Third Party & Independents Archives

David

Entitlements. Need we say more?

Look at your charts.

In 1965 we spent 27% on entitlements. Now it is 54%.

We will be spending 25% of our entire GDP on SS, Medicare and Medicaid. That is more than the TOTAL Federal budget.

We have to address entitlements. Nothing else really matters. We can control ALL the other spending. We can cut defense spending to zero. We can close all the parks. And we still cannot solve the problem unless we can control entitlements.

We will probably have to ration health care at some point. Let’s be smart about it. Everybody dies eventually. How much is one more year worth?

BTW - we really got no place to go. The U.S. is relatively well off re entitlements. Our ratios are better than other industrial countries. The whole world is in this swamp. You best bet it to head for the hills, without a phone and when the Lord calls, just go without making trouble.

Posted by: Jack at April 10, 2006 11:09 PM

I am not an economist, but I knew there had to be some correlation between the economy and the growing deficit, and that it wasn’t good.

Thanks for the info.

Posted by: womanmarine at April 10, 2006 11:10 PM

It’s just this trend that we’ve been seeing since the 70’s that prompted Harry Chapin to write the song ‘Danceband on the Titanic’. I recommend everyone get a hold of a copy and check it out…

Posted by: Rhinehold at April 10, 2006 11:26 PM

Jack:

I never can tell when you are being honest in your opinions or trying to ruffle feathers.

You post the most outrageous things.

We have to address entitlements. Nothing else really matters.

How much is one more year worth?

You best bet it to head for the hills, without a phone and when the Lord calls, just go without making trouble.

What a load of crap, probably one of the worst things I’ve seen you post.

Posted by: womanmarine at April 10, 2006 11:27 PM

Jack, your one sided answer is not quite as bad as doing nothing, but close. Your answer is to cut entitlements. Cutting entitlements can be one part of the answer. But, there are many other actions that must be taken as Mr. Walker pointed out. He stated unequivocally that NOT allowing the tax cuts to sunset is as grave an action as the passing of the Rx drug plan. Remember, Jack, Walker is talking in terms of present value dollars. The one dollar cut in tax today results in 400% loss in balancing revenues for the future obligation/revenue equation 20 years from now.

The goal is to preserve quality of life in America. Your solution of just cutting entitlements simply brings the future recession and loss of quality of life to the present post haste. He talked about reinstating pay-go rules for tax cuts and spending, he talked about taking radical steps to move Americans to fund their own futures in part, making the sacrifices today that are needed to insure quality of life tomorrow.

Yes, there is no question some entitlement cuts will have to be born now, or later. And they will be far more painful and injurious to our economy later. But, cutting entitlements can be surgical causing least pain.

A good beginning would be to eliminate Soc Sec benefits for the very well off. Their FICA taxes will be an investment in their children’s future for living in a society which has not fallen prey to recession, depression, or revolution against the wealthy. The wealthy should consider it an insurance policy for their kids safety walking the future streets of America.

There is no question that estate taxes must be adjusted and kept in place to insure against accumulation of wealth into so few hands that it results in seismic losses of consumerism in the future. A great many expensive programs cut today will yield much larger savings in the future like NASA spending. Joint space endeavors with other nations and shared costs must become the rule. We cannot afford to fund an independent space program.

World cop initiatives which have already cost us a half trillion in Iraq, cannot remain our foreign policy position if we want to salvage our economic future.

Tax deductions of all kinds constitute a huge opportunity cost in future dollar value. They need to be reviewed and adjusted downward.

The simple answer of cutting entitlements alone is just hastening the future loss of quality of life to become present. Cut entitlements, but, progressively and surgically, and along side the many other measures listed above, and more. Then, and only then, will politicians have a chance of surviving reelection challenges while at the same time seriously and responsibly addressing our future path of economic calamity.

Stop looking at the problem from Republican eyes, and start looking at it from a parent’s eyes, and a grandparent’s eyes. The Republican answer is as woefully inadequate as the Democrats. Saving our economic future will require sacrifice by all, today, and in small but progressive annual measures. It is a math problem in the end, not a political philosophy problem. Take the partisan blinders off and open yourself to the realm of many steps that can be taken from increasing taxes, cutting entitlements, ending no bid contracts, ending pork spending, ending unlimited political spending, educating the public toward savings and rewarding them for it, and make investemnts and savings through employers truly portable for life. These measures and more together present a math solution which carries with it hope.

Simple singular approach solutions like increase taxes or cut entitlements will fail politically, and therefore, will fail the nation and her future, because mathematically, they are woefully insufficient solutions.

Posted by: David R. Remer at April 10, 2006 11:40 PM

Rhinehold, Chapin is one of my favorites. It’s not hard for bright folks to read the handwriting on the wall. What’s hard is getting everyone else to slow down, read it, and understand it too!

Posted by: David R. Remer at April 10, 2006 11:46 PM

David good article. Even better follow-up to Jack.
You wrote:
“The Republican answer is as woefully inadequate as the Democrats.”

This however seems a bit unfair to me. All Democrats are not the same. Some have great ideas and have proven themselves to be serious and sincere on the topic of fiscal responsibility.
Feingold is one such Democrat — and he is a true Liberal as well.

Posted by: Adrienne at April 11, 2006 12:06 AM

Adrienne, the Democrats left this nation with over 5 Trillion dollars in national debt in the early 1990’s and if they had their way, it would have grown much higher. Newt’s Republicans brought Clinton around, and halted that climb by 2000.

So, I say to you the same as I said to Jack, take the partisan blinders off and address the math. Follow the link in the article, read what Walker has to say, pull out your calculator and crunch a few numbers, and realize the politicians en masse have brought us here, and they are as yet unwilling to act to reverse this course of the Titanic.

I respect Feingold on the debt, and I respect McCain on the debt. But they are ineffective. They are not turning the wheel. To turn the wheel to avoid the berg will require a mass layoff of incumbents, forcing politicians to equate their reelectability with fixing our nation’s broken rudder. Allowing incumbents to return simply rewards their short sighted political greed for reelection.

Posted by: David R. Remer at April 11, 2006 12:16 AM

David R. Remer wrote: [David Walker said]: America is on a path to depression and bankruptcy, and the politicians to date, refuse to act to prevent it.

I hope not, but it is not hard to fathom. Not at all. Not if you consider the growing number of pressing problems that congress talks about all the time, but never resolves. These many pressing problems certainly won’t make recovery from the next recession (which occur every 2 to 11 years for the last 46 years) easy. Sadly, it is easy to see how it could easily turn into the next Great Depression (or worse).

Mr. Walker said, the public has not been educated to accept responsibility for the viability of our nation’s future.

Sad, but true. They are lazily slumbering or looking for a handout.

Education is the first step to understanding the human factor (laziness) that fuels corruption, and the right mix of the six (6) fundamental components needed to maintain a healthy society. It requires the proper mix of Power, Education, Transparency, Accountability, and Responsibility. Otherwise, Corruption prevails.

[David Walker said]: The bottom line I took from his speech is this. If you can acquire great wealth over the next 20 to 30 years, do it.

I’m not sure we have that much time. Neither do several other economists, such as Harry S. Dent, who predicts a depression starting about 2010, and lasting for a decade or longer.

• Looking at historical norms, %Debt to GDP has never been higher since WWII.
• National %Debt to GDP is 68% (up from 33% in 1980)
• The $8.4 trillion National Debt (adjusted for inflation) has never been higher (true, there has been growth in GDP too, but we can ‘t grow enough to outgrow the debt).
• The National Debt would take 140 years to pay down if we started (now) paying back $1 billion per day, and stopped borrowing $1 billion per day. But we can’t (or won’t). The debt is growing by over $2 billion per day;
• The size of the government has never been higher. There are more jobs in government than all of manufacturing.
• Median incomes have been falling for 6 consecutive years.
• Foreclosures have been climbing for the last 14 consecutive months.
• interest rates are climbing.
• inflation is climbing.
• energy vulnerability; fuel prices are rising fast.
• the trade deficits have never been higher.
• foreign competition has never been stronger;
• entitlement systems are in trouble; Social Security is $12.8 trillion in the hole; Medicare is unknown trillions in the hole;
• the PBGC and pensions are over $450 in the hole;
• The amount of wealth belonging to the wealthiest top 1% of the population has never been higher since the Great Depression of 1929.
• And, foreign competition has never been higher (and increasingly better educated). Global Corporatism has never been higher.
• The troubled entitlement systems and dependency on government has never been worse.

Posted by: d.a.n at April 11, 2006 12:27 AM

I agree with all you said but this call for a third party is asinine. You work with the Government you have and it is clear the present Republican one is full of idiots.

The priority is to replace the GOP Majority. Vote Democrat. To do anything else is to support Bush.

Posted by: Aldous at April 11, 2006 12:49 AM

D.a.n, the quote at the beginning of your comment is mine, not Walkers.

Also, “The bottom line I took from his speech is this. If you can acquire great wealth over the next 20 to 30 years, do it.” is also my quote as indicated, not Walkers.

Where Walker is quoted or summarized I say so explicitly.

It could come as soon as 2010, but, Walker sees the crest of baby boom retirement wave in 2020 as the primary trigger and if I recall him correctly, that point in time when our obligations exceed our revenue capacity by enormous sums.

Posted by: David R. Remer at April 11, 2006 12:53 AM

Screw incumbent Democrats, Aldous, they haven’t learned their lesson yet, either. By all means vote Democratic if you wish but, don’t vote for a Democratic incumbent if their record reflects they are part of the problem instead of the solution. In fact, if your incumbent hasn’t already stirred up tremendous controversy trying to put Congress on the right track, the odds are they don’t deserve to be reelected. So, if you don’t know where your incumbent stands on these issues, they haven’t been working to make the changes necessary, and you are safe voting them out of office and doing your country and her children the best of all possible favors.

Posted by: David R. Remer at April 11, 2006 12:56 AM

I agree with all you said but this call for a third party is asinine. You work with the Government you have and it is clear the present Republican one is full of idiots.

The priority is to replace the GOP Majority. Vote Democrat. To do anything else is to support Bush.

The republicans are already using that angle. Sounds like an election year.

http://www.foxnews.com/story/0,2933,191253,00.html

Posted by: Amani at April 11, 2006 01:42 AM

Adrienne, the Democrats left this nation with over 5 Trillion dollars in national debt in the early 1990’s and if they had their way, it would have grown much higher.

Bollocks! Clinton ran Budget Surpluses for the last 7 of his 8 years, and actually managed to Pay Down The National Debt in two of the eight!

Now, I’m going to post some Links to some very informative Graphs here, but since the WatchBlog LinkNazi Paranoiabot will kill the entire post if I list more than *two*, you will have to copy-and-paste everything to the right of “http://” into your browser Address-Bar:

img.photobucket.com/albums/v11/fredcdobbs/USNationalDebt2.gif

img.photobucket.com/albums/v11/fredcdobbs/USNationalDebt1.gif

img.photobucket.com/albums/v11/fredcdobbs/PresidentialYearlyAverage.jpg

img.photobucket.com/albums/v11/fredcdobbs/WhiteHouse1.jpg

img.photobucket.com/albums/v11/fredcdobbs/RevenuesVSExpenditures.gif

img.photobucket.com/albums/v11/fredcdobbs/BurLabStat2.jpg

img.photobucket.com/albums/v11/fredcdobbs/BurLabStat1.jpg

img.photobucket.com/albums/v11/fredcdobbs/ClintonA.gif

img.photobucket.com/albums/v11/fredcdobbs/ClintonB.gif

img.photobucket.com/albums/v11/fredcdobbs/BushSr.gif

img.photobucket.com/albums/v11/fredcdobbs/BushSrB.gif

img.photobucket.com/albums/v11/fredcdobbs/BushJrA.gif

img.photobucket.com/albums/v11/fredcdobbs/BushJrB.gif

Any serious analysis of these graphs, which come from such sources as the Bureau of Labour Statistics, the White House, and the Treasury Department, will reveal the Truth to you: Clinton Good - Bush Bad; Democrats Good - Republicans Bad.

And that is throughout history, mind you! From Hoover vs. F.D.R. to Clinton vs. The Bushes: the economy does better under Democrats than it does under Republicans.

Imagine that.

Posted by: Betty Burke at April 11, 2006 02:10 AM

I agree with Jack that entitlements need to be addressed. You cannot look at those charts and not conclude that. It is interesting to note that social security is flat. It isn’t something that needs to be “fixed”.

An interesting number relationship to look at would be the cost of healthcare as a percent of GDP. You will find that even though utilization has remained relatively constant, costs have risen well above other CPI factors.

What does this mean? Record profits for the Health and Insurance industries. Follow the money and you begin to recognize who is screwing who. I think research is something that should be promoted, but first you take care of those that need treatment.
Rationing of Healthcare? It has to be, even in the private sector.

Nationalizing Healthcare is the only real solution that offers to resolve this profiteering with out screwing over the general population. It can be done by making providing basic healthcare as defined by some moving medical definition, a cost of being in the healthcare business. If you can also finance a privately funded,with out cost shifting, higher end service, more power to you. Real consequences for malpractice and fraud, and incentives to also develop new technology.

Then you’d have true free market conditions in Healthcare. Today we have a fraud based, cost shifting, profit lead instead of medically responsible, boondogle-like mix of private and public monies.

Massachusetts has begun a program that may well be a national model, that keeps its in the private sector.

Posted by: gergle at April 11, 2006 04:35 AM

If you can’t amass great wealth, consider raising your children in another country whose economic future is not a sinking ship like that of the United States.

Not that easy, David. If the US goes down, the rest of the world goes with it. Everything’s connected. And that’s why Bush is counting on China not to pull the plug on us by calling in our debts to them.

Jack, if Republicans were serious about reforming entitlements like Social Security, they wouldn’t have insisted on the private accounts which are revenue neutral (minus the $2 tillion initial expense). They would have proposed something that actually reduced the cost of entitlements.

Posted by: American Pundit at April 11, 2006 04:57 AM

gergle:

I have reservations about the Massachusetts health proposal because I haven’t heard the specifics of what financial benefits will be available to subsidize insurance costs paid by people who get partially subsidized insurance through work.

While I am sympathetic to the plight of the uninsured, as someone who paid over $200 a month for insurance through work, I am leary of giving insurance to everyone else for free. I believe they propose some aid to persons with job related health coverage, but it the heat of political debate and economic realities, my group is likely to be the first excluded to save money. If that is the case, this program won’t be different from any of the previously proposed give-away programs to insure the poor.

Posted by: goodkingned at April 11, 2006 04:59 AM

It isn’t just the uninsured getting screwed,Ned, it’s everyone. As long as you see it as a them or me problem, you are only helping the thieves operate.

I’m not sure Massachusetts Plan will work, either, no plan will work if not executed properly. This at least. appears to be a step in a sane direction.

Posted by: gergle at April 11, 2006 05:55 AM

Jack, if we can control all of this spending (parks, defense, etc.) how come we are not doing it?

I agree completely with David here. It seems my viewpoint does not differ at all here.

Something I would like to add though, my generation (currently still in school) will most likely pay all the way for social security, but not get it. I have a very strong feeling about this. It is only a prediction, but we are now basically giving the government money to fuel its own problem.

I am hoping that in the 2008 election that things like this finally spark up in the American mind. People have to realize the danger that America is headed in during the next decade.

I also would like to remind everyone, that despite how much I do not like Clinton, he balanced the budget. Bush, well, didn’t.

Posted by: Ethan Poole at April 11, 2006 07:18 AM

I respect Feingold on the debt, and I respect McCain on the debt. But they are ineffective. They are not turning the wheel. To turn the wheel to avoid the berg will require a mass layoff of incumbents, forcing politicians to equate their reelectability with fixing our nation’s broken rudder. Allowing incumbents to return simply rewards their short sighted political greed for reelection.

Yes, but we need to make sure the people running against them are willing to do something about the debt. We seem to have failed at this too.

Posted by: TheTraveler at April 11, 2006 07:49 AM

D.a.n, the quote at the beginning of your comment is mine, not Walker’s.

Ooops. I am sorry. I really confused who said what.

It could come as soon as 2010, but, Walker sees the crest of baby boom retirement wave in 2020 as the primary trigger and if I recall him correctly, that point in time when our obligations exceed our revenue capacity by enormous sums.

Well, I hope it never happens, and we have to do something very soon to stop the decay. But it is looking more and more inevitable. Our many ignored problems just keep growing worse and worse, making it hard to see how it can’t end badly.

The thing is, when things go bad, they have a strange way of accelerating. Bad feeds more bad. Our nation and economy is large, but not invincible.

If it wasn’t such a sad and serious topic, I’d say we should start a pool. But, we don’t want to fuel a self-fullfilling prophecy.

We might make to 2026 or 2036, and it is amazing how long it takes things to play-out.

Ofcourse, no one knows, which is why the current policy of “(1)spend, (2)borrow, (3)print-money, (4)return to step (1)” seems even more irresponsible. But, if I had to guess, we will not make it to 2026 or 2036. My guess is that the following factors will be the catalyst that triggers a total economic melt-down:

It will eventually catch up with us.
There will be consequences.
There are dozens of factors , but the biggest five factors will be the following:
_______________

• [1] FISCAL and MORAL BANKRUPTCY: $8.4 National Debt and $40.2 total nation-wide debt, decreasing options, lost opportunities, falling dollar (not backed up by real value), potential inflation, trade deficits, and the failure stop the debt from growing ever larger. Also, the PBGC and pensions are $1.6 trillion in the hole.


• [2] GENERATIONAL STORM: 77 million aging baby boomers (that all vote), making less, spending less, pay less tax, expecting to draw from already troubled Social Security, Medicare, Medicaid, & welfare; while Social Security is currently $12.8 trillion in the hole now, these entitlement problems could culminate since Medicare, Medicaid, and Welfare are already in huge trouble, now;
  
• [3] ENTITLEMENT

SHORTFALLS: The looming Social Security shortfalls are hard to ignore, but Medicare, Medicaid, & welfare deficits and short falls are already here. And in time, the decreasing number of tax-payers per entitlement recipient will only get worse. We can’t possibly grow, tax, spend, or immigrate enough to change that.
[4] LIMITED GROWTH & INCREASING FOREIGN COMPETITION: The limited capacity for growth due to declining quality of education, a generally less educated population failing to develop new technologies, coupled with a steady increase of foreign competition.

• [5] ENERGY VULNERABILITY: Of all the responsible, insightful things government could have done, bought-and-paid-for incumbent politicians failed miserably to research and foster alternate energy sources, more energy efficient homes, automobiles, etc.

Posted by: d.a.n at April 11, 2006 09:56 AM

I see this as a money making situation. The problems others create provide great financial opportunities for anyone who is able to seize them.

Of course, it is because most people will be in financial trouble that this holds true, but at least it’s a (small) bright side.

