Me and Mr. Obama; One of Us is Dead Wrong!
From time to time, I like to go back a year or so and revisit my writings and my predictions to see whether I’m providing you with chicken or feathers. The following are portions of a lengthy piece that I wrote in February of 2009, just one short year ago.
The news channels continue to debate the subject of the President’s bailout. Will it all work? If not, what parts will work? How will it help you? The short answers are, no, none, and forget it.
Until such time that we deal with the root cause of the illness, we will find no cure. The obvious quandary is that over the years we have created millions upon millions of the make-believe jobs.
The top job in the U.S. from a sheer numbers standpoint is that of a retail sales clerk. The second most popular is a cashier. This is not surprising for a country that depends on power shopping with credit cards as our main economic basis.
Shopping is currently, shall we say, having some issues. As we watch the inability to use a home as an ever increasing collateral source, collide with the hierarchy of actual needs, it becomes evident that our little game of borrow and shop is over. And many salesclerk and cashier jobs will also be over.
Retail and office space is now standing vacant. I reported months ago that the failure of commercial real estate would be the next major shoe to fall.
Can we avoid this unfortunate end to power shopping as a basis for our ongoing economy? No, it was never sustainable. Retail power shopping was merely supported by a mirror image of unsustainable borrowing.
The ripple effect of a failing retail sector will have far greater consequences than is being reported. The manufacturers, suppliers, landlords, tax base, transports, and communities at large will suffer mightily from the collapse of the frivolous retail trade that existed purely on the basis of ever increasing debt.
Government, however, doesn’t see it that way at all. They believe that since the public can no longer borrow money due to being totally tapped out, it is government’s obligation to borrow money from foreign governments and pass it out for pet projects that will further burden the already broke public.
Mr. Obama tells us five times per day that he inherited this excessive deficit. I point out that president Obama spent a whole lot of money campaigning to acquire that deficit.
The idea being conveyed by Obama is, “It ain’t my fault.” He talks about the deficit as if it were a very bad thing. His solution to getting us out of a very bad thing is to run an even greater deficit. Go figure.
So how is more debt going to get us out of the mess that we are in? The infusion of trillions in borrowed capital and ill considered guarantees is being promised as the silver bullet to produce growth, growth, growth, growth, growth and more growth upon which to collect taxes, taxes, taxes, taxes, and more taxes.
So what if the growth doesn’t materialize? Let’s reduce this thing to Mikeronomics for a moment. What if you bought a home with no money down on an adjustable rate mortgage and were counting on your wages going up at a greater rate than the increasing mortgage payment and your wages didn’t go up? What if your wages not only didn’t increase, but in fact decreased?
In the new fictional world of Micro-Obomics, you could have your home loan reduced in both principal and interest to fit your wages. But what if you lived in the real world where the exact sciences of math and physics dictated the outcome, rather than the current rule conjured up by the political science gang?
In this make believe world that is devoid of math and science, the U.S. has run deficits for as long as any of us can remember. In the very best economic years in the U.S., we haven’t been able to pay our bills. Therefore, we put the difference on the kids account because they don’t get to vote. We promised that growth will be so massive that it will eventually make up the difference in the necessary tax collection. That promise has been each and every year since 1970.
What would happen in this fictional world of mine where math and science rule, if the U.S. economy reached zenith and could no longer grow in real numbers? What if we spent Trillions and Trillions of borrowed dollars, put on a really big party, and no one showed up except those attending the free lunch? Then what?
As you know, I predicted many months ago that the U.S. has in fact reached economic zenith. I maintain that any future reported growth of GDP, when adjusted for increased debt, inflation, and per-capita share, will result in an actual decrease.
If I am correct, where will the money come from to support our growing cost of government? Where will the ever increasing population find viable work? Who will pay the interest on the debt? From where will the funding sources for Medicare, Social Security, pensions, and general welfare be derived? These are only a few of the problems that would occur nearly immediately if growth were to stop.
But wait, growth did stop, we are officially in recession and all of these terrible things are already rushing toward us.
Don’t worry about my ramblings though; President Obama doesn’t believe a word that I say. All he has to do is increase the debt and wait for the growth. Just as his predecessors did.
“It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.” Thomas Jefferson [end previous article].
That was my outlook one year ago and that is my outlook today.
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Government keeps trying to spend its way out of this because they have no choice. Our economic system must grow to survive, there is no way around that. If it continues to contract it will eventually collapse.
Our economic system is debt and interest based and it must grow so we can pay the interest on all of our loans.
It is really that simple. The only way out would be to peg the interest rate at zero. However, if we do that bankers can’t make any money. We all know that won’t happen.
The US Government can and did offer interest free loans during our distant past and it worked beautifully, but since things have been hijacked by banking interests we are stuck with our current system. Until the banks are out of the lending business, we have no choice but to continue to grow.
I highly recommend reading Ellen Brown’s Web of Debt. She does a great job of explaining why we are in this mess and how we can get out of it.
Greg,
Yep, we must grow; but can’t grow. Now that’s a problem isn’t it?
