UNDERSTANDING AMERICA'S FINANCIAL CRISES
PART 3

By Michael S. Coffman, Ph.D. and Kristie Pelletier
May 24, 2011
NewsWithViews.com
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Collapsing the Global Economy & Demagoguing Solutions

Globalists have been actively working for decades to create a single financial system and currency for the world. But first, they had to create economic chaos in order for the citizens of various nations, especially the United States, to be willing to abandon their national currencies. Has that day arrived?

Like falling dominos, the states within the European Union (EU) are failing financially, one by one. The economies of Greece, Ireland, and Portugal have already been bailed out by the EU and the International Monetary Fund (IMF). Spain is teetering on the edge. Because of its size, analysts have concluded that Spain is too big to be saved by outside intervention. Spain’s failure would cause an unstoppable domino effect; first within the EU, then the U.S. and the world.

At the same time that Europe has been facing financial disaster, the spending policies of Presidents G.W. Bush and Obama have more than doubled the U.S. national debt from $5.7 trillion in 2000 to $14.3 trillion in mid-2011. Why? Interest on the National Debt is expected to top $430 billion for 2011. State unfunded liabilities for public sector pension plans could reach $3 trillion. Social Security, Medicare and Prescription Drug unfunded liabilities total $113.6 trillion by April 2011. It is simply unsustainable.

In the two and a half years he has been in office, Obama has racked up a deficit that nearly equals the combined debt created by all the presidents up to G.W. Bush. His initial 2012 budget continues piling up debt at rates that will double the debt to $26 trillion in 10 years. Along with this debt, the Federal Reserve (Fed) is printing trillions of dollars out of thin air (QE1 & QE2). This is not only irresponsible, it is insanely irresponsible.

The great concern is that this will result in high inflation, perhaps even hyperinflation. It is already happening. We are being told that the rate of inflation only is only 2.5 percent. Yet, every day as we walk into the supermarket or gas station we get hit again with skyrocketing prices. If you think something is wrong, it is. The way of calculating the inflation rate, or Consumer Price Index, was changed in 1980 and again in 1990. It no longer includes such mundane things as food or gasoline prices.

If the rate of inflation was calculated like it was before 1980, it would be a whopping 10.2 percent! That means anything less than a 10.2 percent raise in wages is a pay cut—except the average person doesn’t know it. Social Security recipients will lose 10.2 percent of their benefits this year because they got no cost of living adjustment at all. The U.S. dollar is being devalued before our eyes, yet it is being obscured by smoke and mirrors. At least a part of the skyrocketing gas prices is due to the devaluing of the dollar because of inflation.

The trillions of dollars printed out of thin air by the Fed in QE1 and QE2 were supposed to make money available to businesses and the mortgage market. They failed. However, they did cause the stock market to soar and the banks receiving this cheap money reaped record profits from investments, many of them overseas. Once again the banks profit at the citizen’s expense. On the positive side, if it could be labeled positive, because the money didn’t get into the hands of citizen’s, the potential hyperinflation it could have caused did not happen—yet. Economist and consultant John Williams warns it could happen at any time, however.

President Obama and his tax and spend progressives are hell-bent on keep up the spending spree. Obama’s original 2012 budget kept his bloated federal spending at about $3.7 trillion, the same as 2011. Although he claimed he was doing all he could to reign in the deficit, the 2011-2012 budgets were 23 percent higher than the last Bush budget of $3.0 trillion in 2008. Amazingly, Obama’s budget did not touch entitlement spending at all—something that must be done if there is any hope of reducing the huge deficit.

Not to worry, however. Obama claimed the 2012 deficit would be only $1.1 trillion compared to the $1.65 trillion deficit in 2011. As with all of his rosy projections, Obama accomplishes this amazing feat of deficit reduction by smoke and mirrors. He claims that all of his stimulus efforts will finally trigger the long-awaited economic recovery by building into the budget huge revenue increases resulting from a booming economy. Reality, however, suggests just the opposite; a stagnate or plummeting economy accompanied by high inflation, perhaps hyperinflation.

Possible Solutions Demagogued

Rep. Paul Ryan (R-WI) introduced the Republican’s House budget blueprint on April 5 which called for drastic changes in government spending—including entitlements. Unlike the smoke and mirrors in the Obama budget, Ryan’s budget had real cuts that would carve out between $4 and $5 trillion over the next 10 years. Ryan called the blueprint a starting point for bipartisan negotiations.

Rather than making a counter offer, however, progressive Democrats immediately demagogued the Ryan blueprint with the politics of fear. They have used this strategy successfully for decades. Obama proclaimed the Ryan plan would “end Medicare as we know itâ€