Posted by: Zeek at April 11, 2006 09:56 AM

David
“The priority is to replace the GOP Majority. Vote Democrat. To do anything else is to support Bush”

“reveal the Truth to you: Clinton Good - Bush Bad; Democrats Good - Republicans Bad”

I think these quotes, and the exact opposite of each, pretty much sums up why “vote out all incumbents” will never be successful. We are a divided nation, one where party has become more important than country.

While I’m sure our country will go the way Mr. Walker has expressed and I will not sit back and do nothing.
Our country deserves better and we Americans deserve better.
Give Washington DC a flush and lets start a new chapter with new characters. The path we are on now is not working so what do we have to lose?
In 06 and 08, I will not vote for one incumbent.

Posted by: kctim at April 11, 2006 09:59 AM

Zeek,

True. Some wealthy will get wealthier.
Land and hard assets are usually sold off cheap.
It’s really a shame to see people foreclosed on, but voters really have themselves to blame for all of it. This sort of pain and misery is necessary if we are to ever learn.

I’m preparing now … paid off the house and all loans (zero debt), diversified investments, and will liquidate quickly and buy hard assets, such as you suggested above (real-estate), before losing a huge majority of it as many did in 1999 to 2002.

There is one more silver lining.
When inflation grows out of control, people’s debt ( $40.2 trillion nation wide ) will practically disappear. Unfortunately, so will their savings, pensions, stocks, and bonds.

BTW, the PBGC and pensions are already $450 billion in the hole now.

A war is brewing.
A generational storm.
Those paying into Social Security and Medicare their entire life are not going to be happy when they denied their entitlements, but there is no way to get around the simple math. We have massive debt. We can’t grow, print money, borrow, or immigrate enough to solve the problem. Spending cuts will occur whether anyone likes it or not, because the money will simply not exist. You can’t get blood out of a turnip. They are screwed, and we are already bankrupt, but simply don’t realize it or refuse to admit it.

As hard as some try to paint a rosy picture, it’s really hard to see how this can’t end badly.

kctim, you may be right. It may never work in our lifetime. But it is the only thing that will ever work, some day. Everything else simply pushes that day further into the future.

Parties are not the problem or the solution.
Think outside of the box.
Don’t be seduced into the petty partisan warfare.
That is a tactic to distract and fool voters.
Don’t allow yourself to be manipulated any longer.
Take off the partisan blinders.
Stop wallowing in the petty partisan warfare.
Grow wise and learn how to spot those clever tactics.
Don’t listen to those that promote mediocrity.
Don’t accpet the status quo.
America should be the first to take the next step to a higher level.

• We have tried this party, and that party.


• We have tried conservatives, moderates, and liberals.


• We have wallowed in the partisan warfare, and despised those that fuel it.


• We have tried power and corruption, and we have forgotten transparency and accountability.


• We have tried to live at the expense of everyone else, but complain about the danger of the growing deficits and National Debt.


• We have tried to reduce waste and pork-barrel, but keep voting for those that bring the pork home, and bribe voters with the voters’ own money.
  
• We have tried to ask government to provide for us from cradle to grave, but complain that bloated government meddles too much in our lives.


• So, after we have tried everything else, why don’t we finally try the one simple, common-sense, no-brainer, non-partisan, honest, and responsible thing we were supposed to do all along?




Vote out all irresponsible incumbents, always, every election, until:


• no more irresponsible incumbents exist,


• government finally agrees to pass the many badly-needed, common-sense, responsible reforms that incumbent politicians have refused to pass for many decades,


• and our many pressing problems are finally addressed, instead of being ignored and allowed to grow in number and severity, threatening the future and security of the nation.

_________________________________________
Stop Repeat Offenders.
Don’t Re-Elect Them !
_________________________________________

Posted by: d.a.n at April 11, 2006 10:24 AM

my generation (currently still in school) will most likely pay all the way for social security, but not get it.

You’ll get it Ethan. The baby boom “crisis” is a bubble. It’s the pig in the snake. Americans are having fewer kids and after the baby boomers all kick the bucket there will no longer be a solvency problem with Social Security — if there is one to start with, and many economists don’t believe there is. Fiscal projections are made on absolute worst-case assumptions, and things just aren’t that bad.

The best thing that could happen is we stop throwing hundreds of billions of dollars a year into unnecessary wars and irresponsible tax cuts that only benefit the wealthiest elite.

The middle class tax cuts (ending the marriage penalty, the child tax credits, and expanding the 10% bracket) — the tax cuts credited with boosting the economy — were all made permanent in 2004. The tax cut extensions the GOP is looking at now (three quarters of the entire tax cut package) are for people who derive most of their wealth from stock dividends, capital gains, and who own estates worth over $4 million.

Posted by: American Pundit at April 11, 2006 10:40 AM

David,
You and me have discussed the National Debt problem in depth (2004) before on this site so I would like to take this time to address what I see IMHO is the problem established by the Democrats and Republicans stand on the Issue of the “Working Poor” in America and what a Demo-Publican political party could do to direct America toward a Politically Unalienable Correct solution to the problem of Foreign Owned Debt.

Therefore IMHO, VOID.org needs to address the Ancient Argument of how to keep “The Poor” poor so that they will serve “The Rich” and the Social Elite of Society and still keep Civil Peace among the Ignorant of the Law I think would be considered Politically Correct if one was to summarize the stance taken by both Political Parties back in the 70’s. For if I am not mistaken it was Our Parents that fell for the line that “We are here to serve Society.” Yes, God forbid if “The Poorest Consumer” was able to have a job so that they could pay for what they need to live the Simple Productive Life demanded from them by Society. How would that make them different from the “Silver Spoons” and effect the “Royal Bling-Bling” long associated with the Kings and Queens of the World. What about Social Class standings that has always been a part of Society? Yet, why in the 21st Century of the Human Race are “We the People” fighting a War over a few Rapitalistic People of Society who believe that by blowing up the world they have the ultimate Power over others is a “Better World” than making the “Poorest Human on Earth” who is willing to live a simple productive Life and obey the Intent of the Law of the Land economically viable and financially Independent which is Established Law.

For as you and I have discovered, the Wealth of the Average American is not in them serving Society, but the Freewill and Knowledge of what Investing in the Individual’s own Inherent Best Interest and that is “We the People.” Sure President Bush could of saved America by asking the American Public to buy “Terrorist Bonds” to finance the Future of “We the People” instead of telling the general public to “Go Shopping” in defense of your Country like he did right after 9/11. Sure, the Immigration problem could be addressed by the raising of wages to curve demand just as the Oil Companies are doing with gas prices; however, we both know that is politics and “We the People” must live with the Right and Wrong of Our Elected Officials. Nevertheless, the Politically Unalienable Correct thing for Congress to do is to establish a Federal Elective Pre-Payroll Program that would allow Americans to invest a part of their Employer/Employee Payroll Tax into United States Federal Reserve “Special Treasury Notes” and reap the reward of the Interest paid by our Federal Government as they build the Unlimited Sustainable Global Economy that is an American Birthright.

Now, I am not saying that my 20/7/40 plan is politically right for America, but I do know that the Founding Fathers would stand up and cheer that the American People finally figured out how to use Compound Interest to their own Inherent Best Interest instead of that of a Wealthy few. Yet, I must in all good Faith and Honor believe that the Global ramifications of Intelligently Designing, Creating, and setting into motion a Societal Movement that will yield every Citizen of America and Humanity’s Nations of Law the ability to become Economically Viable and Financially Independent in a Society where Rapitalistic Nature of Man is kept in check would not only pay tribute to those Americans that have walked before Us, but send a Clear and Present message to Washington and the Rest of the World Leaders that Humans are not as Dumb as they Think. Because after all, Knowing will always beat Thinking in the Battle for the Mind and Soul of the Human Physic.

If America is going to survive in the 21st Century as a Leader of Nations than it is the Duty and Responsibility of Everyone who truly believes in Freedom and Freewill is to VOID Washington until Our Civil, Political, and Religious Leaders comes to term with the Principles & Standards established by the word Consume and it’s root word Upanishads which mean the Teaching of Knowledge through the Spirit of American Law found in the Peace Maker and Constitution of the Six Nations of Iroquois because that is exactly were Thomas Jefferson built America’s Liberty Tree and The Founding Fathers placed the Faith of this Nation in. Any argument about a level playing field?

Posted by: Henry Schlatman at April 11, 2006 12:21 PM

American Pundit wrote: … after the baby boomers all kick the bucket there will no longer be a solvency problem with Social Security — if there is one to start with, and many economists don’t believe there is. Fiscal projections are made on absolute worst-case assumptions, and things just aren’t that bad.

Sorry, AP, but I have to disagree.
The insolvency problem can not be resolved quite so easily.

Social Security is already $12.8 trillion in the hole (source: CATO Institute, FAQ # 2). The lock-box is full of I.O.U.s .

And, you should look at the whole picture. Social Security, Medicare, Medicaid, Welfare, Iraq, $8.4 trillion National Debt, PBGC $450 billion in the hole, high costs of illegal immigation, trade deficits, corporatism, rising inflation, rising interest rates, rising foreclosures for 14 months, falling median wages for 6 years, etc., can not be considered individually. All are managed (or, more accurately, mismanaged) by one irresponsible entity. Democrats can’t fix it. Republicans can’t fix it. Voters could, but won’t fix it. So, saying it is merely a bubble is very optimistic indeed. If I didn’t know better, I think some imposter from the rose-colored column hijacked your handle.

Just take one thing; such as the $8.4 National Debt. It is growing by $2 billion per day! Interest on the debt is crushing us. Government has already started printing too much money to reduce that debt. The problem is, the price of a loaf of bread goes up. Your savings fall in value.

Anyway, if we started today paying down the $8.4 trillion National Debt, by paying back $1 billion per day and cease borrowing $1 billion per day, it would take 140 years. But, it gets worse. Social Security and Medicare are already in trouble. Those shortfalls are not even part of the $8.4 trillion National Debt yet. Deficits are forecast from decades. %Debt to GDP is already 68% (up from 33% in 1980). It’s going to get worse. Either spending cuts or complete failure will occur. Americans don’t understand the magnitude of the problem. They hear one economist say everything is rosy, and believe what they want to hear.
Research it yourself.
Look at the data.
Then decide for yourself.
Also, check out those strange theories (at rodgermitchell.com) that say we can never go bankrupt, your children will never pay back the debt, Social Security and Medicare will never go bankrupt, etc. Some people really believe this stuff. Note: the book is called “FREE MONEY” (but the book is not free).

True, tax reform is needed too, but no reforms will ever come about until voters figure out what it was they were supposed to be doing all along. I fear they’ll have to learn the hard way again and again.

No, it’s not a pretty picture, no matter how you look at it.
It is not difficult at all to see how it can very easily lead to an economic meltdown
_________________________________________
Stop Repeat Offenders.
Don’t Re-Elect Them !
_________________________________________

Posted by: d.a.n at April 11, 2006 01:33 PM

David:
“So, I say to you the same as I said to Jack, take the partisan blinders off and address the math.”

Uh, I was agreeing with you — and the math. Guess you just can’t take yes for an answer, eh? :^/

“Allowing incumbents to return simply rewards their short sighted political greed for reelection.”

The point I was trying to make is that people can actually remain loyal to their political viewpoints by keeping the responsible incumbents in their parties, yet still vote out the ones who have brought us to this bleak and dismal point.

Posted by: Adrienne at April 11, 2006 02:14 PM

Woman

It will come down to that. We can keep people alive indefinitely, but not with a quality life and not at an acceptable cost. The bioethics problem is significant. Until not long ago, we could always be on the side of life because we knew our efforts were limited. Now we have to make a choice at some point. It sounds very bad, but honestly, is it worse than keeping someone alive such as Terry Scheivo?

People ask a question, “what if it was your child who needed the care?” Of course, if it was my child, I would spend the whole GNP. So would others. That is why we cannot make it an option.

You would be enslaving the whole society to support the needs of a terminal few.

David (& Ethan)

You can cut the world cop thing out completely and you still cannot pay for entitlements if they continue to grow as they have. The deficit is small potatoes compared to entitlements. Interest on the deficit is 7% of the budget (about half of what it was in 1985) and the entire Federal government consumes around 20% of GNP today. At their current growth, entitlements alone will consume 28% of GNP by around 2060. It is on your charts and in your report. And it doesn’t stop growing even there. You can’t have it. There will not be enough money in the U.S. to pay for it even if you tax all the money from the rich.

We will cut entitlements before that. No matter what anyone says. I am sure there will be a clever way to hide it.

I have said many times, and it is true, that only current producers can support current consumers. Unless you are living off a basement full of canned goods and dried fruit, you are living off what someone produced THIS YEAR. This will happen in the future too. No matter what the accounting procedure or how it looks on paper.

If I am still around in 2060, I will certainly be among those needing extra care. Don’t give it to me. Life is sweet, but there comes up time for all of us to shuffle off this mortal coil and keeping our current piece of protoplasm alive for a couple more years is not worth it.

Ethan

If nothing changes, your generation would be better off investing in lottery tickets than SS. AP is right that the baby boom is a bubble (1946-1960), but given current and expected life expectancies that bubble will persist for around 50 years. After that, you will still have medicare problems and you will never again have the large working populations supporting the small group of retirees we had through the 1990s.

SS is around 7% of your pay. You and your employer pay around 15%. That percentage will grow. Don’t count on seeing it again.

Posted by: Jack at April 11, 2006 03:10 PM

Adrienne, agreed. Took your last comment for me to recognize that we are on the same page. My apology.

Posted by: David R. Remer at April 11, 2006 03:24 PM

Jack,
Entitlements and other such things as electiciy for our Federal Buildings can be eliminated by using Our Brains for more than following the Status Quo. By pushing forawd an Economic Plan that sees the Poorest of Society able to invested in their own Inherent Best Interest, America can change he World without the need to double Taxes. Unless, the ideology of the Republicans are still to Oppress the Consumer in 2006 & 2008.

Short of making every American a potential Ecomically Viable and Financially Independent through opportunity’s and education the Market will always go Bust. No, the true path to making oneselve rich is by making everyone else around them rich. In that manner the Beast of Nature “I the Consumer” does not have to use his Rapitalistic Nature and take that which was not given to him.

Posted by: Henry Schlatman at April 11, 2006 03:42 PM

Henry

We can talk all we want about what we should do. The fact is that entitlements grow and have grown without regard to administration or political party since the 1960s. Most of the people who will be getting entitlements in 2050 are already born today and so are the people that will be supporting them. We can count and project with near certainty and if we don’t change, we cannot support it.

Posted by: Jack at April 11, 2006 04:12 PM

Okay, let’s take a global view. The “entitlements” are the problem. These “entitlements” include Medicare (one of the most effective downward pressures on health care costs until the Republican Congress mandated that they not negotiate with drug companies to lower drug costs), SS, etc. So these entitlements will go to pay for actual health care and living expenses for retirees that paid into the government for years using the regressive tax structure of FICA and CMS. Now, somewhere, somehow, society has find the money to pay these costs, whether from the individuals incurring them or some other source of funds. The problem is made more acute as legacy employers strip their retirement funding obligations and pass them along to the individuals or, in all likelihood, the government.

So it seems to me that the conservative beef is that these expenses come from tax coffers, rather than directly from the individuals. Of course, this is grossly unfair, as the tax structure has tilted further away from the rich and more toward the middle class. There ought to be a special tax on all of us who have made money off the backs of the working class to pay for these expenses. Yes, I wish they would have saved more, but then our economic expansion would have been less and our deficits and debt even greater (Clinton would have failed, for example, to create surplus revenue). But I am happy to pay what it takes to ensure that the retirees live in dignity and health, as long as everyone does their share. And by that, I mean they pay proportionately to their benefit. And by that, I mean their aggregated wealth, not just their income that they couldn’t find a way to shelter.

Posted by: mental wimp at April 11, 2006 05:59 PM

“But I am happy to pay what it takes to ensure that the retirees live in dignity and health, as long as everyone does their share”

Thats everybodys “share” according to what YOU think it is, right?

Posted by: kctim at April 11, 2006 06:04 PM

David, good blogpost as usual. Keep up the good work.

I might suggest a slightly more apt analogy to our situation, being the frog in a pan of water gradually being heated on the stove burner; the heat is rising so gradually he does not even realize he’s being cooked until it’s too late. (Disclosure: I plagiarized this analogy)

I have to believe when the Titanic hit that ‘berg, at least a barely perceptible tremor passed through the ship causing some concern among those who didn’t see the shaved ice all over the deck.

But when the proverbial waste matter hits the universal distributor in our current economic situation, it’ll be all over but the crying for anyone holding paper assets, including cash.

The situation has, IMHO, little per se to do with this federal program or that federal service… It has everything to do with the citizen who just does not care. And unfortunately, it just may take a severe depression or hyperinflation to get people caring about what the government does again.

Posted by: wanna_be_jack at April 11, 2006 06:12 PM

Jack,
America was founded on the idea of every Citizen being able to become Self-sufficent. In Todays World that means it is the Duty and Responsiblity of The Individual and Society to have the Knowledge and Opportunity to become Economically Viable and Financially Independent to the Lifestyle of their Self-Nature.

Now, I want to hear from a Republican explain just why it is ok for the “Rich” to invest in Treasury Notes and Bonds, but somehow it would be wrong for “The Poor” to be able to invest in these same funds. Certainly the Idea of your fellow Americans holding your National Debt would be safer than the UAW’s of the World. Would it not?

No, being Economically Viable and Financially Independent is the first step in building a Righteous Nation and the need of National Treasury has never been higher if America is going to win the War on Terror. Cry opppress the “Poor of the World” if you want, but just remember that at NO Time in Written History has the “Rich” every won out over “The Poor” in this Race to Equality and Fairness that is taught by The Human Teachings of Man.

Posted by: Henry Schlatman at April 11, 2006 07:22 PM

Henry

My fellow Americans can and should invest. Their government cannot invest for them. If the government buys its own debt it is like you writing a check to yourself. You can have a big pile of checks in your bathroom cabinet, but you cannot cash them with real money unless you have money in the bank.

The government has only one way to pay off its obligation - tax current Americans. The Americans of 2006 can promise themselves anything they want. They can promise that the American of 2060 will pay them at that time. But the Americans of 2060 must do the paying and they will decide whether or not to do so and in what way. And they will be the ones to be able to pay or not.

In 2060 - according to David’s charts - entitlements will make up 28% of GNP. That is not 28% of the budget. That is 28% of all the goods and services produced in the United States. For comparison the WHOLE Federal government today takes about 20% of the GNP. So entitlements alone will be costing more than everything the Federal government now spends.

Cut out Iraq. Cut out all military. Cut out the State Department, Cut out Interior. Fire every civil service employee and you still don’t have even half of this.

Do you really think this is possible or sustainable. I know some people want to tax the rich etc, but if you restored ALL the tax cuts you would not get 1% of the money you need. If you doubled taxes on everybody, you still would not have enough money to pay entitlements and reasonable government expeditures.

David is right about the Titanic analogy. I - the optimist - am one of the only people to understand this and what it means. The rest of you think you can someone avoid the pain just by raising the taxes on the rich. Good luck to all of us if we don’t face reality.