We need more oil, but can’t produce more oil.
We need more food on the planet, but can’t produce more food on the planet.
We need more clean fresh water, but can’t produce more clean fresh water.
We need more money in the system, but can’t pay back the interest on what is already in the system.
These are called physical limits; something that humans don’t know a thing about until they reach those limits.
To paraphrase Tennessee Ernie Ford, “another year older and deeper in debt”.
I don’t agree that the bankers are the problem, it is the dam*** politicians. They get so totally full of themselves and their notions of omnipotence that every notion becomes just another way to insure their legacy, especially if when they have their name on the bill. McCain-Feingold, for example.
A house cleaning is totally in order.
Clyde, Just a question.
I’m NOT letting the politicians off the hook, I never do, but…It is reported that Goldman Sachs is giving their CEO a one year BONUS of $100 Million. Do you believe that this is okay?
Mike,
I had to do a double no triple take when I saw this headline in the New York Times!!
“Huge Deficits May Alter U.S. Politics and Global Power”
http://www.nytimes.com/2010/02/02/us/politics/02deficit.html
I’m still in shock that someone at the NY Times can do 8th grade math and isn’t drinking the kool-aid.
Here is a sterling example of blatant government fraud.
Boeing makes the giant C-17 Globemaster III transport aircraft for our military. But the military says they have all they can use…and then some. However, Congress ordered more of these aircraft all the same because lots of folks who vote build military aircraft.
http://abcnews.go.com/Business/Economy/story?id=7282659&page=1
George #5
Wow, good find George. When the New York Times starts to agree with me, it getting really scary. Here’s a clip from the article link that George posted above.
“…buried deeper in the budget’s projections, is the one that really commands attention: By President Obama’s own optimistic projections, American deficits will not return to what are widely considered sustainable levels over the next 10 years.
“In fact, in 2019 and 2020 — years after Mr. Obama has left the political scene, even if he serves two terms — they start rising again sharply, to more than 5 percent of gross domestic product. His budget draws a picture of a nation that like many American homeowners simply cannot get above water.”
Mike,
And we all know the NY Times is going to paint as good a picture as it can for Obama. So I’m estimating that their figures are 1/2 of what Real World Physics and Math will show to be true.
Mie,
I assume you meant to say that you were NOT letting the politicians off the hook.
In my opinion, were it not for Barney Frank, Chris Dodd and others of a similar stipe, there would be no possibility for the Goldman-Sachs obscene bonus debacle. Banks are business just as are hardware stores - remember the Home Depot CEO buyout?
The politicians sell their soul to the highest bidder in exchange for legislation that enables such despicable activities. Stockholders generally applaude because their dividends reflect a similar rip off mentality.
The entire problem is a reflection of the culture. “Get yours before someone else gets his and yours too”.
The statement that “Our economic system must grow to survive”, is one most Americans buy into. Reasoning behind this is the fact that most Americans (or members of planet earth for that matter) do not understand how uncomfortably close we are to total resource depletion. And due to the fact that our consumption of all vital resources is growing exponentially, we are all feeling a false sense of security regarding the time tab;e involved with this depletion. And we are ignoring the limitations this collapse will place upon the inhabitants of our planet.
But, just as peak net energy will happen in the not too distant future (somewhere around 2025-2028), also the total elimination of all vital natural resources will too become extinct (many are already). And it is the growth at all cost, for any reason mentality that will lead us to our demise. Rather than stop the exponential, run away train we are on (and let the false economy collapse as it will anyway), attempt to utilize the remaining vital resources for future planning (which is too painful for most minds to handle), we just keep listening to “They”; and even though most realize that the god, “They” created the problems we face; these same folks will follow their god over the cliff; mostly because “They” are saying things that make us feel good or at least better. Damned be the truth.
So in essence, there is no way out, since the core problems cannot be tolerated in most all Americans minds. Simple? Yes. Helpful? Not a chance. -bb
Oh, I suspect we can expect what is left in our 401Ks etc to be taken over by Uncle Sugar. It will not save things but will buy the pigs more time to feed.
I understand that Treasury has issued an edict for comments with respect to this very issue. Of course, only positive comments will be received.
http://www.zerohedge.com/article/treasury-soliciting-your-feedback-regarding-proposed-annuitization-401k#attachments
I have been gradually drawing down my IRA for 4 years and will take the last of it out this year. The 10% penalty is a known quantity versus an unknowable future. I suspected 401K’s and IRA’s would be forced into Treasuries, or some other means of propping up the debt. Looks like I was right. Increased taxes are a certainty.
Pickdog # 11
Robert Kiyosaki’s best selling book, Rich Dad, Poor Dad, was much about ERISA, the Employee Retirement Income Security Act.
The ERISA act for all practical purposes moved employee pension money from a defined benefit plan (so much a month when you retired) to a defined contribution plan (put it the markets each month and let them work the magic. If there is anything left when you retire, take it out).
The act made Wall Street’s wildest dream actually come true…captive long term investors that had no idea of what they were doing.
