Exceeding the Limits:
Good Frosty Morning from the land of the frozen mountains; your King of Simple News is hot off the press.
We had quite a discussion yesterday due to many being sidelined by the blizzard that has swept across our nation. Maybe we should have more blizzards that would give us all time to pause from our all consuming workaday lives and consider the predicament that we find ourselves in?
One question that was repeated yesterday by Econalmost and Hotrod centered on capital formation. Is there a reasonable way that we can make money with our money by investing it and having it grow? Well, that’s a “sort of - maybe,” type of question.
But, let’s not get lost and wander aimlessly in the complex world of manmade finance; that is not the ruling factor. I think that we can all agree that if men and women made up the rules; those men and women made those rules to benefit themselves and their friends without so much as a glance in our direction. That’s just how humans are.
The money supply cannot grow larger than the value of the physical world that we live in…but it has. In a Mikeronomics example, when you go to the bank and borrow money on an automobile, they will only lend you the fair market value of the car. If you go back the next week and attempt to borrow more, you will be turned down flat. That being said, then how can our government continually borrow more money against the same diminishing assets? Did we add a state that I’m not aware of?
The word that we are looking for is “limits.” All things in a finite world have limits. Hmmmm.
Why then is there not a limit on the National Debt? States have debt limits, cities have debt limits, you have a debt limit; so why not the Federal Government? Oh sure, there is a limit to the National Debt, but it’s only a matter of Congress voting to raise it, which they do nearly every year.
Why would your representative be willing to continually raise the National Debt? Why would Barrack “fiscally responsible” Obama run a $1.75 Trillion annual deficit?” Why did Congress raise the debt limit in February of this year to $12.104 TRILLION? Why have they already prepared us for additional years of $TRILLION deficits? How can the government continually raise the debt against the same aging car?
The answer is simple, had they not; the whole shebang would have to shut down. Ya see, the game of balance played out about 1970 and we have lived on raising debt and taxes every since. But like I said, there are limits. Very hard limits.
However, being that the American people don’t want to have their government shut down; they shut up, and don’t say anything. The general consensus is that, “Surely our government knows what they are doing.” Right? The truth is that we don’t want to know the truth. We are willing to pay the ultimate price to keep from learning that truth. “The Biggest Lie Ever Believed,” fits the bill nicely to avoid the inconvenience of reality. What about that Tiger Woods, huh?
All of the talk about healthcare, Social Security, bailouts, banks, finance, and Tiger Woods is a diversion. The real problem can be summed up in one word; limits. We have exceeded our natural limits…but don’t tell anyone; okay?
Don’t get caught majoring in the minors. I know, “When you are up to your butt in alligators it’s difficult to remind yourself that your main objective was to drain the swamp,” but please try.
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Mike, you said,”The truth is that we don’t want to know the truth. We are willing to pay the ultimate price to keep from learning that truth.”
You just stated all that can be verbalized, right there in that one statement. That is, however, until that denial is purged from all those poor individuals, you’ve referenced, by the truth. Kind of ironic, huh. -bb
Billyb,
There’s a line in an old song that goes, “The truth doesn’t wait to come in season.”
Oh how true, it is what it is.
Like grown children, we always push the limits, but there are some limits that just won’t be pushed, in fact, they push back in a very persuasive manner.
The crazy part is that we don’t have to push those limits. The good life is a paradigm shift away, but we can’t get our minds off those alligators.
So how is GM (Government Motors) doing?
GM said Wednesday that James Campbell will now lead Chevrolet, the company’s largest and most important brand. Campbell replaces Brent Dewar, who will retire April 1 to spend more time with family and pursue personal interests.
In addition, GM said Michael Richards, who was named Buick and GMC general manager on Dec. 1, is leaving to pursue other career opportunities. That’s the same day that the GM board forced the resignation of former CEO Fritz Henderson.
This reminds me of the picture of the grizzly looking tough old cowboy with the caption: “There’s some things about this outfit that they didn’t tell me when I hired on.”
If we have reached the limit then why are we still going? One reason, when we start losing the game, those in power will change the rules.
Going off the gold standard was one rule change. Increasing the debt levels, bailouts, etc are others.