Posted by: Jack at April 11, 2006 08:13 PM

wannabejack and Jack, thank you for your contributions. I agree with you both. Taxing our way is as insufficient as spending cuts. Both, and a number of other things must happen in a comprehensive plan to turn the ship before the boomers crest in 2020 and ride that wave for another several decades.

It is time to put the partisan philosophies and bickering aside and address the problems wholistically, and both parties must be willing to say lobbyists, donors, and special interests be damned. The entire future of the nation depends upon taking modest but rapidly increasing more substantial steps to raise revenues where they can be and still maintaing economic activity, cut entitlement spending without prematurely killing Americans whose lives depend on them, and educate, educate, educate the public that savings is crucial to their future, belt tightening time is here regardless of which party has control, and sacrifices have to be made, symbolic and real from the President and Congress down to the janitors and maids.

Can we do it? Glad I am not a betting man.

Posted by: David R. Remer at April 11, 2006 08:36 PM

Henry, savings is a crucial leg of the 3 legged stool that can support our future. Raising revenues and cutting spending being the other two. Now who with the power to make it so, will step up to the plate?

Check this out though! “Consumer credit outstanding rose to $2.164 trillion in February, rising at an annual rate of 1.8 percent from a slightly revised $2.161 trillion in January. The revision in January’s gain was mostly due to a downward revision in the December total to $2.155 trillion.”

Divide 150 million workers into 2.164 Trillion. The result is a nightmare. Who is going to save at 2.5% interest when they have debt with interest rates ranging from 8 to 28%. There is no savings to be had by this public which is leveraged to the hilt. Scary stuff, this.

Posted by: David R. Remer at April 11, 2006 08:41 PM

David R. Remer

This is central to the point I was trying to make. The costs will be there, it’s a question of how, as a society, we intend to meet them, given how big that cost will be and how dire our debt situation it. Any attempts to just shift the source of funding from one group to another, especially from those with a lot of resources to those with little, is rearranging the deck chairs and fighting over lifeboats, folks. Either the money will be there or there will be carnage.

Clearly, cutting the costs of medical care is one necessary step, and that will take a revamping of how we approach the idea of health as a private benefit or a public good. I tend toward the latter and think that approach will make the costs go down precipitously, much like the public health approach to drinking water has made the costs of water-borne disease plummet over the past century (and, no, it isn’t because of antibiotics; that’s propaganda).

But encouraging saving while our government policies are driving down real incomes and preventing debt-laden individuals from starting over to the benefit of the already wealthy (no, those savings will not go into the consumers pockets; that’s a fairytale told by an idiot) is a cruel joke. It is important to understand that the consumer debt belongs to the middle class, the ones who in the past have been self-sufficient in retirement. The choice we have now is between the currently fashionable political philosophy being pushed by those who welcome a return to the days of the robber barons and wish to dismantle the New Deal apparatus that led to the unprecedented growth of the middle class, against the more nuanced philosophy that regards some redistribution of wealth as a necessary counterweight to the inexorable flow of wealth and power to those who already possess them. I know it doesn’t fit the dogma of a vocal segment of our political classes, but I’m afraid it is vitally important.

Posted by: mental wimp at April 11, 2006 09:26 PM

Can we do it? Glad I am not a betting man.

I think it’s already past the point where we can do anything about it. The economy is already on life support; the only thing keeping it from keeling over is federal deficit spending and easy credit.

IMHO, if federal spending is reduced enough to make a difference with the deficit or if credit becomes tight enough to encourage saving, we’re looking at a recession or depression. Ben Bernanke has already promised (threatened?) to dump baskets of cash out of helicopters if that’s what it takes to avert a depression. How many dollars do you think that loaf of bread will cost you when helicopter Ben starts up?

I’ve seen several remarks along the lines of “_______ has some good ideas but I don’t see them doing anything to turn the ship.” Needless to say, not trying to be pedantic, what we have is 535 people just in the legislative branch each trying to turn the ship in their particular favorite direction. Some want tax cuts, some want to tax more, some want to provide incentives for particular behavior, some want to provide incentives for other particular behaviors, etc. Some seem to simply want to exert and consolidate their power for personal gain and for the benefit of their patrons, with no particular concern for the common good.

We started out over 200 years ago having a government for the common good. Somewhere we took a detour to this weird place where the good of certain individuals has taken the place of the common good.

I think the wrong turn occurred at about the point when politicians realized that they could spend their entire adult life in Congress and get rich in the process.

The only hope I see is for strict term limits and draconian campaign financing regulation. But since these laws would have to be enacted by incumbents, it isn’t going to happen.

Posted by: wanna_be_jack at April 11, 2006 09:30 PM

wanna_be_jack, the idea of term limits and reform is wonderful. However, it is currently a pipe dream. You are right that incumbents won’t do any thing to cange this. I began reading David R and D.A.N’s posts a while ago and believe they have the answer. I think VOID is the right idea, if we hold elected officials feet to the fire for an election cycle or 10 they will have to concern themselves with what we want. It would be nice if they bothered with our concerns more than at election time, if only a few “safe districts” start to fall consistantly we could wrest government back from lobbies, corporations and large $ intrests.

Posted by: Ted at April 11, 2006 09:57 PM

Mental Wimp, thanks for the comments. I agree entirely that our ship is already sunk if we continue to allow the accumulation of wealth to accrue into so few hands, because as the ship sinks, guess where that wealth will go? Yep! Overseas along with many who made their wealth here if depression, chaos, and civil strife mark the sinking. Those counting on the majority of the wealthy to bail out the sinking ship are dreaming.

Redistribution of wealth is essential, but in a manner which leaves investors investing, and businesses surviving, and workers working. The irony is, research shows most of the wealthy would gladly give up tax cuts if they would help secure the nation’s financial future. But, they have no faith in that happening if Congress won’t take the responsibility to end the deficits and chart a plan for zero debt growth through the baby boom retirement years. And Congress won’t assume that responsibility until their careers are put on the line if they don’t. That is where Voting Out Incumbents comes in. It really is up to the voters whether partisan power and politics governs legislative outcomes, or saving the nation’s future does.

VOID has generated a growing number of supporters for the concept - many hundreds. But, at this rate, holding Congress to account might occur after barnacles have consumed the sunken ship for a few decades at the bottom of the ocean. Spreading the Vote Out Incumbents solution is going to take real commitment of money and time and energy by its supporters to hasten the spread of its logic.

And with our without VOID, the voters are going to have to exercise their common sense in November and demonstrate a show of strength to the anti-incumbent sentiment all on their own. If the anti-incumbent logic does not become commonplace by the 2008 elections, I am not sure time will be left to avoid the berg.

On a lighter note, a lady emailed me today telling me her precinct captain told her there is no box on the ballot for voting out the incumbent. I explained as diplomatically as I could, that voting out the incumbent means voting for a challenger to that incumbent. But, I don’t know who any of the challengers are, she said.

Common sense, it is not as pervasive as most of us would like to think.

Posted by: David R. Remer at April 11, 2006 10:41 PM

wannabejack, I do understand your sense of Catch-22 frustration. My perspective is this. Either I invest my time, money, and energy to make the difference that must be made, or I leave this nation to sink without me, or I stick around to sink with her.

The latter two are less appealing to me to than the first. Your mileage may vary.

Posted by: David R. Remer at April 11, 2006 10:44 PM

Ted, thanks for the reflections. Glad to see another citizen acknowledge where the hope lies.

Posted by: David R. Remer at April 11, 2006 10:45 PM

SS [Social Security] is around 7% [6.2%] of your pay. You and your employer pay around 15% [actually, 15.3% = 2(6.2% + 1.45%)]. That percentage will grow. Don’t count on seeing it again. Posted by: Jack at April 11, 2006 03:10 PM

I don’t. Especially since:

• Social Security is $12.8 trillion in the hole.


• Medicare is in worse shape (trillions in the hole).


• National debt is $8.4 trillion.


• PBGC is $450 billion in the hole.

That picture isn’t pretty at all.

Recovery from the next inevitable recession (predicted to be any time between now and 2013) will not be easy.

I’ve been watching things for decades grow worse and worse. The thing we need right now is highly unlikely. Voters could force government to be responsible and accountable , and they may some day, but it’s probably too late now.
They will probably have to learn the hard way.
There is a method right there under the voters’ nose, but they can’t ever get it together to do the right thing. And, it’s getting hard and harder as millions of illegal aliens are also voting in our elections.

These problems will solve themselves, since inept government can’t and slumbering voters won’t.

The problem is, no one is going to like the default solution.

Posted by: d.a.n at April 11, 2006 10:51 PM

Jack,
So your solution to the problem of National Debt is to leave it for your Children’s Childen in 2060. Gee, what kind of present would of been left to us if Our Forefathers did not have the foresight to leave us Nature? No, the National Debt is not a problem of raising taxes or selling America’s asses such as our ports. Americans in your life have walked among us that saw the United States own 75% of the World’s Gold. Now, does the Political Parties of the 60’s have the Courage to do what is right or will the American Youth of the 21st Century seek a new political party that can take them to the Promise Land?

To borrow a phase from the 60’s, Times; they are a changing and the 21st Century Rat Race will not be a Race to the Bottm, but a Race to defy “The Sky is the Limit” imposed upon the American Socieyu due to their Ignorance over what Right and Wrong is. Please read the Republican report that says Today’s Collage Students trive off that debate.

BTW, yes investing in the Federal Reserve Special Treasury Notes is like allowing each American to write their own check almost. Good Credit and a friendly Financial Advisor can show you how to borrow up to 80% of those funds and invest it into a nice nest egg without paying a dime. Ben Franklin put it best when he said “Thank God for Compound Interest.”

David,
Part of taking back control of Washington and thus by defualt America is for the American Public to own more of Our National Debt than any other enitiy. Yes, a few Trillion Dollars may seem like alot of money; however, if it is “We the People” that own that debt than the Debate over what to do with it is a Family Matter not a weapon that can be used by other Nations to influence the Political Will of “We the People” in the Halls of Congress.

Currently, I am working on such a plan that I call 20/7/40 and hopefully in the next few months can demonstrate to you and others the Knowledge and Wisdom that can be found from Our Grandparents of The Great Depression and how through the purchase of War Bonds in WWII the Collective Wealth of America grew to the point that our Leaders are able to run up a National Debt of over 40 Trillion Dollars.

Posted by: Henry Schlatman at April 11, 2006 11:02 PM

d.a.n, don’t give up hope. Soc. Sec. can be saved still with modest adjustments in 2008, 9 and or 10. Social Security is not the problem, it is salvageable. If the government can show Americans that giving up a little sooner can save the program through the boomer event, they will climb on board and make accept the adjustments, gladly for the most part. A safety net for retirement is a very, very important item for most Americans.

The killer is health care. Not just entitlements but the inflation rate of health care costs. That is a tougher one to solve, and there may be no solution that will preserve an adequate health care system as we know it today. But, that does not mean their aren’t alternatives that could work. Examples: 1) Move away from the doctor centered model of health care to a Physician’s assistant and nursing centered health care system. I don’t know what the stats are, but, it is safe to say that the vast majority of visits to a doctor could be handled by PA’s and nurses. That would cut the Doctors out of the cost chain, and dramatically lower health care costs. 2) Tax cosmetic and elective surgical procedures to offset the rising costs of Medicare. This would lower the demand for health care procedures and with lower demand comes lower rate of inflation, plus increased federal revenues. 3) Establish health care courts run by a judge, and health field professionals WHO ARE NOT in health care delivery for a profession. These courts could screen out obvious frivolous laws suits against health care providers, and handle small dollar cases to settlement through in court arbitration. 4) Halt federal subsidies to medical research and development. Until the baby boom generation has passed, the government should not be funding extending lifespan through R&D. That is just plain economic suicide. 5) Allow states to determine physician assisted suicide laws for terminally ill patients under court review. 6) Open Rx imports from nations with clearly high standards. Pharmaceutical companies be damned.

These measures off the top of my head and others, could go a long way toward reducing the health care cost impact upon our economy and federal debt. There are solutions, the trick is to force politicians to do their homework and produce results. This game of stalling because we are too busy getting reelected is what will eventually sink the ship, as you and I both well know.

Posted by: David R. Remer at April 11, 2006 11:26 PM

Henry

I am saying just the oppostite. We have to restructure entitlements. We cannot save for it. I don’t want to leave debt for my kids.

Your compound interest example doesn’t work when the government invests in itself. It just moves debt from one pocket to another.

Here is the question. If the government invests in the government debt, and the debt matures in 20 years, who pays the debt?

Again, the simple example is you, a piece of paper and a pen. Each month, you write yourself and IOU for $100 and you grant yourself 10% interest. At the end of 20 years, you want to retire. You take all your IOUs out and find you have a$1 million in IOUs. What are they worth? It is monopoly money. You say you owe yourself a million. If you have a million you can pay yourself off. But have you become richer by paying yourself? If you don’t have a million dollars, are your IOUs worth anything at all?

The government creates the money and the debt. It owes itself. It has only the money it gets form current taxpayers.

We should cut government spending. But no amount of cuts and no amount of taxes can pay for entitlements if they reach 28% of GNP.

If we don’t restructure entitlements, future taxpayers will either go broke or default. I prefer default.

Posted by: Jack at April 11, 2006 11:48 PM

There are solutions, the trick is to force politicians to do their homework and produce results. This game of stalling because we [incumbents] are too busy getting re-elected is what will eventually sink the ship, as you and I both well know.

Yes, that one fundamental change (vote out irresponsible incumbents, always) is a prerequisite, and the prerequisite step to that is education.
Of course, giving up is not an option, since that accomplishes nothing.

Posted by: d.a.n at April 11, 2006 11:54 PM

David:

I used to buy “doomsday” finacial books at garage sales and use them for my financial seminars.

Here are some titles:

The great depression of 1990.

Bankruptcy 1995

The coming economic earthquake, (written by Larry Burkett in about 1990).

All of them use exactly your premise. Your thoughts are very old, and have been expoused and proclaimed for at least the last 20 years, and I even remember books like this from the 1970’s, but I am alas getting old and cannot remember the titles. The books from the 70’s were about high inflation and the oil crisis that was going to ruin America.

I have at least in my memory four decades of thoughts and publications of thought tracts like these here.

What is ironic is that in the late 1980’s early 1990’s it was the religious right the was preparing for the collapse of our economy. I remember a woman pulling all her money out of her IRA’s paying the tax and penalty to pay off her mortgage. This was in about 1992.

One of the errors I see from your side of the argument is that debt numbers are almost never put inside a context of assets. For instance in the last 5 years or so, American Net Household Worth has increased by as much as the national debt. That is networth!! Assets minus debt.

When we look at fiscal spending and say it has a present value debt of $40 Trillion, that is so misleading because you fail to calculate the net present value of Net worth. the $40 Trillion is based on todays dollars and size of economy.

Are there going to be problems and issues? Of course. We cannot have 80 million people get sick and die without feeling the effects. As we go through the years watch the economy shift.

Watch:

1. Retirees take on part time jobs.
2. Immigration increased.
3. More aggressive taxation on Estates.
4. A major change in how health care is delivered.

Let me stop on #4 for a minute. An assumption from your end of the argument is that we will continue to deliver Heatlh services has we have. We wont. How do I know that? The health care system is dominated by care for the elderly. (My parents age). Every single institution our generation has touched has be transformed and recreated. We are watching our parents in health care, and we are going to demand changes.

When I was a kid, church has an organ and a piano and a choir. Drums and electric guitars were of the devil. Now I can’t find a church without drums and electric guitars. My church meets in a school. (We want to spend money on something other than buildings!!).

Health care isn’t a good “deal”. It’s too expensive for the health it provides. It’s going to change.

On number two (sorry for wandering) Don’t you think legalizing 8 million illegals has something to do with paying for Social Security? Nothing wrong with Social Security that immigrating a hundred million young folks wouldn’t cure!!

5. Innovation. Even in financial products.

Did you know for instance that on the AARP website is a way that is guarunteed for reverse mortgages, to allow seniors to use their homes in effect as a pension? They can never loose their homes. Add the present value of that new pension sourse to the equations for corporate pensions. It is actuarily sound. Now imagine using that wealth against the $40 Trillion net present value of our health care. With innovative estate taxation, it can happen.

I see the problems you and others have presented the last fourty years. But I also believe our system will create solutions as we approach these issues, and invent solutions that may not be doable (politically) or seeable at this time.

In the end, like I have said through out many debates, doomsday is not going to come, and the economy will continue to grow at or nearly at historical growth rates. There may be a slow down, such as Japan went through, but hardly doomsday. I could see our economy mirroring Japan, but actually not as severely. Ours system is far more flexible.

By the way, did you know that Corporate profits have risen in this recovery faster than any recovery in the post WWII era? Not bad huh? Corporate profits as a percentage of GDP are near 45 year highs. (looking for a place to tax?).

Craig

Posted by: Craig Holmes at April 12, 2006 12:10 AM

Craig Holmes,

American Net Household Worth has increased by as much as the national debt. That is networth!! Assets minus debt.

Hmmmmmm. They put it into homes, but it won’t mean much when they are foreclosed on, and the real estate values plumment. That networth could disappear very quickly.

Speaking of foreclosures, they have been rising for 14 months, and median wages have been falling for six years.

BTW, I’ve seen many of those books. I didn’t believe them then. Now is different. But, things take a long, long time to play out.

The important thing is the not one thing (such as debt, Social Security, immigration, trade eficits, etc.). The warning sign is the large number of serious problems, culminating all about the same time. Many things are piling up worse than ever now.

Corporate profits as a percentage of GDP are near 45 year highs.

I’m not sure Americans are thrilled by that, since median wages have fallen for 6 consecutive years.

Craig,
You know, even though all those books were wrong, it does not mean a depression can’t happen. Don’t be lulled into a sense of false security.

Also, I’m not sure our federal government could find their butt with both hands, much less a way out of the mess we’re in now. That’s a very serious factor. Solutions are useless if corrupt, inept, FOR SALE government won’t ever implement any of common-sense reforms.

No reforms (including immigration reform) are possible until one fundamental change is made first. All voters need to do is the one simple, common-sense, no-brainer, non-partisan, safe, peaceful, inexpensive, and responsible thing voters were supposed to be doing all along:

Vote out (or recall) all irresponsible incumbents, always, every election, until no more irresponsible incumbents exist, and government finally agrees to pass the many badly-needed, common-sense, responsible reforms that incumbents have refused to pass for so many decades.

: )

Posted by: d.a.n at April 12, 2006 02:04 AM

A note on term limits:

I see a danger of being able to implement long term policies if term limits were instituted. Some problems require consistent application of a policy to effect change. Educational reform, infrastructure overhauls, environmental conservatism and intergenerational poverty are examples of problems that can’t be solved with a short term shotgun approach.

The legislative attention span is already too short with few legislators willing to support unpopular, yet necessary, programs during an election year. Without sponsors to shepard multi-initiative programs through congress, many legislative issues would wither on the vine.