Kiyosaki’s prediction was that when millions of Americans began withdrawing their funds for retirement income, the markets would collapse. Makes sense; but it looks now as if the feds are eying the loot!
Remember when George Bush wanted to put Social Security in the markets? Not that Wall Street has any influence.
Clyde,
I promise, this isn’t pick on Clyde day, but I have a good reason for re-asking this question. It is okay for the boards to award $100 million in bonuses to the CEO? Is it okay to pay a guy $210 Million severance after being asked to leave, as Home Depot did with Nardelli?
Mike,
OK, Mike, why it is not OK? I see very little difference between high bonus payments and high athlete contracts or politician perks. Excesses abound all around.
If the companies were privately owned, we would not even know such things were happening.
Clyde,
Thank you for playing along with me. You said, “Excesses abound all around.” Bingo!
I want to produce an article and get opinions on this very subject. Can America afford these excesses and have any but the super rich survive in the end?
I’ll whip up something in the next couple of days and we’ll have a great discussion.
Thanks again Clyde.
Clyde,
I agree that the politicians are a large part of the problem. But McCain- Feingold was one of the few things they’ve done right in recent memory. Until we have publicly financed campaigns and elections, we’re going to always have the best government money can buy. The recent decision by SCOTUS makes things even worse. We’re supposed to have government of, by and for the PEOPLE.
As far as banks are concerned, why do they only pay us 2 or 3 % on our deposits, but charge us 8 to 12 % or as high as 29% interest on loans or credit cards? GREED!
And they do it because they can. The corporations and moneyed class buy the politicians and the politicians do their bidding. They make the laws and design the system to benefit themselves.
But it only works if we play along.
Appreciate your imput, even though we may not always agree.
Best Regards,
wordherder
I don’t have any problem with an individual spending every dime he has for a political goal. Unions, publicly traded companies, and other non human entities should only disperse such funds after a vote and divided according to the expressed wishes of their members, shareholders. The small company behind the lawsuit was trying to make a well timed profit on an unflattering movie about HC. News Organizations are allowed to capitalize on political frenzy but apparently film companies and book publishers had some timing restrictions (now lifted). Money makes the Circus so the Clowns make money.
I’m sure these guys are breathing easier, http://www.herobuilders.com/08.htm
Hutch,
You said it right- individuals.
Corporations are not people, though according to the legal system they are.
In addition to public financing of campaigns, i’d like to see a few other changes:
duration of campaigns limited to one or two months prior to election
we can vote for candidate A, candidate B,
or none of the above, which would require a whole new set of candidates
ability to recall an elected representative- if they don’t serve the people, we kick them out of office
restriction from employment by any private firm which benefitted from policy decisions or legislation a legislator was involved in while in office
upon leaving office, legislator subject to review by non-partisan citizens review board, with no immunity for criminal or treasonous activity while in office
term limits across the board
Any thoughts folks?
wordherder
Wordherder,
I like the “none of the above” ballot provision, plus a severely limited, publicly funded campaign season with 2 terms maximum for Senators and 4 terms maximum for Representatives. No pensions. No benefits or perks beyond the same as other citizens.Total and immediate reporting of all lobbyist activity of any kind. Re callable by a majority vote of the electorate represented (actually this exists, I believe). After replacement, culpability should continue under the auspices of a court of law.
Campaign finance reform would have to be at the top of my list. It is the most important step that we could take.
Secondly, term limits are mandatory. When asked to continue unbounded as president, George Washington replied, “Two terms as president are enough for any man.” So why not other federal offices?
Robert Byrd, Senator from West Virginia, is well known as “the tallest hog at the trough.” He has been in the Senate since 1959, Fifty- One long years. The man is 92 YEARS OLD!
Our system is broken in many ways. Fixing it is not a job that we could expect the likes of Robert Byrd to help with; after all, he helped to break it.
I apologize, the film was made by Citizens United which is a “non profit” 501c. This means they don’t have to actually earn money to provide lucrative employment to their friends.
Well, now you’ve done it Hutch, unveiled the underlying secret for creating a 501-C non-profit…hire high paid friends until it’s no longer profitable!
Here’s an idea for true represenitive government and campaign reform. All representatives from the Town Council to the President of the United States, must be DRAFTED and will serve only 1 term. How’s that for campaign reform? Then we can focus of Bureaucracy Reform.
OK, on a more serious note as Mike often says “Figures Don’t Lie, But Liars Figure” Here’s a dozy that we all suspected but only now is our Government fessing up to the Truth. The Labor department will release on Feb. 5th the ‘Inconvenient Truth’ that is some how forgot to count 824,000 unemployed Americans during 2009. What will that do to the 2009 revised U3 and U6 Unemployment numbers. it will put the U6 Unemployment numbers equal to if not greater than Unemployment during parts of the Great Depression.
http://www.bloomberg.com/insight/birth-death-model.html
But remember the same Government says the recession is over. Hard to believe isn’t it?
George,,
I’m posting this up on today’s comments to be sure that everyone sees it. Once again, good find!