Thread: America's Predicament

June 10, 2010

America's Predicament

By Vasko Kohlmayer
26 Comments

America's public debt recently exceeded 13 trillion. This is more than 90 percent of the country's GDP.

Public debts of more than 60 percent of GDP are considered unhealthy. Public debts above 90 percent of GDP cause severe disruptions in the country's financial framework and the economy at large.

According to the Obama administration, America's public debt will exceed 100 percent of GDP in the next fiscal year. History shows that most countries whose debt exceeds this mark are rarely able to control it. This level of indebtedness usually leads to currency debasement.

There are a few historical examples whereby countries were able to contain debts of more than 100 percent of GDP. But in those instances, the debts were almost always contracted as a result of extraordinary one-time expenditures, usually war.

America's debt, on the other hand, is a result of decades of structural deficits. This means that we have grown accustomed to spending more than we can afford. If we want to solve our debt problem, we must slash spending and start running surpluses. The problem is that it may prove impossible to break the spending habit.

Our government is like a drug addict who cannot quit because the dope is too easy to get. Bonds are the dope of the American government. But the price of the dope will eventually rise, since low bond yields will not persist forever. When this happens, the addict will go into seizures. But he will not lie down and sweat it out. He will go on a rampage to get his fix. He will loot people's retirement accounts; he will confiscate their gold. Things will turn ugly.

It has long been impossible to cut anything in Washington. Every proposal for a reduction is met with hysteria from some special interest. The hysteria is then amplified by the media. There is wailing, there are tears. The final appeal is always made for the children. It always works. They will suffer, goes the refrain. What can politicians do? They back out while the rent-seekers lick their chops. In the meantime, the debt just keeps growing.

Many people thought Barack Obama would save America from its troubles. Unfortunately, they were wrong. When it comes to America's finances, the president is doing exactly the wrong thing. We are headed toward an abyss, and instead of braking, he has slammed down the accelerator. He is behaving like a perfect madman. And like Emperor Nero, Barack fiddles while the Treasury burns.

Paul McCartney thinks Obama is a very smart man. The president, however, does not seem to realize that one cannot borrow his way out of debt. Not even the American federal government can do that. The American government has more leeway than the rest, because the dollar is the world's reserve currency. But no one can defy the laws of finance forever. When the day of reckoning finally arrives, the dollar will collapse.

It would be wrong to think that America's debt problem has been caused Obama. Obama is not the root cause. He is merely a symptom. He could not do what he is doing if the ground had not been prepared beforehand. This was done by the decades of fiscal recklessness. The problem began long before Barry Soetoro started attending a madrassah in Indonesia.

Both parties are responsible. Do you still remember who started us down the never-ending road to bailoutville? That president even called himself a conservative. He was a good man, but he left a mess behind. He went about his saving work in the wrong way. He should never have tried to save capitalism from itself. Instead, he should have tried to save capitalism from government.

Like Bush, Obama does not mean any harm. He is convinced that what he is doing is good and right. He is just badly misguided -- too bad so many people fell for his pretty words. They thought Barack was a great leader, and they said he would lead us toward better days. Those prophets were wrong. Barack is leading us toward disaster. John McCain, however, would not have done much better; he would also be bailing out right and left. We have a problem in this country: Neither of the two major parties is any good.

Sir Paul told us that Barack knows what a library is. That's good. Barack should visit one and check out a book called Economics in One Lesson by Henry Hazlitt. Beautifully written and full of common sense, it is the best introduction to economics one can find. An average person can get through it in a few hours. Since Barack is so smart, he can do it even faster. If he read it and took it to heart, we would all be better off.

We should all read this book. It could help to set us straight. We conservatives have lost our way. We like to think of ourselves as heirs to the founders' legacy of limited government, but most of us do not realize what that implies. The founders' America had no Department of Education or Department of Commerce or Department of Labor or Department of Housing and Urban Development. In had almost none of today's countless federal departments, agencies, and boards that waste money and make our lives miserable. The founders' America had no income tax or corporate tax. The founders' America had no central bank. In the founders' America, the dollar was backed by precious metals. That is what limited government looks like.

The idea that we should go back to this kind of government would scandalize many present-day conservatives. They say things have moved on, and we need more government now. This is a lie straight from statism's darkest pit. Too bad so many of us have fallen for it. Today we are reaping the fruit of that error: an oppressive government, debts that cannot be paid, a rapacious political class, a disintegrating currency, and a smug president who makes bad things worse.

http://www.americanthinker.com/2010/06/ ... ament.html

We conservatives have lost our way. We like to think of ourselves as heirs to the founders' legacy of limited government, but most of us do not realize what that implies. The founders' America had no Department of Education or Department of Commerce or Department of Labor or Department of Housing and Urban Development. In had almost none of today's countless federal departments, agencies, and boards that waste money and make our lives miserable. The founders' America had no income tax or corporate tax. The founders' America had no central bank. In the founders' America, the dollar was backed by precious metals. That is what limited government looks like.

The idea that we should go back to this kind of government would scandalize many present-day conservatives. They say things have moved on, and we need more government now. This is a lie straight from statism's darkest pit. Too bad so many of us have fallen for it. Today we are reaping the fruit of that error: an oppressive government, debts that cannot be paid, a rapacious political class, a disintegrating currency, and a smug president who makes bad things worse.

Ever wonder why our government is so big and far removed from the Constitution and the will of the people?

Follow the dollar. It dictates oppression. There is not money if there is no debt in the perfect Keynesian world. When the private sphere (the citizens and private business) have had their fill with taking on debt, the economy slumps or crashes. The government must then step up to the plate and take on debt in order to stimulate the economy and to get people back into the market place of debt. (of course the weaker members need to be fleeced first. Collateral damage you say,... tough love says the Keynesian economists.)

The problem is the money borrowed from the central bank has to be paid back with interest. The people have to pay more and more into the government in order to meet the debt obligations. The government must grow and must demand more from the people to pay for the public growth. The bigger the beast, the bigger the debt, the more prosperous(?) we become. But that prosperity comes attached with stipulations........sell your freedoms and liberties,....hock your Constitution. The borrower IS slave to the lender.

Health Care Reform.............slush fund for more government and more debt.

Carbon Tax.........more money for more government for more debt. (feeling prosperous yet?)

Illegal immigration..........more demand for more government means more debt. Remember more debt is good for stimulating the economy. Keynesian economics demands more, so more bodies are needed to either take on private debt, or to demand public services,.....more debt for you......either way. It is a win, win.

Sort of like a Ponzi scheme run out of the back room of a pawn shop with nothing but felons and politicians for employees............feeling lucky, punk?

If I had to bet..........I would bet on the house.

Like the proverbial carrot on a stick........that carrot is debt. With the Keynesian system the masses are taught to go after debt, use OPM, other people's money. (this works well for the bankers and the big government socialists or progressives or commies,....paint them which ever color you wish......just stay within the lines. Beings the money is hot off the presses, and the warehouse is filled with ink and paper, there is plenty to buy politicians and government hacks.

With a standard for money, people chase the standard,...the standard being set, places pressure on the savings markets. You can't just run to the back of the pawn shop and agree to terms for your freedoms being placed on hock and the printing press being fired up for your fix. JMO