Posted by: goodkingned at April 12, 2006 02:48 AM

Jack,
Securing the Borders and Ports, Reconstruction of Infrastructure for Commerce and Security, and Iraq are being paid for by who? China? Now how is allowing them to hold that Note for Twenty Years in the Hope that the Wealth of America will grow or me having enough faith in my fellow citizens that some how some way The Children of the American Spirit can learn from the mistakes of Our Parents so that “We the People” can build that “Better World” which the Democrats and Republicans could only dream about 40 years ago.

Invest, be Taxed, or allow America to go down in Written History like every other Nation that has made it to the ranking of the World’s only Super Power. Sorry, but as a Proud American I do believe that the politically unalienable correct way to solve the argument over Entitlements is to make Every American willing to live a simple productive life that adds positively to the function of society Economicailly Viable and Financially Independent. Because at that point you are no longer a Burden to Society and Society is no longer a Burden to You. Therefore, tell me How and Why Society owes you more than that? Can you give me a better idea for a Social Insurance Program?

Yes, “We the People” holding the Fat Side of America’s National Debt so that the Federal Reserve can generate the necessary funds in the World to allow “We the Consumers” to come together and work with the American Business World to bring on line the technology and advancements required to take America into the 22nd Century. While Rome was not built over night, the idea that America’s Economy is doing so good should say that building up the weak link which is the Federal Reserve just makes Common Sense. Now what would be Politically Perfect is the Power to take such a Fund and with the Roll of the Dice be able to assist the Invisable Hand of Society move America and Humanity’s Nations of Law away from the Rapitalistic Side of Man. After all, the last 40 years has shwon us that it is not the Strongest that survive, but the Smart, Quick, and Lucky who through Hope and Risk ensure the forward motion of Society.

Posted by: Henry Schlatman at April 12, 2006 04:21 AM

I agree with Jack that entitlements need to be addressed. You cannot look at those charts and not conclude that.

Actually, you cannot look at those Charts and not conclude that the Economy will be fine as long as it’s not left to Spencerian Trickle-Down Corporate-Welfare Hogs!

Case In Point: if the cost of the unnecessary Iraq War were all fed into the Social Security programme - as it exists now, with no changes - Social Security would be able to function for over 75 Years without coming close to running out of money.

Case In Point: under Bill Clinton’s Trickle Up economics, the U.S. not only ran Federal Surpluses (beginning one year before Newt Gingrich and his Contract Killers took office), but actually was able to pay down the National Debt for two years running! (And, had Al Gore not been replaced in the Coup Of 2000, we would have continued to see Budget Surpluses and pay down the National Debt.)

Take the blinders off! Those figures do not lie!

Posted by: Betty Burke at April 12, 2006 05:51 AM

BTW: in the above post, I meant to highlight the Charts I posted links for. I’m going to try to see if I can set them as Images below. `Hope this works…

National Debt #1

National Debt #2

Presidential Year Average

From The White House

Revenues vs. Expenditures

From The Bureau Of Labour Statistics #1

From The Bureau Of Labour Statistics #2

Under Clinton #1

Under Clinton #2

Under Bush, Sr. #1

UNder Bush, Sr. #2

Under Bush, Jr. #1

Under Bush, Jr. #2

Posted by: Betty Burke at April 12, 2006 06:04 AM

Ahhhhhhh…

The truth, crushed to earth, shall rise at last.

Posted by: Betty Burke at April 12, 2006 06:05 AM

I don’t think the pessimism is warranted, or useful. Sure we may have a big problem here, but we can’t just sit down and do nothing.

People are right that growing out of this is not an option. They are wrong, though, if they don’t think restoring tax revenues is a necessity. A balanced budget is essential for getting this problem under control.

We need to get down to barebones essentials, though, and get rid of the billions and billions of dollars of tax breaks and subsidies that distort the market from sustainable practices and add to the deficit. Cut out the pork. I think voters will understand if the Rich Campaign Contributor Memorial Rest Stop or the Museum of State Bird Droppings doesn’t get built. What’s led us to this point is this “We’re screwed here, so we might as well splurge anyways” attitude, where fiscal responsibility is simply seen as nitpicking.

We don’t need to wait for some big disaster or stock crash to bitch-slap us before we get our act together. We can’t avoid the hard times this crap is going to bring to pass, but we sure as hell can wise up and do better.

Posted by: Stephen Daugherty at April 12, 2006 10:14 AM

Jack, So your solution to the problem of National Debt is to leave it for your Children’s Childen in 2060.

Henry,
It is more like our children’s childrens’ childrens’ childrens’ childrens’ childrens’ children ( 2010 to 2150 ).

99% of Americans don’t fathom the magnitude of the problems (combined).

Observe the foreign nations that are starting to reduce their exposure to the falling U.S. dollar.
Too bad we gave control (via debt due to massive borrowing) of the dollar over to foreign nations.

While our problems, growing fast in number and severity, haven’t been felt yet (things take a long time), and they have not yet created an economic meltdown, has lulled too many Americans (and dumbass politicians who should know better) into a false sense of security.

That is unwise.
Recessions come and go every 2 to 11 years.
The last recession was about 5 years ago.
The following have the potential to change things drastically. These five main things could easily turn a recession into a depression:

• FISCAL IRRESPONSIBITY: $8.4 National Debt and $40.2 total nation-wide debt, decreasing options, lost opportunities, falling dollar (not backed up by real value), potential inflation, trade deficits, and the failure stop the debt from growing ever larger, and increasingly corrupt government too incompetent to deal with it;


• GENERATIONAL STORM: 77 million aging baby boomers (that all vote), making less, spending less, pay less tax, expecting to draw from already troubled Social Security, Medicare, Medicaid, & welfare.


• ENTITLEMENT SHORTFALLS: The looming Social Security, Medicare, Medicaid, & welfare deficits and short falls, and decreasing number of tax-payers per entitlement recipient.


• LIMITED GROWTH & INCREASING FOREIGN COMPETITION: The limited capacity for growth due to declining quality of education, a generally less educated population failing to develop new technologies, coupled with a steady increase of foreign competition.


• ENERGY VULNERABILITY: Of all the responsible, insightful things government could have done, they failed miserably to research and foster alternate energy sources, more energy efficient homes, automobiles, etc.

Posted by: d.a.n at April 12, 2006 11:01 AM

Betty Burke,
Fantastic research!
I learned a lot from that !
If I may add to that, notice that %Debt to GDP is now over 68% (up from 33% in 1980).
But, it is on target to reach 100% within a few years !
National Debt is now quadruple what it was after WWII.

It’s not a pretty picture.
But, don’t worry.
Some tell me everything is “very good”, “good”, or, at least, “OK”.
Don’t worry ! Be Happy !

Posted by: d.a.n at April 12, 2006 11:10 AM

Actually, you cannot look at those Charts and not conclude that the Economy will be fine as long as it’s not left to Spencerian Trickle-Down Corporate-Welfare Hogs!

… as evidenced by Corporate profits (as a percentage of GDP) are near 45 year highs, while median incomes have fallen for 6 consecutive years, and foreclosures (nationwide) have increased for 14 consecutive months.

Posted by: d.a.n at April 12, 2006 11:35 AM

Gee!

I wish I could copy and paste reams and reams of stuff over and over and over again on every posted article on watchblog!

Posted by: womanmarine at April 12, 2006 01:47 PM

Wow, great discussions and comments (all around), and the graphs are extremely helpful! Good work, you guys.

Posted by: Adrienne at April 12, 2006 02:02 PM

One thing that is evident from the charts posted above by Ms. Burke is that it is bad for the US economy to have a terrorist attack on the heart of our financial industry.

All the graphs indicate that the economic situation went to hell in late 2001. It is only reasonable to conclude that the attack on September 11th was the cause of the downtown.

Further examination of the deficit numbers indicates that tax revenue is disrupted by a terrorist attack and the resulting societal upheaval. Based on the above information we can also conclude that waging war is expensive.

The information provided above on job creation and unemployment only extends to 2004 therefore includes none of the job gained in ‘05 and ‘06. I don’t know the number of jobs excluded from the analysis above, but I do know that the job recovery didn’t gain steam until after the 2004 election. I’m sure everyone is aware that the unemployment rate is now about 4.5%, lower than the rate achieved in any of the years charted on the graph.

To sum up, we have learned that domestic terrorist attacks and the resulting aftermath are bad for the economy in terms of tax revenue, job creation, and deficit spending. What an amazing statement of the obvious. The only new information implied by this data is that it takes four to five years to affect a significant recovery from this sort of national event.

Posted by: goodkingned at April 12, 2006 02:43 PM

Gookingned,
In 2001 the President and Congress had the opportunity to cut the Payroll taxes for All Americans instead of the across the board cut. Considering that We had a surplus recession, Common Sense should of told all the Republican Business People that by increasing Wages without the heavier burden of higher payroll taxes would of allowed not only the bottom line of business grow, but would of increased the revenue of the Government through the sell of the surplus goods.

As I told a business person, would you like the government to give you a tax rebate of $100,000.00 or would you rather the goverment give you 100,000 new potentially Economically Viable and Financially Independent Customers?

Posted by: Henry Schlatman at April 12, 2006 03:22 PM

11-Sep-2001 hurt us terribly.
But, the economy actually started sliding in 1999.
Stocks started tanking in 1999.
Things got worse in 2000,
and even worse in early 2001.

11-Sep-2001 hastened the decline.
Despite a few good cherry picked stats (e.g. low, but rising interest rates; low, but rising inflation; low, but stagnant job creation), we are still in bad shape.

No one thing by itself is harmful.
It is the combination of many things, culminating almost simultaneously, that has the potential to turn the next inevitable Recession into the next Great Depression.

• median incomes have been falling for 6 consecutive years.
• foreclosures have been rising for 14 consecutive months (nation-wide);
• the total nation-wide debt is now at an all time high of $40.2 trillion. National Debt is now $8.4 trillion. The interest on $8.2 trillion represents another $38 trillion in interest alone if we started paying it down now, which would require us to stop borrowing or printing $1 billion per day, and also pay back $1 billion per day, and 139 years to do it, and that is if interest rates don’t go any higher than now.
• $8.4 trillion National Debt, highest Debt to GDP percentage since WWII
• Debt to GDP percentage is now 68% (up from 33% in 1980)
• Trade deficits have never been hihger.
• Troubled entitlement systems have never been in worse shape; Medicare has all time high looming shortfalls; Social Security is $12.8 trillion in the hole (source: cato.org)
• The PBGC and pensions have an all time high shortfall of $1.6 trillion; many pensioners are also being ripped off by greedy corporations;
• Interest rates are rising (not at a historical high)
• Inflation is rising (not at a historical high)
• The wealth gap has never been larger since the Great Depression of 1929 ;
• We still continue to lose manufacturing to foreign competition
• Never has foreign competition been higher.
• Foreign competition is increasingly better educted, while we are not;
• There is a brain drain, and it will grow worse as the economy grows worse. And technology won’t save us with the decreasing quality and sky rocketing cost of education;
• We have a nation that graduates more lawyers than engineers and scientists, where lawyers are in league with bought-and-paid-for government that are perverting the laws to do the very things they were originally supposed to prevent
• the size of government is at one of the all time highs, and growing fast to nightmare proportions;
• There is an increase of legal plunder; just from 1998 to 2002, there have been over 10,000 cases of nation-wide eminent domain abuse, and the Supreme Court cleared the way
• Tax Payers are being ripped off and the tax system is severely abused; Do you wonder why Congress likes it the way it is ? Wonder why they refuse any type of tax reform ?
• Future American generations are being ripped off and burdened with 140 years of massive debt.
• Bought-and-Paid-For governments are pandering to corporations, giving rise to the ugly side of capitalism and elitist government;
• government is fiscally and morally bankrupt
• We have lost untold number of opportunities due to crushing national and private debt, reducing our options, even threatening national security
• It may already be too late, but that’s no reason to hasten it, making it worse for us and future generations, or making recovery from the next recession more difficult;
• We can not grow, immigrate, or tax our way out of the debt or pressing problems that are growing in number and severity, and increasingly ignored by bought-and-paid-for incumbent politicians, who are constantly trying to distract us from their miserable behavior.

Posted by: d.a.n at April 12, 2006 03:39 PM

Here’s a radical idea: make the entitlement problem the baby boomers problem today.

I always hear with a smirk from baby boomers how younger generations are screwed social security and medicare-wise but that the boomers will be ok.

To me, the boomers elected these politicians over the course of their lifetime that mismanaged their social security and medicare, and the boomers - not the next generations - should be the ones who fix it or suffer the consequences. Their benefits should be threatened immediately in order to get them to use their political power to elect politicians that fix the long term problem.

If you break it (be it purposely or for lack of paying attention) you should be the one to fix it or suffer, not your children.

What the hell is wrong with these people? They take take take and when they can’t afford their wants, they run up the national credit card and plan to leave it to their children to inherit.\

We need some UNcompassionate fiscal conservatives to be elected. Finding a fiscal conservative nowadays is a hard thing to do, the Republicans since Reagan have been far worse than Democrats.

Posted by: Redlenses at April 12, 2006 03:48 PM

Posted by: Ted at April 11, 2006 09:57 PM … if we hold elected officials feet to the fire for an election cycle or 10 they will have to concern themselves with what we want. It would be nice if they bothered with our concerns more than at election time, if only a few “safe districts” start to fall consistantly we could wrest government back from lobbies, corporations and large $ interests.

Ted, I agree!. We’ve tried everything else. Why not, finally, try the one simple thing we should have been doing all along?

David R. Remer at April 11, 2006 wrote:

Common sense, it is not as pervasive as most of us would like to think.

Either that, or a conflict-of-interest.
Self-interest that is.
The irony of our microscopic self-interest is that it sabotages our macroscopic goals.
Microscopically, we instinctually and logically know our desire for security and proseperity.
Macroscopically, we are unable to do the most simple, common-sense, non-partisan, inexpensive, responsible thing that is right under our nose, for the improvement of us all.

Voters have the right to vote, but fail to see that very thing that is right under their nose to peacefully force government to be responsible and accountable too. Education is the key.

Then, hopefully, someday, we will understand why and how we keep shooting ourselves in the foot.
______________________________

… the boomers ; not the next generations ; should be the ones who fix it or suffer the consequences. Their benefits should be threatened immediately in order to get them to use their political power to elect politicians that fix the long term problem. If you break it (be it purposely or for lack of paying attention) you should be the one to fix it or suffer, not your children.

Redlenses,
Something has to give somewhere.
That is what they mean when they talk about the “Generational Storm”. There is going to be a struggle. Young people are growing resentful of the entitlements. Especially as the ratio of younger tax payers to entitltements recipients grows smaller and smaller, and the tax burden becomes larger and larger. Several have written books about this coming “Generational Storm”. It’s not hard to fathom.

I would forfeit everything I’ve paid into Social Security and Medicare over the last 34 years if they would stop making me pay into it now. But, that is the very microscopic viewpoint mentioned above. The boomers paid into Social Security and Medicare all their life. Should they be denied the benefits? No. However, since it has been so terribly mismanaged, along with dozens of other things for so many decades, the problem will most likely solve itself the hard, painful way.

Posted by: d.a.n at April 12, 2006 04:17 PM

BINGO! We are allowing our enemies in, handing them our sword and laying our collective heads on the block. We are even apologizing for not being capable of beheading ourselves so they won’t have to be bothered with the chore.

As Ann Coulter so aptly put it, go to France or Mexico or the Middle East or any OTHER FREAKIN’ COUNTRY ON EARTH and try this crap with them. They’ll be no apology, or amnesty, just a good buttkicking, jail and deportation back home, IF you are lucky. We have become too chicken-s#*t to defend our freedom or our security, and we now deserve neither. I am sad for my country and for the world, it will be worse off without us.

Posted by: David C. at April 12, 2006 10:48 PM

Entitlements the problem? No, financial mismanagement is at the root: as a nation, we’ve failed to master simple addition and subtraction. We spend much more than we take in. Period. No fancy economic formulas needed.

Any Republicans who claim to be “conservative” are either stubbornly deluded or simply perverse. The Republican Party is the party of radical and libertine irresponsibilty and ineptitude. Whatever we thought of Mr. Clinton personally, his administration could at least balance a budget. Alas, the nation voted in the current administration, which is reckless to such a degree that an objective observer could be forgiven for assuming it is intentionally striving to destroy the economic stability of the richest nation on earth.

My theory? The only possible answer left in a world gone mad: George W. as Manchurian Candidate.

Posted by: Reed Sanders at April 12, 2006 10:53 PM

Reed Sanders wrote: Entitlements the problem? No, financial mismanagement is at the root: as a nation, we’ve failed to master simple addition and subtraction. We spend much more than we take in. Period. No fancy economic formulas needed.

Thank you!
Now, wasn’t that simple?
I couldn’t agree more.

The only possible solution (which is a long shot), is to educate voters how it all works.
A picture is worth a thousand words.

It seems people have no common sense (some don’t).
But, what most people lack is education.
People have a microscopic viewpoint.
People understand their own desire for security and prosperity.
People do not understand the macroscopic (big) picture.
People do not see how they are shooting themselves in the foot, because they do not understand what they need to do to help themselves.
People have been given the right to vote, but they lazily squander it by pulling the party lever (i.e. straight ticket).
People have got to stop being lazy, stop pulling the party ticket lever, and start doing what voters were always supposed to be doing all along.
Voters can keep re-electing irresponsible incubments,
keep empowering incumbents irresponsible behavior,
keep letting incumbents ignore problems growing in number and severity,
keep letting corruption grow (as it always does if allowed),

… Or simply do what voters were always supposed to do: vote out all irresponsible incumbents, always, stop re-electing repeat offenders, and stop shooting ourselves in the foot.

Eductation will lead to demands to make things Transparent, which will lead to Accountability,
which will lead to Responsibilty.

Posted by: d.a.n at April 12, 2006 11:30 PM

Dan,
Can you produce the same picture above only with the names on the doors changed? IMHO it would make a great sign for what VOID Voters need to do in 2006 & 2008.

Posted by: Henry Schlatman at April 13, 2006 12:46 AM

Wow!
That’s a great idea, Henry.

Posted by: d.a.n at April 13, 2006 01:57 AM

Now put 2004 vs. 2006 and I think we might have a good picture for VOIDNOW.org

Posted by: Henry Schlatman at April 13, 2006 04:45 AM

Here are some ideas for fixing Social Security:

1) Eliminate the cap of $90,000 that is tax eligible. However, to ensure that the middle class isn’t hit with an enormous tax hike the tax should be progressive. Like 2.5% for any income exceeding $90,000 but below $150,000, and 5% for income above $150,000 and below $200,000, and the usual rate for any income over $200,000.

2) Tie the retirement age to a percentage (I would suggest 90%) of the average life expectancy determined with each census. So if the life expectancy for men and women averaged about 77 years in 2000, then the retirement age would be about 69.

