Thread: Return To What? "where do we return to?"

Return To What?

Peter Souleles
Sydney, Australia
Oct 26, 2009

"Sacred cows must be slaughtered, especially if they are too fat to walk on their own. Cash for clunkers, stimulus cheques, tax credits for home buyers, and rescue packages for auto manufacturers are nothing more than the equivalent of burning ones furniture to keep warm."

Let me tell you up front and very clearly that the recession is not over until your wealth, income and purchasing power have ALL been restored (on a sustainable basis) to where they were before the Global Financial Crisis. Forget the other definitions. Until we return to that level of "affluence" there can be no end to the recession. The problem however is that yesterday's level of affluence was largely a series of dovetailing mirages. Thus the mirages were not only transient but also undermined whatever strengths there were prior to that period of "hedonistic" unbridled capitalist aberrations.

So what were these dovetailing mirages? YES we can keep fighting wars forever, YES cheap interest can cure all economic ills, YES we can use our homes as ATMs, YES we can become rich by flipping condos, YES we can increase government expenditure and still reduce taxes, YES we can print money and still remain the reserve currency of the world, and finally, YES we can spend our way out of trouble. This would all sound insanely funny had the outcomes not been so devastatingly sad.



What is certain is that there will be no return to past glories. The USA is like an Olympic athlete who 60 years after his victory (WWII) has been found guilty of having taken metabolic steroids and is stripped of his medals. The athlete realises the error of his ways and vows a comeback. The problem is the body of the athlete is no longer what it was as the ravages of time and loose living have turned muscle into fat and sinews into cellulite. The USA today is faced with an unpayable and one day unserviceable government and private debt, a disembowelled manufacturing sector, a less than prime demographic trajectory and above all government structures that place power and vested interests above people and democracy. If the balance sheet of the USA is the US dollar then it too is clearly sub-prime.

Lies unfortunately, can last two or three generations and it is only history that eventually catches up to them to punish them. The lie of money printing, the closing of the gold window and the subsequent arrogance of the US in shoving this increasingly worthless paper down the collective throats of the world was topped off by a hungry and gullible world that until recently mistook the alchemy as an elixir of eternal prosperity. At least other regions of the world were able to create infrastructure, manufacturing capacity and a better standard of living and this is the reason why many accepted these pieces of paper with images of dead presidents. Other nations were convinced to spend their dead presidents building fantasies in the deserts of the Middle East.

A return to yesterday is out of the question. Whilst the Chinese make noises about the value of their US dollar holdings, they are also fully aware that they have the US squirming in a corner regarding its immediate reputation and choices. They are also happy to see the US continuing to bleed whilst trying to maintain the Empire through force rather than trade and clean diplomacy. Furthermore, the US is highly constrained about making noises in relation to the manipulation of the Yuan and other issues. The weakness of China on the other hand is its huge population that needs to work so as to survive and thrive, and any disruption to this process can cause incalculable political unrest. China at least has the sense to understand that job security is preferable to Social Security.

The US Government is also doing its own squeezing. Despite the increasingly desperate situation of its various States, the government refuses to have them "bailed-out". The purpose of this is not only to exhibit fiscal rectitude to the world but to also force the States to make structural changes that it itself is not willing to adopt.

As the USA's affluence and influence comes under threat there is a danger that steps will be taken by the elite to concentrate in their hands whatever assets and power they can. Legislation, law enforcement and the courts will close ranks behind them. This will be a retrograde development and will be in stark contrast to the principles and aspirations of the founding fathers. In fact this is the pivot upon which the USA's fortunes rest. If the US is to re-invent itself the lead must come from high minded money and power that have the means to initiate change without the further inefficiencies of a bloated government structure. Imagine if the cost of treating lung cancer and Type 2 diabetes was cast upon the top 5% of income earners? You can bet your last dollar that the influence of the rich upon the legislature would pretty soon see changes to laws relating to the availability of cigarettes as well as to the fat, sugar and salt content of a whole range of foods.

This is the reason why reform of the Medicare system cannot be truly entertained without the reform of lifestyles, particularly in the area of eating, exercise and drug consumption.

Sacred cows must be slaughtered, especially if they are too fat to walk on their own. Cash for clunkers, stimulus cheques, tax credits for home buyers, and rescue packages for auto manufacturers are nothing more than the equivalent of burning ones furniture to keep warm. If your boat is sinking and you are in the water, the last thing you do is try to hold onto your baggage. The baggage of course is a metaphor for "yesterday's fantasies".

In the meantime Sheila Bair closes 2-3 banks virtually every Friday afternoon. In fact it perplexes me that some betting agency does not offer people the opportunity to bet on which bank will be the next to bite the dust. The frogs in the slowly simmering pot however think they are in a jacuzzi. But then one Friday, banks will start to close and depositors will receive only 90 or 95% of their deposits back. The truth is that the FDIC would love to cull ALL deposits with a one-off impost of say 5% but is probably fearful of being painted as another Argentina and creating panic.

The battler who has no lobbyist in Washington but who has his children in Iraq and Afghanistan is between a rock and a hard place. Perhaps if the top 1% were also required to supply soldiers to the "cause" they would see and do things differently. When the political system has become nothing more than a manipulative and opaque duopoly what hope is there for democracy and the future?

I therefore close with three suggestions which will give people a louder voice:

(a) All corporations engaging lobbyists must contribute an equal amount to a fund which will allow "the little people" the opportunity to also engage their lobbyists and argue their causes both face to face with their elected representatives and in the media.

(b) The next elections should have a third choice, namely, the right to tick a box which says, "I do not wish to vote for either of the candidates as neither of their parties has served the interests of this nation."

(c) Finally, a return to honest money as the present dishonest currencies will lead to increasingly dishonest transactions and outcomes.

In the meantime we will all remain hopeful that some catalyst (perhaps a Ron Paul or a Peter Schiff) will bring the US out of its destructive death spiral before it ends up like some socialist/communist style mutation that is relegated to the annals of greatness. Only two things are certain. Firstly, the better the quality of the democracy, the better will be the outcomes of the nation. Secondly, financial and economic solutions must have philosophical underpinnings that are enlightened. This is where we need to return to.

October, 2009
Peter Souleles
email: psouleles@hotmail.com
Sydney, Australia

http://www.321gold.com/editorials/soule ... 02609.html

There is a cure to the death spiral we're in and it requires 5 simple policy changes:

1. stop illegal immigration

2. pass the FairTax

3. protect our trade

4. legalize/regulate/tax the illegal drug trade

5. drill baby drill