflation is pure poison.
The only other option for government is to tell the truth. Tell our citizens that our system of exponential growth in a finite world is impossible. And that inflating our money supply and increasing credit and debt is only exacerbating the problem. But Ron Paul tried to tell us that and was branded a kook.
David Walker, the former Chief Comptroller General of the United States, and a personal hero for me, also tried to tell us the same thing and recently resigned his position in frustration.
The majority of Americans will follow the flawed party line politics that have brought us to this juncture to the bitter end. The good news is, we can pack light; it won’t be a long trip.
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It is exactly like a house of cards.. Without knowing what to do, our leaders are trying to just extend the game one more turn, one more little, bitty card.. Cross our fingers as we gingerly put the card on top.. If I can just last a bit longer, maybe something will happen.. This is their prayer..
And, as you say, it ain’t gonna work this time.. We all know how the house of cards game ends..
WmA…
Below is Robert Hickerson’s conclusions/ recommendations to Marion Hubbert’s studies on depletion of our planet’s natural resources; written in 1995. Obviously this problem has grown beyond belief over the past 13 years, since Robert’s recommendations were published. I have asked him to inject any updates and suggestions he may have at this date, which will most likely include reference to the wars taking place over this 13 year period of time also.
I just cannot seem to drop my search for the reason that denial and apathy dominate our society at such a critical time. Lack of education is a key; but why do we choose TV sound bites over truth and facts? As you can see by the Fannie/Freddie thing, our government is in it for the long haul, at all costs. And like you indicated, Mike; the long haul is not far away right now. -bb
http://www.hubbertpeak.com/Hubbert/hubecon.htm
My personal conclusions and recommendations are:
1. We will never again be able to get sufficient growth of the economy to eliminate or even markedly reduced unemployment. NAFTA, GATT, and Clinton’s hope of growing the economy to solve unemployment is doomed to failure.
2. The promise of competing in the global economy is a hoax perpetrated upon the working and unemployed people of this country because over time a nation needs to buy and sell overseas in roughly equivalent amounts.
3. All attempts to reduce the deficit, balance the budget or pay off the national debt are futile. The deficit and the national debt represent the subsidy the government has paid in its attempt to keep growth and unemployment at the level of social tolerance.
4. The steady state economy into which we are being inexorably forced implies an interest rate of zero.
5. An interest rate of zero (as Hubbert explains) means the end of the money system. We are being forced to completely rethink our cultural ideas about how to organize our economy and distribute purchasing power.
6. Increasingly desperate means will be used by those who think we can continue to have business as usual.
7. The proposals of Negative Population Growth should be implemented immediately.
Willy,
Yes we do! It ends with all of the cards in a messy pile.
I believe that the Democrats will be elected in November and will attempt to tax their way out of this impossible mess. At least that is what they say.
While taxing the rich may give the appearance of providing a solution, it will be short lived, as mathematically, the problem is unsolvable without completely revamping the basis.
I am starting to see new unsold homes in foreclosure in our area. Restaurants are in real trouble as discretionary income is now going to basic needs.
Inflation is being deliberately created as we speak, with artificially low interest rates, and tons of money being printed.
Billy,
My personal favorite is # 3. “All attempts to reduce the deficit, balance the budget or pay off the national debt are futile. The deficit and the national debt represent the subsidy the government has paid in its attempt to keep growth and unemployment at the level of social tolerance.”
The past 13 years of history speak legion for Mr. Hickerson’s conclusions…he was right as rain.