3) In most projections Social Security is set to take in more revenue than it has to pay out for the next 10-15 years. The government has used this money for years on other programs, leaving nearly $13 trillion in I.O.U.’s. I suggest using the surpluses over the next decade or so to give out low interest mortgages for first time home buyers. The Social Security surplus for the year 2005 was about $270 billion, the government could have used that money to give out 1.35 million 30 year mortgages averaging $200,000 each at 5% interest. In 15 years all the money will have been repaid, and in 30 years they will have doubled their money.

Posted by: bushflipflops at April 13, 2006 07:16 PM

bushflipflops:

I think you will see something like that. (probably watered down.

Fortunately our country is in great shape economically. American industry is lean and mean, and very capable of adapting in the future. They ahve record amounts of cash on hand, and profits as a percentage of GDP are near post WWII records.

I think the doomsdayers are flat wrong.

The pattern to all their thought is to use geometric progression on the bad stuff (debt) and linear progression on the good stuff (assets) and then show that doomsday is coming.

For instance in the current article of discussion, the figure of $40 Trillion of debt is used as a present value for entitlements. What isn’t meantioned is a present value of the economy over the same period of time. Since the nominal economy doubles usually every twelve years or so we need to see the Present value of the economy next to the present value of the debt. This is not shown because it would take away the shock value.

One of the first doomsday books I was aware of was the Population Bomb from 1968. In this doomsday book, instead of using debt as D.A.N. does they were fixated on population growth. In their calculations the horrible stuff was going to happen about thirty years ago.

What happens here over and over again is exactly the same error repeated constantly. Geometric growth of debt without comparing to geometric growth rats of assets which of course produces doomsday.

I would ecourage all readers to reject this predictable type of economics, and insist of apples to apples comparisons of asset growth next to debt growth as an intellectually sound form of debate.

Forinstance the equity of our country (Assets minus liabilities) continues to thrive under both democrats and republicans. Our country continues to get more and more wealthy. According to the Federal Reserve, Net Worth of americans has increase in the last five years more than the total debt of the federal government, and continues to improve as I write this.

Craig

Posted by: Craig Holmes at April 13, 2006 09:06 PM

I wonder why Gold is so high right now?

Posted by: gergle at April 13, 2006 10:45 PM

gergle:

>

There is new demand because a new invention called an “exchange traded fund” allows access to owning gold in as simple a form as buying and selling stock. It might take a bit of time for supply to catch up to this new demand.

Here is an article that explains it. Expect gold prices to moderate after demand is quenched.

http://www.321gold.com/editorials/hamilton/hamilton
021006.html

By the way, there is now an “exchange traded fund” or ETF for silver, and there is a new one for oil. this means you can literally own oil. When you buy into this fund, the fund must purchase and store oil. In addition when you “sell” your ETF they must sell oil.

The world stock market is huge, and even a small “market share” is enough to influence world gold prices.

Craig

Posted by: Craig Holmes at April 13, 2006 11:03 PM

Craig wrote: For instance in the current article of discussion, the figure of $40 Trillion of debt is used as a present value for entitlements. What isn’t meantioned is a present value of the economy over the same period of time. Since the nominal economy doubles usually every twelve years or so we need to see the Present value of the economy next to the present value of the debt. This is not shown because it would take away the shock value.

• Craig, The 40 trillion is not the current combined value of $8.4 trillion National Debt and the $32 trillion of private, nationwide debt. That’s not a future value. It is the current value.
• the doubling of costs/values is mostly due to inflation. While something increases in value, so does the cost of things. It’s a wash at the very least. That’s not to say some things don’t actually appreciate. But, my house for instance, now valued at $50K more than I paid for it is a result of inflation. It is really not worth more than when it was new. Inflation is destabilizing and is the result of the doubling of cost/value every 12 years or so. That is, it is a wash, unless there are periods of large inflation, which there is a danger of with massive borrowing, debt, and printing too much money (as they are now).
>

Craig Holmes wrote: … this doomsday book, instead of using debt as D.A.N. does they were fixated on population growth.

• Now, that’s not quite fair or accurate. You should know better than anyone, and I’ve said it probably a hundred times, it is a combination of many these many factors. Not just one. Above, in fact, I named five major factors that have the potential to make the next recession difficult; perhaps even lead to a depression, and they include the generational storm, National Debt, Energy Vulnerabilities, Entitlements, and Global Competition and Growth Limitations.

Craig Holmes wrote: I think the doomsdayers are flat wrong.

• Maybe? Maybe not. We know we have recessions every 2 to 11 years for the last 46 years. So the next recession is likely to occur between now and 2013. What we are doing on many fronts is going to make recovery from the next recession more difficult. Especially as government ignores our many pressing problems, growing in number and severity. In fact, it seems irresponsible to rule out the potential of an economic meltdown some time in the not too distant future. It is not hard to fathom. Not hard at all. It also seems irresponsible to use a few recent, statistics such as low inflation (but now rising), low interest rates (but now rising), and low unemployment (but stagnant, and median incomes have fallen for 6 consecutive years). We both know that things take a very, very long time to play out. The fiscal irresponsibility of the last 25 years will eventually catch up with us. We can’t keep pushin’ into the future forever.

Craig Holmes wrote: Geometric growth of debt without comparing to geometric growth rats of assets which of course produces doomsday.

• True, you have to include assets too. However, people have loaded up on real estate. That has created some bubbles. Also, real estate values can plumment when the economy is bad, and all the equity people have put in their homes can disappear when they get foreclosed on. Recessions bring massive foreclosures. A Depression would be even worse. Also, the last 6 years since the recession has not allowed much time to build up much equity. Too many people have 30 year loans, and there is hardly any equity built up in the first 10 years. That banks get their interest first, up front. Also, how and when did all of this asset wealth building occur, since median incomes have been falling for the last 6 years? Ummmmm…Huuuuhhh. What some don’t like to talk about is the fact that the middle class is getting squeezed. The gap between the wealthy and everyone else has never been worse since the Great Depression.

Craig Holmes wrote: I would ecourage all readers to reject this predictable type of economics, and insist of apples to apples comparisons of asset growth next to debt growth as an intellectually sound form of debate.

• I couldn’t agree more. Also, look at all the factors. Rarely is only one or two things of any great consequence.

Craig wrote: According to the Federal Reserve, Net Worth of Americans has increased in the last five years more than the total debt of the federal government, and continues to improve as I write this.

• Now, that is an good example of being tricky. It sounds great, right? Wow! $8.4 trillion increase in net worth in 5 years. Well, let’s see. First of all, divide that $8.4 trillion by five which equals $1.68 trillion per year. Now, divide that by the U.S. population of 298,412,183. That comes to only $5630 per person over a five year period. That is only $1126 per person per year. Whoooooooppppeeeeeeeeeeeeeeee ! I’m rich ! Uhhhhhhhhhhhhhhmmmm…. Hold on a minute. $1126 per year? That sucks. Over a five year period, that doesn’t sound so great does it? But, to make things worse, guess where much of that asset wealth building went to? Yep, if you guessed the wealthiest Americans, you guessed right. Average Americans spent it on homes. That won’t be much of a consolation when they get foreclosed on, since $1126 per year won’t buy much equity.

  So, you can now see how easy it is to paint a rosy picture or a dismal picture.
  You have to look at the big picture.
  That includes several dozens of issues, many of which have equal importance.

  Now, an intelligent person will sense that the truth lies somewhere in between.

  But, it is probably safer to error on the safe side, and be more responsible, and try to be better prepared for the next recession, and make sure it does not turn into the next great depression. We are not invincible, and 25 years of fiscal irresponsibility will have consequences. Massive debt can have massive consequences. The National Debt is growing by over $2 billion per day. The government is currently printing too much money, which devalues the dollar. Why do they do that? To help pay the interest on the debt, which is over $1 billion per day. Since the U.S. can’t borrow all of the $2 billion per day, they borrow some, and print some. It’s called “FREE MONEY”. If abused, it can lead to inflation. If GDP fails to grow as much as expected, they will have to print more money. This is making some investors-in-the-U.S.-Debt nervous, so they are starting to reduce their exposure to the U.S. dollar. That could lead to the need to print more money, which can lead to more reduced exposure by foreign investors, which could lead to the need to print more money, … , and before too long, you may need a wheel barrow of U.S. currency to just buy a cup of coffee.



• Lastly, neither Craig Holmes, or Harry S. Dent, or anyone knows exactly when the next recession or depression will occur. We know recessions come and go (every 2 to 11 years in the last 46 years). Harry S. Dent speaks of an eighty year cycle ( i.e. about 80 years between the Revolution, Civil War, The Great Depression, and the Next Downturn?).

The main thing is, there will be another recession, and another depression. It’s not a matter of if. It’s only a matter of when. Are we doing what we should to be prepared and make recovery easier, or are we guaranteeing that it turns into the next great depression?

I don’t think so.
That does not one a doomsdayer.
We need people to question the fiscal irresponsibility of the federal government.
Visit Citizens Against Government Waste (cagw.org) to see the massive pork-barrel, waste, graft, and corporate welfare.
The National Debt to GDP ratio is now 68% .
It has never been worse since WW II.
We are not invincible, but irresponsible incumbent politicians must think so the way they squander tax dollars, and squander countless opportunies to interest payments, graft, waste, corporate welfare, horribly mismanaged systems, fiscal and moral bankruptcy.

Posted by: d.a.n at April 14, 2006 12:22 AM

Dan,
That $1126.00/ yr which the Federal Government says we gain in Wealth almost equals the same as Every American saving $20.00/week or $1,040.00/yr. Who knows maybe the extra $86.00 a year is compounded interest. However, currently that money is being generated by the why Notes and Bonds work when they are not turned over.

Posted by: Henry Schlatman at April 14, 2006 12:33 PM

Dan:

Now, that is an good example of being tricky. It sounds great, right? Wow! $8.4 trillion increase in net worth in 5 years. Well, let’s see. First of all, divide that $8.4 trillion by five which equals $1.68 trillion per year. Now, divide that by the U.S. population of 298,412,183. That comes to only $5630 per person over a five year period. That is only $1126 per person per year.

8.4 Trillion divided by 5 years is $1.68 Trillion per year. And dividing by 298 million people is as you say $5630 per person. The rest of your equation is wrong. You divided for five years twice. The correct figure should be $5530 per person per year. If you assume an average household of four that means families are increasing their wealth by about $20,000 per year.

On your side of the argument, this does not include two things. First of all it does not include an adjustment for cost of living. The numbers quoted are nominal (gross) numbers. The other issue which is more important and that I concede, is that the wealth is not evenly distributed. The wealthy are getting the lions share of this increase.

There is a great value in doomsdayers and they provide a valuable service to our country and economy. The value doomsdayers provide is a catelogue of the “work to be done”. They are very much like the “nagging passenger” who points out all the things to watch for.

If you look through the past, you will find that doomsdayers are notoriously wrong. The reason is because the world sees what they are pointing out and fixes it. A classic example would be Y2K. Without the prophets of doom, our computers would not have gotten fixed. The prophecies were wrong, doomsday didn’t come, it large part because of their warning.

The exact same thing is true here. We are always going to have recessions. Recessions are necessary and important to get rid of excesses in the economy. As we get better and better at managing the economy I would predict that they would get fewer and fewer, but I would also predict that our generation will not see the end of them.

I stand by my basic premise that doomsday predictions will not happen because our country will fix the problems you see as we go along. For instance I was discussing with a Republican friend of mine this morning how in my opinio this is the worst republican congress ever because of their spending. That message will get back to all politicians and spending in the future will be more contained for a while.

Here is my evidence that doomsday is the wrong approach.

George Orwell’s book 1984 was wrong.

“The Population Bomb” of 1968 that predicted doom in the 70’s and 80’s was wrong.

The book “The great depression of 1990” was wrong.

The book “Bankrupt 1995” was wrong.

The Y2K books that predicted doomsday in 2000 were wrong.

The current doomsday thought is wrong also.

All were correct in identifying problems. Where they all misjudged our country was in our country’s ability to fix the problems.

You are correct as well in identifying the issues we face. I agree with almost all of your data. Please agree with my data. My data is that our society has always fixed the problems!!

I stick by my predictions that our economic growth rates for a long time to come will mirror those of the past. The future growth rate of our economy will be at or near historical norms. We may grow a bit under historical norms as the age wave passes by. We will be fine.

Craig

Posted by: Craig Holmes at April 14, 2006 01:26 PM

Dan:

I was refering to the net present value of future entitlements as listed in the paper of question.

The $8.4 Trillion national debt and $32 Trillion of private debt only has meaning when measured against GDP and our national assets. When this is measured we are fine.

Craig

Posted by: Craig Holmes at April 14, 2006 03:56 PM

Dan:

On the previous post this quote should have been included.

Craig, The 40 trillion is not the current combined value of $8.4 trillion National Debt and the $32 trillion of private, nationwide debt. That’s not a future value. It is the current value.

Craig

Posted by: Craig Holmes at April 14, 2006 03:58 PM

Craig said: “The $8.4 Trillion national debt and $32 Trillion of private debt only has meaning when measured against GDP and our national assets.”

Craig, do you hear what you said? Did you think about it before you said it?

How are you going to convince Americans to cash in our national assets to pay our debts? What an absurd postulation, we would go to war first. And no, it does not have meaning only when measured against the GDP. That is preposterous. It has meaning when measured against our ability to pay the interest on the debt and maintain faith in our ability to repay. That is the important factor. Screw GDP, its a rough guide comparison which utterly fails to take into account changing historical circumstances and context.

Our debt to GDP ratio in 1950 is meaningless compared to our debt to GDP ratio today. Then we had decades of economic growth ahead of us with almost no competition in the world. That is not the case today. Hence a meaningless comparison.

Posted by: David R. Remer at April 14, 2006 05:17 PM

Craig Holmes wrote: 8.4 Trillion divided by 5 years is $1.68 Trillion per year. And dividing by 298 million people is as you say $5630 per person. The rest of your equation is wrong. You divided for five years twice.

I know.
It was a test … . just kidding : )
You are correct. Good catch b>!
It should be $5630 per year ( which is $28,150 over 5 years).

Glad to see someone is paying attention.
After all, it was supposed to a lesson in trickiness.

Just kidding. That was an honest mistake.
I shouldn’t have divided by 5 twice.
With you around, I will have to be more careful in the future. : (

But, still … $5630 per year is not all that great, since you would think most any person could increase their net worth by a mere $5630 after working an entire year !. That’s a net worth increase of only $15.43 per day. Makes you wonder if working is worth it?

No?

And, since we know median wages have been falling for 5 years, where has that net worth of $5630 per year been going? To the wealthiest (largely due to tax cuts for the wealthy; the middle class is getting squeezed). And, the gap has never been larger than the Great Depression of 1929 (see below).

Craig, I meant to say:

The $40 trillion is not the current combined value of $8.4 trillion National Debt and the $32 trillion of private, nationwide debt. That is not a future value. It is the current value.

Craig, We might have been talking about two different things? Anyway, of course, debt and assets are always part of the big picture.

Craig Holmes wrote: The current doomsday thought is wrong also.

Uhhhmmmmmm … Well, none of us can know that.

Craig Holmes wrote: All were correct in identifying problems. Where they all misjudged our country was in our country’s ability to fix the problems.

Well, I’m not sure about that, since most of them are still with use, growing in severity every year.

Craig Holmes wrote: You are correct as well in identifying the issues we face.

When you look at it that way (at the big picture), it has an entirely different impact then the talking heads on Television (saying “interest rates are low, inflation is low, corporate profits are high, and unemploymet is low”), since those are short term indicators, and hide that fact that the next two years could be drastically different.

Craig Holmes wrote: I agree with almost all of your data. Please agree with my data.

I do agree with your data too, and commend you on your attention to detail (and catching my divide by five mistake…very good). I don’t think I’ve ever seen you intentionally make up data.

My data is that our society has always fixed the problems!!

Well … I’m not sure that’s quite accurate, we had the Civil War, the Great Depression, and double digit inflation in the 1980’s. I think we could say there have been some advances over thousands of years (which is cause for hope), but I would not go as far to say that we always fixed the problem. Several times in history, we had to suffer through the consequences of our problems because we failed to fix then in time.

So, we have an honest disagreement on what the future holds. That’s OK. I’ll just have to work harder on building a more convincing case.

I think a recession followed by a depression is probable in the next 5 to 10 years.
You do not, and that’s cool.

But, the U.S. is not invincible; actions have consequences; the many factors are not a pretty picture; and it is not a matter of if we will have another recession and/or depression.
It is a matter of when.
Knowing that, are we prepared?
Or, are we setting ourselves up for more pain and misery?
Is there a possibility that a handful of the numerous culminating factors could become critical simultaneously, and possible have a domino effect? It could be devastating. And, I think our ponzi “FREE MONEY” monetary system of perpetual, destabilizing inflation, borrowing, and printing money to shrink debt (but destroying value) will be a major factor too (I need to add that to my list of factors).

At any rate, it seems we can, and should, do much better on many fronts, and our many pressing problems, the ever growing corruption in our FOR SALE, bought-and-paid-for government, and the complacency and disaffection of voters is a recipe for disaster. It is not hard to fathom, not hard at all, how it could easily lead to depression. It has happened before, and it will happen again, someday.

Posted by: d.a.n at April 14, 2006 06:21 PM

Dan:

I think a recession followed by a depression is probable in the next 5 to 10 years. You do not, and that’s cool.

I believe it is not likely we will have a recession followed by a depression in the next 5 to 10 years. I believe we will have a recession in that period of time, that will be “normal” in the sense of what we traditionally experience from time to time. We usually do!!

But you are predicting doomsday. A depression that lasts 20 years is doomsday.

Craig

Posted by: Craig Holmes at April 14, 2006 09:30 PM

Time will tell.

Posted by: d.a.n at April 15, 2006 12:19 AM

The last depression lasted about that long (20 years).
I’m not sure I’d call a depression doomsday.

Doomsday is a 20 mile wide asteriod hits Earth.

But, a depression happened 77 years ago.
It can happen again …

Posted by: d.a.n at April 15, 2006 12:41 AM

Dan:

You use exactly the same logic as “the great depression of 1990”. I have seen this many times before in different forms. The 80 year cycle is used with many different starting points. It is also used by Harry Dent who is predicting the Dow to reach 40,000. Do you think the Dow will reach 40,000?

Craig

Posted by: Craig Holmes at April 15, 2006 12:50 AM

Dan:

I would seriously encourage you to read “the great depression of 1990.”

Craig

Posted by: Craig Holmes at April 15, 2006 12:52 AM

Dan:

Here is the review written when “The great Depression of 1990” came out:

Doomsayers have always been part of the landscape of economic forecasting. Batra, international trade economist, has ventured a bit afield from his specialty to predict that the economic sky will fall in late 1989 or early 1990. Using P.R. Sarkar’s theory of historical determinism, Batra projects a collapse of the Western economies and a world depression that will arrive in 1990 and plague us for seven years. He analyzes the historical cycles of monetary growth, inflation, and regulation to extrapolate a confluence of cycles in 1990 reminiscent of the crash of 1929. Will it happen? The majority of economists think not. For those who are convinced, chapter 8 recommends financial strategies prior to and during the depression. Not recommended.Gene R. Laczniak, Coll. of Business, Marquette Univ., Milwaukee Copyright 1987 Reed Business Information, Inc.