I believe increased, radical rule changes will happen before any huge crash that many are expecting. I would like to know what those on this board think those rule changes might be and how much longer you think we can keep things going?
Governments rarely go out without a struggle, and I also believe major “Rule Changes” will be coming…
I suppose it all hinges on people’s willingness to lend the government money, as long as Treasury can borrow trillions of dollars, they can keep this game going for an indefinite length of time.
When they all get the “cash out” herd mentality, the end could be swift… things happened fast in the former USSR.
“The crazy part is that we don’t have to push those limits. The good life is a paradigm shift away, but we can’t get our minds off those alligators.” - Mike
Is it really all that crazy? On a personal level you find the smallest alligator and dispatch it first, and work your way on up from the smallest to the biggest. In my life I was surrounded by alligators each one with a level of debt attached to it. From a $500.00 credit card debt, up to a $7,500.00 truck loan, to a $75,000.00 mortgage. One by one the little alligators were paid off and vanquished, leaving more funds available to pay off the next larger alligator until one day even the alligator that was the size of a house was no longer. When does a house become a home? When you own 100% of it
5 years of living off of rice and beans plus the fish and wild game I bagged and my “Crazy” world was made sane. My paradigm has shifted thanks in part to Mike, his book, and this blog.
The challenge now is how do I protect my little bit of property from being lost as I’m going on 6 months of being unemployed and finances are getting tight. I can hold out for another year or so but after that it will become more and more interesting….
Econalmost,
Good question and I’ll pitch in my two cents worth.
To begin, I agree with you that rule changes are coming to kick the can on down the road. Think healthcare.
Government doesn’t change the questions, they change the answers.
Fiat currency will have to be dealt with as will our entire monetary system. World currency? Who really knows.
Stagflation and possibly hyper-stagflation will create a call from the public for government to take bold actions. And they will.
Fuel rationing in some manner is nearly inescapable.
As unemployment persists, and growing the population to grow tax collection is seen as no longer an option, immigration reform will be on the table. As my friend Doug says, “The lower the lifeboat sinks into the water, the fewer friends you have on board.”
New versions of WPA and CCC will be trotted out. Mandatory government service will be required.
Foreign debt holders will begin purchasing the best parts of the United States with dollars that would otherwise be worthless. Real estate sales will then be reported as robust.
These are a few of the things that I see coming down the pike at a pretty good clip.
How about this paradigm shift; All politics and special interests aside [yeah right ]
* We need another stimulus package - we can’t afford it.
*We need to overhaul healthcare -
we can’t afford it.
*We need to maintain 100,000 troops in Afghanistan indefinately.
We can’t afford it.
*We need to do many things but frankly we just can’t afford to.
That’s how I run my little part of the world. It’s a simple concept that our leaders should look into.
This has been an interesting couple of days, now I’m ready for some warmer weather.
I dunno.. Just how much money can the government borrow.. With the Fed buying treasury notes.. I believe they have a nice term, “Monetizing the debt”..
Really, who do we think is buying all the u.s. treasury notes at a rate lower than dollar depreciation.?? A little maybe, but how much are we “selling” now.??
WmA
LT,
Exactly, you are constrained by affordability and cannot exceed your limits; government can and has and will.
But more importantly, millions of Americans believe that there is no end to what government can provide with debt. And there is no end to what government will promise to provide with debt; and there you have a perfect union.
George,
You made the shift that was necessary to give you options and a whole lot of personal freedom. Bet you’re not considering going back huh?
Wma,
How much debt we can pile on before it brings down the house is still up in the air. We are in fact the largest debtor nation in the history of the planet. And, there are limits that printing money won’t solve.
Our National Debt now stands at just over $12 Trillion. Our esteemed representatives are once again in the process of raising the debt ceiling to over $14 Trillion before the Christmas recess. Why do you ask? Because they home most people wont notice at this time of year and also so they don’t have to raise the debt ceiling in an election year. In other words congress has reached it’s credit limit and they are just going to go out and find another credit card with a $2 Trillion line of credit.
http://apnews.myway.com/article/20091211/D9CHCOIG0.html
I was married to a woman that burned though money like our Federal Government does. I filed for a divorce!