See the parallels between this book and your thoughts?

Craig

Posted by: Craig Holmes at April 15, 2006 12:58 AM

Craig,

I read part of that book.
I didn’t believe it then, or any that preceded it.

See the parallels between this book and your thoughts?

No. First of all, I do not know the future. I believe there is a real potential for an economic meltdown. If a handful of things continue on the same path, I am confident an economic meltdown will happen, and few would disagree with that. That is sufficient reason for any prudent person to be concerned. Especially, when we are still, at this moment, on those paths to ruin. The path, first, must change, and only then may concerns justifiably be quelled. Until then, Americans have a right (as always) and the justification to be concerned and question government.

Why? Because it can.
Ever heard of Murphy’s law?
But, also because of many factors.

But, whether a depression occurs or not is not the only issue.

There are important issues regardless, such as:

• lost opportunities


• growing corruption and all of the problems stemming from it alone


• the difficulty of recovering from the next inevitable recession; risking a depression


• the massive waste and burden of $1 billion per day in interest alone


• the burden on future generations for over 140 years to come


• the hypocrisy of the phony “FREE MONEY TREE” monetary system and perpetual, destabilizing inflation and printing money


• the fleecing of the middle class U.S. American citizens


• the security risk caused by the obvious lack of options created by such fiscal and moral bankruptcy

Craig Holmes,
A recession and/or a depression will occur someday.
It is not a matter of if.
It is only a matter of when.

Are we making recovery from it easier ?
Are we being fair to future generations ?
Are we being responsible ?
Are we invincible ?
Is government responsible ?
Do we have a good monetary system ?
If we have a good monetary system, why is destabilizing inflation always present ?
Is there not room for considerable improvement ?

The possibility of a recession/depression is should not be played down, nor overstated.
The possibility of a recession/depression is a real, so people should not be lured into a false sense of security by those that say it can’t happen.

The problem you and I have is that neither one of us can really win the argument.
I prefer to err on the side of caution and preparedness, but not to the point that it stiffles growth and progress.

What I see happening in D.C. does not even remotely resemble responsible management or behavior, which is why many people are fed up.
Hopefully, coming elections may prove it.

Posted by: d.a.n at April 15, 2006 02:52 PM

David:

>

No reason to, we earn enough income off of them to pay the debt.

Craig

p.s. this is not the correct argument on the economy that we keep having. The place where there are very valid points is with equity. The working class truely is suffering in our country relative to the wealthy.

Posted by: Craig Holmes at April 15, 2006 03:04 PM

David:

Screw GDP, its a rough guide comparison which utterly fails to take into account changing historical circumstances and context.

GDP composition has changed many times through out nations history. It is very capable of performing very well within our historical circumstances and context.

Craig

Posted by: Craig Holmes at April 15, 2006 03:07 PM

Craig wrote: The working class truely is suffering in our country relative to the wealthy.

Yes, they are, because:

• median household incomes have been falling for 6 consecutive years.


• decreasing quality, but increasing cost of education (largley due to increased burdens on U.S. citizens due to illegal aliens; $10 billion a year for California; estimated at 24 billion annually)


• increasing cost of everything (inflation; maybe cheap labor ain’t helping that much after?)


• increasing burden on U.S. tax payers for 32% of all illegal aliens receiving welfare


• we are importing poverty and putting the burden on the average U.S. citizen, while greedy employers of illegal aliens, and bought-and-paid-for incumbent, pro-illegal-immigration politicians both make out like profit from it all.


• increasing burden on U.S. tax payers for illegal aliens receiving Social Security, Medicare, Medicaid, college tuitions, etc.


• increasing burden on U.S. tax payers for law enforcement and incarceration of illegal aliens (29% of all prisoners in state, federal, and local) are illegal aliens


• increasing cost of healthcare due to non-paying illegal aliens using hospitals and ERs (the most expensive form of healthcare) as their primary care provider.


• tax cuts for the wealthy.


• the g a p between the wealthiest 1% of the population hasn’t been larger since the Great Depression of 1929.


• 68% %Debt to Debt has never been higher since WWII.


• Social Security is $12.8 trillion in the hole and has never been in worse shape (source: cato.org).


• Medicare has never been in worse shape.


• Foreclosures nation-wide have risen for over 13 consecutive months.


• inflation and interest rates are increasing.


• Foreign competition has never been stronger, and more educated


• Enery costs are squeezing the poor and middle income households.


• Trade deficits have never been worse, and jobs continue to move abroad; it’s a race to the bottom.


• Deficits have never been larger, and $200 to $400 billion deficits (in 2006 dollars) are planned to continue for years. The average U.S. tax payer is paying the burden, part of which is $1 billion per day in interest alone, and we are passing on massive debt to future generations for the next 140 years.

Posted by: d.a.n at April 16, 2006 01:28 AM

By the way, everyone makes a big deal about the $8.4 trillion in National Debt , but that pales in comparison to the other debts the federal government tries to ignore:

• Social Security is already $12 trillion in the hole (source: Cato Institute), which is always dishonestly left out of the federal debt reports.


• PBGC is $500 billion in the hole.


• Medicare is in huge trouble with deficits forecast for years,


• and the National Debt is growing by $2 billion per day!

That comes up to $24 trillion of federal debt alone!

And, all non-federal government debt (nationwide) is: $32 trillion !

That is a total of $56 trillion !
The graph below includes the often overlooked, $12 trillion in worthless I.O.U.s in the Social Security lock box:

That is not just a little debt.
This nation is swimming in an ocean of debt.

Now, toss in the following:

• Energy Vulnerability


• the looming generational storm (debt pushed onto the shrinking percentage of young tax payers) and looming shortfalls in entitlements


• decreasing quality (and increasing cost) of eduction


• limited growth of U.S. GDP, and ever increasing foreign competition (and better educated too), and huge trade deficits.


• and our fiscally irresponsible “FREE MONEY” monetary system which perpetuates the ever present, destabilizing inflation.

If we stay on this path, an economic meltdown is guaranteed.
Americans need to know this.
Trying to paint a rosy picture is irresponsible.

And, debt is only part of it.
There are many pressing problems that will give new meaning to the saying:

“When it rains, it pours.”

Posted by: d.a.n at April 16, 2006 12:52 PM

There is no question that estate taxes must be adjusted and kept in place to insure against accumulation of wealth into so few hands that it results in seismic losses of consumerism in the future.

Thanks to Mr. Remer above, I have thought this very same, with respect to the general economy, that capitalism only functions well when it is in as many hands as possible, that too much concentration of capital results in maladjusted distribution and decision making, in effect over-concentration does more to harm capitalism than almost anything else.

I also think that it IS too late to swerve to avoid the iceberg collision. I believe that like a large ocean liner the economy is too large to turn on a dime, that steps have been taken to intentionally direct our course to the ice.

About entitlement spending, I first should disclose that while I used to be a Stockbroker, with a finance degree, I am now dependant upon the taxpayer as a totally disabled veteran. My conscience is clear about it, I served my country, and I paid a lot in taxes along the way. My entitlement is a mere poverty level $28,800 per year, and while I thank you all for that I am not the cause of the current trouble in the economy. I would posit that entitlements in a fair society are a symptom rather than a cause of economic dislocation.

People cannot help getting old or hurt, it is not the fault of the poor that a visit to the local ER now costs $1,000 just to go through the door. It is policy at higher levels, and for instance I will use healthcare; we already pay far more in GDP for the current system that rations care by deleting 46 million people from eligibility than we would spent on a Veteran’s model universal system. Some wealthier citizens would resent the waiting rooms, but in all fairness is their comfort adequate reason to deny healthcare to tens of millions? As a former analyst with Medicaid I can tell you that we are not getting much bang for the buck, and the same goes for other programs.

I have thought long about the reasons for this and maybe I am just not smart enough, but to me all fingers point to an effort by the wealthiest to recreate a feudal world along the lines of primitive Russia of the 18th century, or if you prefer, the “Gilded Age” of robber barons and magnate control of trusts. One thing I am certain about is that the moves so far have not been in the best interests of the vast majority of people, and smack of manipulation by outsiders with a distaste for freedom and American national goals and ideals.

Can we all please start by agreeing that the CPI numbers are as bogus as any statistic ever produced? Once we do agree then we realize that a lot of the economic data we input into our financial ratios and calculations needed for accurate projection are just as bogus. Nothing so rendered my finance degree a worthless piece of paper as the realization that none of the numbers I had at my disposal were of any value.

All the arguments above that rest upon the premise that the authors have good data is fool hearty. All the charts are skewed, all the statistics are off, and all the resulting opinion about causes and possible solutions are at least partly wrong.

At this point a better way to understand the impacts and possible solutions to our economic situation would be to trust your eyes and your values. You see people living in their cars? You know people (maybe you) who have two parents working a combined 120 or more hours to make ends meet? You hit a pothole that has been in your lane for a year now with no attention? You read articles about mind boggling deficits in government and trade, and even those are understated in true impact?

What will it mean for our collective future? It means Mr. Walker was right about one thing, a very few rich will do OK, the rest are not going to like what is coming once the berg is hit, and I have already made plans to leave the country for a place that already has learned how to survive, even thrive in very bad economic situations.

I can predict right now that once the iceberg in question sinks us the ones in the lifeboats will be astonished that they did not see it in time. Even after all we know they will scratch their heads and say that they could not have predicted this. That we let them do this to us is a testiment to our own problems not theirs.

Posted by: Markus Walker at April 16, 2006 02:18 PM

I want to add to my above comment that finger pointing at political allegiances and parties will solve nothing.

I want to also say that the Mass. Healthcare “Plan” is no plan at all, it is just a way to force people into the already broken private insurance system which many have judged their finances unable to withstand. Mark my words today, this forced purchase will end up as all government interference does, a tool to rob those least able to afford it. Some will flee to other states where they are not forced to buy what they cannot afford, but eventually they will run out of places to go and will be fleeced.

Re the speculative dates given for the “crash:” it is my understanding that the ONLY thing between us and the berg is the “full faith and credit” of the taxing authority of those that print the dollars, so the trigger in my view will not be the crest of the “Boomer” wave in 2020, nor will it be started by a normal business cycle in say 2010, it will happen on the same day as a large holder of our IOU’s believes the USA has not the will or sense to honor their commitments with a sound dollar. Our recent attempts to force the Chinese to revalue the Yuan is a good example, all that they have lent to us would go away, or be reduced significantly if their currency is revalued, why should they risk depreciation associated with holding our junk bonds?

Anyway, they and others like the Japanese have a finite savings to use to support the value of their dollar export sales to us, mercantilism always eventually fails in historic proportions when any one power is the majority debtor, Great Britain is a good example. They have common sense and know this, they have taken steps to insulate their positions, we have not, and as the reserve currency maker of the world we are target one for economic warfare.

A major source of our pain is cheap imported oil, which as we can see is not really cheap anymore though the price of crude is more about dollar hegemony than about market factors like supply and demand, it says more about fundamentals of the dollar trading system than it does about oil. We can hardly blame others for taking advantage of our folly to benefit their own self interests.

We could now take steps to avoid the worst pain of the PEAK oil problems, or we can have it forced upon us later at higher sacrifice, which I might add will be more unfair and actually kill Americans as they freeze to their own floors in unheated houses. We could bite a nasty bullet now or take one to the temple later, I would propose a 100% import tariff upon foreign sourced oil, thus dampening demand to the point of falling prices and thereby increasing potential supply. If OPEC decides oil will be $68, then at the port it will be $136, and the revenue that accrues from this would be used NOT for the general funded entitlements so many here think are the bane of capitalism, but to fund a Manhattan Project of energy independence which would be a huge boon to our economic activity today as well as yielding long-term benefits in the future.

I also want to point out two other of my long-held beliefs from business school, there is no such thing as a tax cut. Taxes can be deferred to the future, but not cut. The ONLY way you can cut them is not to spend in the first place. A true conservative would swear by PAY-GO rules. A penny spent is a penny taxed PERIOD. Or, more if you have to repay with interest in the future. It is immoral to stick future Americans with our debts unless those debts are specifically incurred as an investment in them. And even then that morality is suspect.

Lastly, the value of the dollar and thus the wealth of Americans is inextricably bound up together. It is a straw man to think that the debt is restricted to the federal fiscal budget deficit. In real terms you have to consider the federal fiscal shortfall PLUS the current account gap from trade. Depressing the value of the dollar via the trade/current account deficit masks many problems while some in government crow that it actually GOOD for the economy, but they are outright lying about that and they know it. It leads to inflation which is the most insidious tax of all. It has the advantage for the wealthy of hitting the poorest while adding to their fortunes in the guise of higher returns upon the investor class assets. That we have a CPI that intentionally understates inflation is the right wing answer to entitlements, they aim to make them as good as worthless through inflation. Everyone of us here that is honest knows that inflation is far higher than the nonexistent inflation the Fed keeps bragging about.

So, when you add the twin deficits you find that we are going into the hole at the rate of $4.605 BILLION per day. Note, I make the federal fiscal deficit to be 958 billion when you consider that over $500 billion per year of Social Security receipts are used to mask the “true” shortfall between revenue and expenditures. That was why the republican party was so vehemently against Al Gores suggestion of a “lock box” for SS, it would expose the REAL deficit for what it is.

At $4,605 billion per day inflow of foreign savings it will NOT take till 2020, or even 2010 till we have tapped out our credit card government. And, the result will ergo HAVE to be default either through repudiation of the debts, or via repayment in worthless dollars which is a political way to do the same thing. I am on record as saying that we will not get through 2006 without being financially undone. Now that political prophets foresee a democrat victory at least in the house in November I think we will see it “triggered” between the election and Christmas in order that the left will get blamed. Look for derivatives to start it in response to “nervousness about democratic control.”

Perhaps my handle should be Casandra because I may be right with future clarity, but it will happen anyway with nobody paying attention. All that cash flowing in today is in a Trojan Horse that is filled with destruction for us.

Posted by: Markus Walker at April 16, 2006 03:16 PM

One other thing, doomsayers have always been a part of the economic landscape gets a mention above, but “depression is coming” crowd is like a terrorist in one respect, they only have to be right once to see major pain and trouble. I would rather see a situation in which honest discourse between good minds replaced political hidden agendas where economics is concerned. I am a doomsayer in economics, but I will eventually be right and when I am there will be blood in the streets, it happened before and will happen again.

Posted by: Markus Walker at April 16, 2006 04:08 PM

Markus Walker,

Thank you for those informative posts.

You are perceptive.
You have given this much thought.
Too bad you are an extreme minority.

Yes, the $8.4 trillion National Debt.

Government also has people brainwashed into believing 4.5% inflation is good. They do not understand that 4.5% every year destroys savings, destabilizes the economy, and sends everyone scurrying to find ways (sometimes risky) to earn interest to offset inflation. They do not understand why we have inflation. Government create it so they can spend more than they have, and destroy the debt by making it worthless.
It is a fiscally irresponsible “FREE MONEY” monetary system which perpetuates the ever present, destabilizing inflation.

I’ve ignored the doomsdayers until 1995 (when %Debt to GDP was 67%, and now (68% and growing fast), because the path we are on, if we stay on it, will, without a shadow of a doubt, lead to an economic meltdown.

And, as you say, it may already be too late.
We may not be able to turn this Titanic problem around soon enough to avoid the iceberg.

The problem is a total lack of oversight and Transparency. Thus, there is no Accountability, or Responsibility. Voters need Education to understand the basics.

Posted by: d.a.n at April 16, 2006 07:21 PM

Markus Walker:

One other thing, doomsayers have always been a part of the economic landscape gets a mention above, but “depression is coming” crowd is like a terrorist in one respect, they only have to be right once to see major pain and trouble. I would rather see a situation in which honest discourse between good minds replaced political hidden agendas where economics is concerned. I am a doomsayer in economics, but I will eventually be right and when I am there will be blood in the streets, it happened before and will happen again.

I agree with much of this. A broken clock is right twice a day. These are not different times. There have always been lists of horrible things on the horizon. There is always doom in the future. And of course opportunity. It is great to have a list of our work to be done listed over and over and over again.

The future will be much like the past. There will be recessions. There might be a deppression in our life time. It certainly will not be like the one int the thirties. I believe we have learned what caused that one, and how to prevent one of like cause again. (Raising taxes and tarriffs in a recession is backwards and induces more severe consequences).

I very much doubt a depression would be caused by anything listed above. There are great minds working on all these problems. A depression would be caused by something new. A nuclear terrorist in a major US city, or something like that. In the sense that doomsdayers will eventually be right. IT is because there is new evil to be created that the world has not seen.

Until then, the economy will continue to grow at or near historical rates. It may grow a bit under historical rates as the age wave passes.

Craig

Posted by: Craig Holmes at April 16, 2006 09:37 PM

I resent being called an age wave. :)

Posted by: gergle at April 16, 2006 10:55 PM

These are not different times.

… but? …

It certainly will not be like the one in the thirties [i.e. Great Depression].

Why not, if times are not different?

There are great minds working on all these problems.

Is Harry S. Dent one of those great minds ? What do these great minds have to say about the current situation (e.g. $24 trillion on total federal debt, falling media wages, growing g a p between the wealthiest 1% and the remaining 99% of the population, etc.)? From what I can tell, many of them are worried. It is only a few (who seem to be mostly pro-Republican) trying to paint a rosy picture of the gathering storm.

The question is, are we doing the right thing now to make recovery easier? I don’t think so.

And, even if a depression is not in the not too distant future, does that justify the current fiscal and moral bankruptcy ?

I believe we have learned what caused that one, and how to prevent one of like cause again.

It does not appear so at all. $24 trillion in total federal debt sounds like a recipe for disaster, much less being responsible and prepared so that recovery from the next recession/depression can be easier. And the other numerous factors are piling up because do-nothing government continues to ignore them, and refuse to make tough decisions for fear of risking re-election or angering their big-money-donor-puppeteers.

Recessions and a Depression have occured before due to fiscal irresponsibility.
There is no reason to believe it can’t happen again. Among the growing list of pressing probems, only a few have the potential to bring about an economic meltdown.

If the government stays on its current path (and it may be too late…it may not matter if the path is changed now or now), an economic meltdown is guaranteed. Growing the National Debt by $4 billion per day can not continue. Government FOR SALE can not continue. Continuing to steal from Social Security can not continue. No vision for energy alternatives makes us vulnerable.

(Raising taxes and tarriffs in a recession is backwards and induces more severe consequences).

Definitely true. But, if we do anything to taxes, it should be to reform the tax system so that most pay their fair portion. That last round of tax cuts for the wealthy did not help matters much.

The real wild card may be the fiscally and morally bankrupt government we now have, and slumbering voters that don’t know how to step out of the path of an oncoming train?

Posted by: d.a.n at April 16, 2006 11:55 PM

Dan:

>

No. I don’t think the dow will go to 40,000. Besides he totally diagrees with your train of thought. Harry Dent has the prime mover as demographics. You have the prime mover as debt.

What do these great minds have to say about the current situation (e.g. $24 trillion on total federal debt, falling media wages, growing g a p between the wealthiest 1% and the remaining 99% of the population, etc.)? From what I can tell, many of them are worried.

There is always something to worry about. The great minds also see increasing productivity, low inflation, increasing trade, and the Internet boom heading into the build out phase. I think the dominant thinker right now that has captured the language if the book “the world is flat”. I think that book laid out a new language for others to build within.

These are not different times.

… but? …

It certainly will not be like the one in the thirties [i.e. Great Depression].

Why not, if times are not different?

This is not the thirties because we have lived through the thirties and wont make the same mistakes. We will not pass legislation that destroys trade. We will not raise taxes in a falling economy. We will increase liquidity in times of crisis.

The best way I can tell you that it is the same and different is driving in snow. When the car slides, if you turn the wheel the wrong way you will roll the car. YOu have to turn into the slide. Things are the same, because we are going to have snow storms in the future. However we have learned not to turn the steering wheel the wrong way like we did in the thirties. We will have an other depression, but it will be when we face something that we have not encountered before. (Something not on your list).

Recessions and a Depression have occured before due to fiscal irresponsibility.

I think this is a wrong characterization. Most recessions are caused by excesses created during expansions. For instance, job growth increases to the point of labor shortages which cause inflation which causes interest rates to move high, which chokes off growth and causes the economy to decline. Then of course there are lay offs which causes a decline in inflation, which causes a lowering of interest rates which the sparks consumer spending (housing) which starts a new business cycle. By manipulating interest rates, we are getting better and better at managing the cycles so that excesses to not occur.

Which recession/depression are you blaming on corruption?

Craig

Posted by: Craig Holmes at April 17, 2006 12:50 AM

I remember the stories Grandfather told about the depression, I will not repeat the long detail of the nickle an hour hefting of grain sacks when he had been raised in “the lap of luxury” as the scion of a prosperous family in Bremerton Washington. I will say that some things never change, the human condition, how we feel and respond to poverty, to injustice, these things do not change.

If anything we are in a far worse position now than we were in 1929, some things are the same and others better, others worse, but one thing we did not have then was the debt level we have now. I saw the post above that claims we have MORE than 52 trillion in total dollar denominated debt when you account for all sources of owing. I have reliable figures that show that it was more like 65 trillion two years ago, so it would be in the neighborhood of 78 or more trillion now. Considering housing inflation it could be a good deal more.

One of the most basic lessons I learned in university in finance was that money is NOT created by printing up more of the paper dollars, it is created when it is LENT. Naturally every dollar that is lent by one entity is borrowed by another. So, if there is at minimum 70 trillion owed then there is 70 trillion more dollars than what is considered the “money supply.” By the way, the only way to reduce money is to take it out of circulation. The point here is that 70 trillion and growing SO fast that the government will no longer publish the money supply numbers after last month, means that we will experience inflation not seen since Weimar Germany. Who cares what our debt to Japan is if it is equal to the price of one new car?

Unfortunately it will leave all but the citizens with tangible assets totally dependant upon entitlements or charity for life itself. I guessed what the republicans were up to in this when they restricted bankruptcy laws in ways you are not yet aware of. Do you readers understand that half of all Americans have NEGATIVE assets? That is another way of saying that if we have a crash tomorrow half of all people in this country will have less than zero to support themselves, and a good deal of the rest will be a paycheck away from that.

Here is something few democrats and zero republicans understand, when the government spends money it has to be paid into the treasury by those that have money. Seems simple enough, but you will be surprised at how few people grasp this. I am not saying the government should NOT spend, but it should spend wisely, prioritizing expenses. Iraq alone, a mess and boondoggle, will cost us more than a trillion bucks if we got lock stock and barrel out today. How smart was that? What was made better by our charge of the mastercard brigade? What was made worse?

The problem is that our government is no longer a democracy, nor is it even a republic, it is Rome with half wits running the show for the benefit of their powerful patrons, not you, nor I. There was a time when America meant opportunity, endless expansion into the west, and all you needed was hard work and a little luck and you had a setup that would make you and your family well off. Now, the best chance of getting ahead is illegal drugs, or Powerball. As bad as the lottery is in admitting people into the American dream it now offers better odds than hard work, but rest assured that if you do hit the millions in the lottery you will pay tax upon it one time, the year you win and never again after that if you have a half decent accountant.

Another thing the left often forgets and the right denies in total is that the oil companies, the timber companies, the miners, fishermen, and every polluter, the ranchers that feed stock on public lands, the builders of dams on our rivers, all the users of America’s riches are taking what belongs to all Americans. They work hard and deserve rewards, but, not the obscenities they now steal. There needs to be a progressive tax on wealth, not mere income, otherwise the nation will die. The rich can still be rich, just not obscenely rich, the middle should be the rest, there should be no really poor people in America. We need a culture that instills pride in ones contribution not in ones ability get all he can. We need a culture that makes a place for the disabled who can work to contribute without losing vital income and healthcare.

My own sister went on disability and welfare because she had a kid and could not get work that afforded them healthcare, how many millions are on that “lazy” treadmill for the healthcare alone? Of course, in that county in California unemployment has never been below 10% and when I graduated high school the official rate was over 35%. The only person to benefit is the employer who gets his workers cheaply, and the military recruiters of course. The state, or federal government could have changed that, they could have given incentives to business to root there. Here is a clue for you all, that model is the national model in coming years.

I have always held that republican America is all about reducing the cost of the business input called labor. That is why we had amnesty under Reagan, that is why we will get it again under Bush, called a “guest worker program” or some such twaddle, but the same thing. The bottom line is that the border is never going to be guarded. Companies will still get federal welfare to outsource offshore. The middle class will be historic curiosity only, bottom line is that the input called labor is you. You have been made cheaper, you will sell your time for nearly nothing soon. One of the great achievements of the right wing in America has been to suspend, at least just long enough, the laws of supply and demand, they did this by obscuring the true values of what both were. Thus the statistics that few believe any more.

And, for a last note, not so much financial but a symptom of the general atmosphere we now inhabit, I saw those jets on September 11 go over my house in New York that gorgeous morning while I was enjoying my first coffee on the patio, and they were travelling wing tip to wing tip in a west by south west flight path. The government says that they crossed paths over our area but minutes apart. I saw what I saw, one the American Airlines jet, the other United, low enough to see the markings on the tails and the windows where people were looking down at their last sights of their lives. If the government will lie about such a small detail then what else will they lie about to us? That one detail was enough to make me question the whole totality of 9/11/01. We live in a make believe world now where we are children that believe in the Santas and the tooth fairies they ask us to believe in. It could be that a rural agrarian society that is both small and homogenous as the 13 colonies were are a utopia that can be democratic, and that a nation of continental scope with hundreds of millions just cannot be that. If that is so, I think it is, then at least we must have people in power that are the lesser of two evils. Those that would try to reform the system with a Ralph Nader or a parliamentary system of multiple splinter coalition governments are fooling themselves and in fact supporting the worse of the two evil.

So, off my soapbox for tonight, I have packing to do as my rent was raised so much that I will be living in my vehicle after the first of the month. At least I can CLAIM to be camping. But, I plan to vote with the feet and go to another country this year. I am too old and have fought my battles. Time to tango till the bombs fall.

Posted by: Markus Walker at April 17, 2006 01:12 AM

Is it not sad that in this nation of fabulous wealth, the richest most powerful place on the planet that Safeway (and other grocery stores)put padlocks on their dumpsters because there are so many homeless eating out of them that it has disrupted delivery trucks?

Medford Oregon where I now live is a city of about 100,000 and the Rogue Valley has twice that, and it is considered quite prosperous in terms of unearned income, dividends and land wealth, and such, but one of every five high school students here is homeless. One in five folks, and that is the “official” number that is understated.

When I read that in the local paper a few months ago I was devastated, I felt an urgent need to do something about it and yet that same month my rent was raised from 700 to 800 for the coming year and I was looking into homelessness myself. I had cut out the newspaper delivery, I had cut out the premium channels on TV, I had dropped the renters insurance, I had lowered my auto insurance to the legally required minimums, I quit eating most red meat and stopped fish altogether, thank god I am thin enough to get by on pasta. I almost quit driving, one tank a month with gas at almost $3 per. I no longer donate, nor can I support PBS. All that I have held to have value in my life is gone, I am down to bare survival on $28.8K a year. And, now that the “luxuries” are gone I have to start redefining luxury to include such things as a roof. My possessions will go into storage at $65 per month till June 1 when the storage place informs me that rent there will be $75 (or 15.3% inflation).

Of course living in the Durango will be hard with gas so high. When I bought it in August 2003 I paid $1.59 for unleaded. Now it is $2.89, or 81.7% increase in a bit over two years. Hey, but I believe Bush and Greenspan when they say there is NO inflation. Of course they cannot have the same cable service as the monopoly we have here. It has gone up almost as fast as healthcare and tuition.

What kills me is the FACT that housing just is NOT in the inflation numbers at all. It is a major, even the LARGEST part of all household budgets, and it has been going up at 20-30% for years, which by itself SHOULD give us double digit inflation in America, but through the use of magic smoke and mirrors at the Department of labor which tracks prices we have zero inflation.

I don’t know about you, but I resent being taken for an idiot. I know that my Mom rented a 6 bedroom farmhouse in Nebraska in 1968 for $90 per month, and this little apartment will be more than 10 times that next year. I know that I bought a 2,300 square foot house of brick and four columns on the front porch with a concrete in ground pool in the back (rare in Tallahassee, the ground is clay and pools have a tendency to “float” up out of the ground unless expensive reinforcements are done) for $105,000 in the year 2000. Anybody want to sell me such a house for that today, I will buy it, promise.

Oh well, most of you have yours for now, you certainly don’t want me telling you about locks on dumpsters to keep people from eating out of them d you? You know what? When the crash does happen I hope none of you have to fight over spoiled food to feed your kids from the local dumpsters. It would just wreck your day and we would not want that.

I do wonder how many people DO have to eat out of dumpsters before they rise up and take what is theirs?

Posted by: Markus Walker at April 17, 2006 02:32 AM

Markus Walker,
Those are very thoughtful passages.
There are many that don’t think the debt is anything to worry about.
That might be true if were not for a number of other things, all culminating about the same time to produce the perfect storm.
I am preparing and recommending others start ASAP, by:

• 
  owning a home (not necessarily the one they are in which is probably more than they can afford), so they will at least have a place to live without being foreclosed on; also, property taxes will be lower; most people have 30 year loans (dumb) and don’t have much equity;


• when stocks and securities start falling, don’t hang on to stocks to the very end. Be prepared to cut losses soon, and get out early (if possible).


• Be ready to cash out 401K’s and IRA and invest in tangilbe assets (e.g. land, low cost housing, etc.), rather than watch it dissapear before your very eyes due to inflation.


• Live moderately; make your home more energy efficient; get some solar panels & batteries perhaps; the cost of energy is going to get much higher and unreliable; it will get worse before it gets better;


• learn new skills; learn ways to be more self sufficient;

Craig Holmes wrote: Which recession/depression are you blaming on corruption?

Hmmmmm…All of them. Fiscal and moral bankruptcy is a result of corruption, which are rooted in:

Like electricity (flowing to the path of least resistance), people seek security and prosperity with the least effort and pain. Unfortunately, some will resort to unethical or criminal methods to obtain it.

Education is the key.
We will never get to the next level until we get back to a few fundamental basic.

The biggest threat to any nation is the lack of Education, TAccountability, and Responsibility, because it breeds corruption.

• Responsibility = Power + Education + Transparency + Accountability.
• Corruption = Power - Education - Transparency - Accountability.

Corruption is always trying to flourish.
Especially where there is power and opportunity.
We all know this, but fail to deal with it.

A lack of understanding (Education) of the human factor, and failure to account for it, results in a failure to design and maintain systems of government, business, and organizations that are sufficiently Transparent and Accountable. All that is left is Power, which exacerbates the problem.

We might muck through (as you say, Craig), but we can never reach the next level until we understand and adequately deal with the human factor, provide Education about the human factor, which will lead to Transparency to increase visibility, outrage, reduce opportunities for abuse, and discourage corruption, which will lead to more Accountability to reduce corruption and provide the proper application of power to ensure consequences to discourage corruption, which will lead to increased Responsibility.

Posted by: d.a.n at April 17, 2006 11:14 AM

D.A.N.: To your list of preparations I would add this; some silver, but NO gold. The price of both has been driven up by those that know what is coming, but they are still both dirt cheap in comparison to what they will be soon.

Many buy gold as an insurance policy against true economic disaster, but they are wrong to do so. I would remind them that in the last great depression (1932) the government outlawed private gold ownership and ordered citizens to surrender their gold at a confiscatory price, and when the feces hit the fan this time they will do the same. Better to buy silver which is far cheaper and so allows one to buy far more.

Also, if we “doomsayers” are wrong the metal will retain more real value because it is an industrial metal of which worldwide stocks are dropping far faster than they are being replaced. By contrast gold is only going to appreciate if people are afraid of future catastrophe in the economy. The fact that it has doubled in the last couple years says a lot about expectations. Funny thing about expectations, they have a way of being self-fulfilling.

Posted by: Markus Walker at April 17, 2006 02:12 PM

Markus Walker:

I’m sorry for your situation. I looked at the statical abstract for Oregon and the economy there is lagging behind other US states. You should consider moving to the South. Housing and all other costs are much lower in this part of the country.

You mentioned leaving the US, I’m curious where you would move.

Posted by: goodkingned at April 17, 2006 03:31 PM

Markus Walker,

Thanks for that tip.
I had thought that about gold and platinum, but had not considered silver. Thanks.

Also, I’m not sure moving south is a good idea at all. I have land in New Mexico, Texas, and Oklahoma, and I’m looking to move further north, because the southern states are being overrun by illegal aliens.

It is costing about $70 billion per year.
It was costing $24.4 billion in 1996.
It is only going to get worse, since Democrats want more votes, and Republicans want more cheap labor. Crime rates have doubled (or more) in many areas. Healthcare costs are skyrocketing because illegal aliens’ primary healthcare provider is the ERs , and they don’t pay. Hospitals are closing and costs are skyrocketing.
Property taxes are through the roof, because tax payers are getting forced by the federal government to pay for public education for illegal aliens. The cost of education is climbing while the quality is falling, and we’re being force to teach bilingually. The nationwide cost of that education to taxpayers is about $24 billion. Also, auto insurance rate are increased since most illegal aliens don’t have auto insurance.
There is also an issue of disease. As more illegal aliens sneak past our borders without being screened for diseases, they disperse throughout our country carrying a backpack full of Center For Disease Control consequences. An average of 2,000 illegal aliens streaming across our borders daily. One illegal alien in Santa Barbara, California infected 56 other people with tuberculosis as reported on April 24, 2004, by the Santa Barbara Press-News, “Anatomy of an Outbreak”.
Health insurance is becoming unaffordable and employers are making employees pay most of it now, and many are not carrying insurance anymore. And there is no easy way to measure the violent crime, but I wrote about it in the rose-colored-column. Conservative estimates show people in the U.S. being murdered at a rate double that of U.S. citizens. All other types of crime rates are climbing too. It is no coincidence that the southern border states are seeing climbing crime rates. Now, a lot of people are going to cry “racist”, but it has nothing to do with racism. It is the obvious negative impact anytime there is massive, uncontrolled, illegal immigration.

Therefore, I wouldn’t recommend moving south.
I’m looking to move to Wyoming or Montana.

Posted by: d.a.n at April 17, 2006 05:47 PM

Good King Ned: I have a cousin in Joysey named Ned, I would go first to Europe because my Dad was Irish and I have dual citizenship, also I would like to see it before BushCo decides to start bombing it too. I was thinking of the Black Sea Coast of Romania, or Bulgaria, pleasant resort towns with a cost of living similar to Tijuana, and both nations will join the EU next year so I will actually be a citizen there soon. Once they join the EU they will not be such a bargain and they will have KFC and Starbucks everywhere.

I also have a friend in Buenos Aires that wants me to come, he says he would like to leave BA for a smaller city there, Mar del Plata maybe. I do not know about staying that long in Argentina, resident status is hard to get there, though they do not have the immigration goons we do I would hate to get deported.

After that I cannot say, the world will be different soon, so planning long-term these days may be a major waste of time. It could well be that Americans are just not going to be acceptable elsewhere, and my veteran’s disability may not buy much in Euro conversion soon. Hell, it does not buy much here anymore, thus the “camping” trip.

Posted by: Markus Walker at April 17, 2006 06:27 PM

You know I was just looking at today’s closing commodity prices and noted that silver was up 50 cents for the day, gold was up $18 and oil closed at a record, over $70 per bbl., with gasoline up to $2.16 a gallon on the wholesale market, meaning it will rise another 30 cents by next week on the retail level, and the reason cited was the jitters over the Iran nuclear kerfuffle.

If a trader was caught using organized rumor to affect the prices of oil he would be arrested for manipulating the markets, and with Bush/Cheney’s oil connections they know in advance that oil will spike due to the rhetoric coming out of the Whitehouse, did not Martha Stewart go to jail for similar manipulations?

I wish someone would actually enforce our laws.

Posted by: Markus Walker at April 17, 2006 06:38 PM

Wow, I never thought of that.
You think it could really be?

Posted by: d.a.n at April 17, 2006 07:36 PM

Oil was $20 when BushCo took over, and the “official” OPEC pricing band is still $28-35, all the increase has been BushCo actions and jawboning to pump up price and curtail supply, or maybe some do not remember that he was devoutly against the clean air standards till recently when his EPA order the switch to massive ethanol, and WHY? Because his oil pals realized that they could screw the public ROYALLY on gasoline by creating false shortages due to the change over.

How often do I see the “talking point” argument on the right about how it is increased Chinese demand that is responsible for price increases. In fact demand has increase globally, at a SLOW and more importantly STEADY pace. To argue that demand causes higher prices totally ignores the fact that demand is one HALF of a ratio between supply and demand. Who ever wrote that talking point was convinced that nobody out in the world understood that or any economics. To argue that demand was driving prices higher is the SAME as saying supply cannot keep up with demand, and yet there is PLENTY of petroleum on the market. Supply to fill the demand is NOT the problem. And it is also BS that cleaner fuels are responsible. They add about 1% to the cost, MAYBE 3 cents.

If one actually watches the oil industry closely they see that estimates of oil reserves are actually rising FASTER than demand, Venezuela just earlier this month more than doubled it’s estimate of reserves to the third largest in the world, Russian supplies in the arctic have also gone up dramatically in the last year. Mexico last month announced a MAJOR new find in the Gulf, their largest ever.

Our NEED to reduce carbon emissions dictates that much of this “new” oil should never get used. I have always said that some day oil will be too expensive and alternates will come out, when that happens oil will go down to a price that makes other energy uneconomical and I see that very soon, they have a vested interest in keeping us hooked in spite of the damage to the planet.

The other thing you see when you watch the oil patch is the marginal difference between the wholesale and retail, AKA the RACK price. It was for a long time bumping around 20-30 cents, it is now 50-90 cents depending on where you live, per gallon, with billions of gallons sold each month. Crude is by far the largest source of revenue for the oil pigs, but jobbers profits are also soaking us.

I have a 6 year old Durango with a 25 gallon tank, that gets 13-15 MPG and I have gotten my driving down to one tank a month. Gas was $1.50 when I bought it, and I paid as little as $1.13 in Houston in 2004 on a trip. I am upside on the loan since nobody wants these anymore, I have 22 payments left. So, until it is paid for I will call it an RV and live in it. I got it because I needed a seven passenger vehicle for work as a Care Facility Administrator in 2003. With double digit inflation we now have I have no choice, thanks Mr. BushCo.

Now, if you just create a little more hysteria over the Middle Eastern oil due to say Iranian nukes we can have $5 per gallon by Memorial Day. Never mind that all agree Iran is YEARS away from a deliverable nuke.

When it comes to oil pricing all we get are lame excuses, there is NO shortage, there is no structural problem with supply.

Posted by: Markus Walker at April 18, 2006 01:09 AM

By the way, I also got the Durango for the four wheel drive, and I -unlike MOST SUV drivers- actually take it out into the mountains to places no sane person would ever take a car. I have been up the side mountains on rutted dirt tracks that scared the crap out of me when I did it. Being a native guy of the north woods though I was well able to control the shrieking bowels that accompany such manly thrills (and lesbianly I suppose, when I wear plaid shirts and jeans after a fresh buzz cut I am often mistaken for such). Hey, it is Oregon where the men are men and the women are too. :)

Posted by: Markus Walker at April 18, 2006 01:22 AM

It does seem like, for some time, the government is doing just about everything it can to BUBAR (Bushed Up Beyond All Recognition) everything it touches.

Perhaps Americans are just a bunch of whiners.

What do they have to be upset about?
Afterall:

• Median wages have fallen for 6 consecutive years,
• the wealthy got big tax cuts,
• the g a p between the top 1% of the wealthiest and the remaing 99% of Americans has never been larger since the Great Depression of 1929
• foreclosures have been rising for 13 consecutive months
• the middle-class tax payer is getting squeezed from all sides
• %National Debt to GDP (now at 68%, up from 33% in 1980) has never been higher since WWII.
• a looming generational storm as younger tax payers become increasingly resentful of the heavy burden of entitlements since $12.8 trillion has been plundered from Social Security (not to mention the cost of Medicare)
• and polls show Americans don’t think we’re on the right path
• Iraq, no WMD, bad intelligence, mismanagement, etc.
• rampant pork-barrel while troops go without body armor and medical attention
• abuse of eminent domain laws
• … more …

Seems like government has totally BUBARed everything it has touched (Iraq, Katrina, Social Security, Medicare, Illegal Immigration, etc., etc., etc.).

Government, for quite a few decades now, seems to have a knack for creating problems, and solving none.

• Stop Repeat Offenders.
• Don’t Re-Elect Them !

Posted by: d.a.n at April 18, 2006 09:00 AM

I am all for the higher prices and shared sacrifice of the consumers on the road to oil alternatives. What I vehemently oppose is the record windfalls to oil companies, their investors, and the politicians who trade on their own actions, not to mention the oil industry subsidies from tax payer dollars and the attempt to make permanent tax cuts for the wealthy oil investors.

If the rest of us have to share the sacrifice, I damn well want to see the oil companies and their investors sacrifice 1) tax cuts, 2) sacrifice subsidies, and 3) sacrifice the margin of profits which are setting new profit records.

Now, that is only half the deal. The other half is their rescinded tax cuts and their rescinded subsidies should go for alternative energy R&D and subsidies to consumers for adopting them to help move their marketability into an affordable price range.

Now that is a policy that would make sense to me, and one in which the whole nation and her future would be benefit.

Posted by: David R. Remer at April 18, 2006 10:13 AM

Especially when corporations (especially oil companies) have 45 year high-record-level profits.

Posted by: d.a.n at April 18, 2006 10:33 AM

Dan:

Especially when corporations (especially oil companies) have 45 year high-record-level profits.

This is true of corporate america as a whole. Corporate profits right now are at or near 45 year highs.

Craig

Posted by: Craig Holmes at April 18, 2006 12:41 PM

Craig,
Yeah, the middle class income groups are gettin’ squeezed from all sides: healthcare, insurance, eduation costs, property taxes, abuse of eminent domain, energy costs, fuel costs, $12.8 plundered from Social Security, and greedy corporations. Many thanks to the following
crooked CEOs, CFO, Presidents, VPs, and the SEC that empowered them:
Ken Lay (ENRON)
Bernard Ebbers (WorldCOM)
David Myers (WorldCOM)
Dennis Kozlowski (Tyco)
Mark H. Swartz (Tyco)
John Rigas (Aldelphia)
Timothy Rigas (Aldelphia)
Scott Sullivan (WorldCOM)
Burford Yates (WolrdCOM)
Jeff Skilling (ENRON)
Andrew Fastow (ENRON)
Lea Fastow (ENRON)
Samuel D. Waksal (ImClone Systems)
David Duncan (Arthur Andersen)
E. Kirk Shelton (Cendant)
Ben Glisan Jr. (ENRON)
Dan Boyle (ENRON)
Weston Smith (HealthSouth)
Aaron Beam (HealthSouth)

However, the coming generations are really going to get squeezed big time. The young people had better start standing up for themself, otherwise, the cheaters will keep dumpin’ on them, raisin’ their taxes to pay for Social Security, Medicare, Medicaid, and welfare for 3.84 million (32%) of illegal aliens, etc.

Posted by: d.a.n at April 18, 2006 04:14 PM

Dan:

Just another look at your and my debate. Some data came across my desk concerning the information you have given, that drills down into the firgures a bit. When I looked at the data for those making $20,000 and less, (household income), That is the bottom 40% of households, I can see great distress. As you move up, the finances continue predictably to improve. Debt ratios improve greatly as income rises. In addition home appreciation is greater for higher priced homes.

I can see that if the view is in the $20,000 class, economic data could be interpreted as doomsday. The data does look bleak.

Craig

Posted by: Craig Holmes at April 18, 2006 06:48 PM

Dan:

Like I said, I am an ally in that the economy is not lifting the bottom half of our citizens. However I don’t have much of a solution because of globaliztion.

Many of our countries decisions were made before this came into full bloom so to speak.

As a country I think we are going to be fine in terms of GDP growth.

Many things are not to be measured in GDP growth. We need a new misery index.

We should add up the percentage of income it takes an average family to pay for their medical, heat, and fuel for a car.

I don’t know much what we can do about wages.

YOu know the profits that are so high in corporate america? There is a huge portion that is coming from overseas profits.

If the Democrasts would get of their @sses, they could really make some proposals to help these people.

Craig

Posted by: Craig Holmes at April 19, 2006 12:00 AM

QUANTITATIVE EASING… was the Japanese buzzword for the economic policy they introduced years ago in order to combat deflation and a slowing economy. In effect they bought US dollars in order to keep their currency artificially low, while pumping vast amounts of new yen into their banking system as a remedy for falling prices. It did not really work though, prices kept falling, though how far they would have fallen without such drastic intervention is anybody’s guess.

Here is a good article about the situation and where it stands now, it says that the era of zero percent interest is over for Japan, though I do not buy the excuse that it is due to sudden upticks in their economy, prices are still not rising, and by the way, their gage of inflation is as phony as ours, zero percent lending has not revived the economy significantly after some 4 years of deflation.

http://atimes.com/atimes/Japan/HD18Dh01.html

I want you to see it and comment because there are ramifications of near disaster proportions in the wings for us soon as one can easily extrapolate from the article.

I ask you to consider that the Fed has raised the Fed funds rate to 4.75%, and with the assumption that inflation is running an official 4.3% there is very damned little being paid to borrow. However; I do not know any serious financial professional that even remotely believes that the CPI counts inflation accurately, most think the real inflation rate is 300 basis points higher, I think we have this spring hit double digit inflation. A fact that if true will be painfully obvious to all in a matter of weeks. (I mean really, $13 dollar chickens in the market, and $1.89 for broccoli that is more stem than flower? $3.79 for a loaf of bread, and steaks so expensive they walk you out to your car when you buy them.)

If our prime rate is under 5%, but the inflation rate is over 5% by all professional opinion, then what we now have is a nominal interest rate that is negative, in short, OUR government is paying people to borrow, and yet we are still mired in a “jobless” recovery, with wages flat real wages falling fast. Yet, today the market rallied 2%, 200 points on the news that the Fed has pretty much decided to quit raising rates. When the market has gone down by triple digits they blame high energy costs, but today as the market shot up energy smashed through all moving averages and ceilings to the upside, closing at over $71 per barrel. So, the next time you hear the market went down due to oil prices mumble to yourself BULLSHIT!

Why do I think this is happening, such a perplexing set of contrary indicators? A) The numbers are faux in regard to CPI (and all other things like GDP that use CPI in their calculations) B) The news about economics is cherry picked for propaganda reasons. C) the government has made a deliberate decision to inflate their way out of an impossible situation D) buy time till the worst of the damage can be ameliorated (spun)

Did it not hit you like a ton of bricks when the government said it would no longer track and publish money supply figures? Well, they know what the money supply is, and they will know what they create or destroy in the near future, so that WILL be tracking it, they just will not be publishing it. If you are in any way a scholar of the Austrian school you will be making plane reservations out of the country.

I am convinced that the money supply is going to swell vastly in the next month or two and over the summer but you will not notice at first, you will not READ about it, people FEEL richer when they do this, who cares if gas is $4 per gallon when you have all that hot cash in your wallet?

Three months from today you could read this and say I did not notice but damn, that Markus was right.

Why do it? November. The sad part is that it will likely work to that end, congressmen that support BushCo will be returned to office.

The dark side is that inflation will ROAR, even as we are told like now that there is no inflation, but it will be hyperinflation (most do not understand that term, it does not mean inflation over XXX%, it means inflation that feeds upon itself, a closed feedback loop, inflation that causes inflation) and that plays into BushCo’s hands as well, the middle class will shrink to the point where it can be “drowned in a bathtub,” and the poor will be willing to sign up for indenture, and you would be SHOCKED at how fast it will happen too.

All assets with intrinsic value will be bought up on the cheap by those of the top 1% with liquidity, a few Boyar families will literally own the rest of us, you will work for them on a casual basis with low pay and no benefits, you will shop in their stores at the prices and credit terms they demand, you will rent from them, and if you refuse there will be two or three others that WILL do it out of desperation, and it would only take a few minor changes to the law to make that happen. A labor law here, a regulation change there, a ruling by a conservative court and VIOLA, it is Russia in the 18th century.

School vouchers that do not begin to cover the cost of schools will replace public education. The only people that get them will be the ones that have enough money to pay the 90% of costs for private schools that the vouchers do not. The government will say that by your not paying for your kids education with the help of the government you have chosen home schooling.

In effect all education expenses will be a new form of welfare to the rich. Example, here in Medford Oregon, a well off town on one side, and poor on the other, the schools are falling down and bond issues will be on the ballots. Wealthy homeowners who have kids in private schools are going to defeat it, the poor who have no other choice will lose. The poor have most of the kids by the way. What happens when the buildings are condemned in a year or two?

If you have a medical bill you will be on the biggest hook you could imagine, one illness, or accident, and you could have bought a house with what they decided to charge you. Ask a single male in this country how much help can be expected from the government in the event of an ER visit. I will tell you, zero. Nothing at all. It was a visit to the ER (on top of a fire that killed my love and burned all I owned) that pushed me into filing chapter 7, and as a financial professional that was the end of my career. You have a degree in finance and a bankruptcy on your record, it would be much like a doctor with a bunch of dead patients, he might be a good doctor but he is done anyway and NOBODY will care if the patients died from his hand or from the earthquake that knocked the hospital down. Take my word for it, in a climate where there are 20 people for each good job the last person in finance that will get an interview is the cute stud with a bankruptcy. :)

But I was talking about economics, bankruptcy laws were changed last year to end most chapter 7’s. They can still be had, but you have to be really bad off to get it. Now, most who qualify for chapter 7 cannot pay the filing fees for the bankruptcy court. One of the provisions that you might not be aware of is that they REQUIRE a 180 day waiting period between filing and hearing your case in which you will have to pay to be “counseled” and take money management classes. The GOP pushed hard for that clause, it has NOTHING to do with your learning how to manage money, it has to do with punishing those that learned the HARD way about money, yes, but it has a LOT more to do with the fact that when you stop making payments on your home the bank must wait 180 days to foreclose (or sell your home from under you). Prior to that time your house goes into liz pendens, or the foreclosure waiting period. Now, if you try to salvage your home via chapter 7 you are out of luck because the republican mandated period of 180 days means that the bank can foreclose on your mortgage and sell your house before you can get a dismissal of debt in chapter 7. They are just now finding out about this in Michigan where one in 400 houses is now in the foreclosure process, coming to a town near you soon. Not that most people actually kept their houses in chapter 7 anyway, but the old system allowed them to get out from under and retain at least SOME of their equity to start over on. It has been estimated that out of the 1.2 million annual (now closer to 2 million) bankruptcy filings only about 9% were habitual filers using the law every 7 years. The rest were one time only and most of them were pushed over the brink by a combination of credit card debt and medical costs.

Gee, I wish I had the power as a citizen in congress that those two industries have.

Posted by: Markus Walker at April 19, 2006 12:09 AM

Craig wrote: Dan: I can see that if the view is in the $20,000 class, economic data could be interpreted as doomsday. The data does look bleak.

Yeah, the low end is gettin’ squeezed the worst, and then, the middle income groups next. The wealthiest seem to be getting wealthier (especially when looking at the 1%/99% population versus wealth distribtion graphs).

Craig wrote: However I don’t have much of a solution because of globaliztion.

Tax Reform maybe? Of course, no reforms are likely until voters regain a balance of power (not simply shift it between Dems and Repubs).

Craig wrote: As a country I think we are going to be fine in terms of GDP growth.

For a while perhaps. Slowing some due to globalization, an aging population, rising energy costs, and debt burden could hurt growth.

Craig wrote: Many things are not to be measured in GDP growth. We need a new misery index. We should add up the percentage of income it takes an average family to pay for their medical, heat, and fuel for a car.

Yes, prices of medical, energy, education, and property taxes (because of education) are skyrocketing.

Craig wrote: I don’t know much what we can do about wages.

Well, what would help is:

• we stop importing cheap labor, poverty, and disease, and that would eliminate a portion of the net loss of $70 billion due to crime, and the burden on education, healthcare, ER, hospital, law enforcement, welfare, Medicaid, Medicare, Social Security, law enforcement, voting, and prison systems would help.


• Fix the tax system; the wealthy have too many deductions and loop holes; save many billions per year also by eliminating so much book keeping, scheming, and planning ways to evade paying taxes.
  
• Stop taxing corporations. Only tax people (see tax reform above). Corporations just pass tax costs to customers. Taxing corporations hurts us in trying to compete abroad.

Craig wrote: YOu know the profits that are so high in corporate america? There is a huge portion that is coming from overseas profits.

Yeah, corporations are global and they are making the most of cheap labor. But I worry about the practice of descending on nations for cheap labor, standard of living rises, and corporations leave to descend upon another place of cheap labor, etc., etc., etc., always guaranteeing cheap labor somewhere, instead of growing toward global equilibrium.

Craig wrote: If the Democrasts would get of their @sses, they could really make some proposals to help these people.

Yes, Democrats and Republicans. I don’t see vast differences between the two parties, and it appears to me that both are just taking turns. Thus, parties are not really the problem. It is what makes up the parties. Too many irresponsible incumbent politicians, with too many cu$hy perk$ and unfair advantages. Democrats stand a good chance to win back many seats, but I fear that will not accomplish anything. Voters need to oust all of the irresponsible incumbents, always, like they were supposed to be doing all along.

Markus Walker wrote:
However; I do not know any serious financial professional that even remotely believes that the CPI counts inflation accurately, most think the real inflation rate is 300 basis points higher, I think we have this spring hit double digit inflation. A fact that if true will be painfully obvious to all in a matter of weeks.

That is interesting. Double digit already?

Markus Walker wrote: Why do it? November. The sad part is that it will likely work to that end, congressmen that support BushCo will be returned to office.

Hmmmmm…. I hope not. Too bad more incumbent Senators aren’t up for election. It seems like Democrats might regain some seats, but I wish both parties would lose a lot of seats to newcomers. Unfortunately, after November, newcomers will still be outnumbered in the Senate. Thus, it will take several elections to remedy the Senate. Now, the house is different, and that is where much incumbency is less guaranteed.

Markus Walker wrote: If you have a medical bill you will be on the biggest hook you could imagine, one illness, or accident, and you could have bought a house with what they decided to charge you. Ask a single male in this country how much help can be expected from the government in the event of an ER visit.

Providing healthcare for 12 million illegal aliens is not helping contain health care costs either. Illegal aliens primary care doctors are the doctors in the ERs (the most expensive form of primary care).

Markus Walker wrote: The dark side is that inflation will ROAR, even as we are told like now that there is no inflation, but it will be hyperinflation (most do not understand that term, it does not mean inflation over XXX%, it means inflation that feeds upon itself, a closed feedback loop, inflation that causes inflation) and that plays into BushCo’s hands as well, the middle class will shrink to the point where it can be “drowned in a bathtub,” and the poor will be willing to sign up for indenture, and you would be SHOCKED at how fast it will happen too.

Marcus, I’ve been thinking the same thing (sort of, with a little different scenario) about inflation. It seems to me that the National Debt would have to grow by another $2 trillion. But, that won’t take very long (18 months perhaps). I GDP growth is lower than expected (with increasing foreign competition), tax revenues are lower than expected (due to increasing energy, medical, educaiton, etc.), interest rates keep climbing, %Debt exceeds GDP, and the interest alone becomes too much, the government will have no choice but to print more money (and they are printing too much now, already), because they can not default. That would be suicide. So, as you say, it will cause it to feed upon itself, and it will cause a domino effect, as foreign investors (in the national debt) sell off securities, further causing the dollar to fall, increasing the difficulty in paying the daily interest, and so on, and so on, and so on … until we have totally screwed up the entire monetary system (which was a phony monetary system anyway), triggering a recession, that quickly turns into a depression. Also, another hurricane (or two), or something worse could hasten all of this.

The important thing is that it could have all been prevented if we could be better prepared, and able to recover quickly from a recession/depression.
But, what we have been doing for the last 25 years is not making recover easier, and may in fact allow a recession to decay into a depression.

Posted by: d.a.n at April 19, 2006 02:41 AM