Posted on 04/12/2011 9:10:41 AM PDT by Kaslin
"Madness is rare in individuals - but in groups, parties, nations, and ages it is the rule." -- Friedrich Nietzsche
Does it seem too strong to call the way America deals with its debt "madness?" If not madness, then what? Denial? An addiction? However you phrase it, we're a country that's in deep trouble, but so many of us seem unable to deal with it.
Liberals in this country, for the most part, will admit that we're running up "unsustainable" deficits. Yet, these same liberals adamantly oppose any and all serious efforts to do anything about it. Once you move out from liberals to the general public, once again you'll find plenty of people who admit that this nation has a huge problem. Yet, when you leave generalities, get down to specifics, and start looking for programs to cut, then suddenly everyone gets nervous and says, "never mind." It's like the old saying, "Everyone wants to go to heaven, but no one wants to die."
Sadly, this is a natural outgrowth of ladling out public funds to special interests. There is so much collective money that few people feel or appreciate it when even billions are saved. Yet, if we yank even a few million away from special interest groups like PBS, Planned Parenthood, or the unions, they squeal like pigs that are about to accidentally be put in the wolves’ pen at the zoo.
In the face of that, people have to realize that this country is on pace to go bankrupt -- and it could happen relatively soon if we don't start taking serious steps to control our spending. Mike Pence thinks we could just be ten to fifteen years away. Tom Coburn is less optimistic and thinks it could happen in as little as five years. If that happens, we're not a tiny country like Greece -- we're the biggest economy in the world. That means there's no cavalry coming to pay our bills for us because we ARE the cavalry.
What happens then? Well, we don't know for sure, but we can make some educated guesses about what COULD happen and how it will impact YOUR life.
1) Your life savings could be reduced to nothing almost overnight. Inflation is a fact of life. As Thomas Sowell has noted, "As of 1998, a $100 bill would not buy as much as a $20 bill would buy in the 1960's." That's under normal circumstances.
However, the thing governments have traditionally done when they simply can't pay their debts is print more money. The problem with this is the further you expand the money supply, the less the money you already have on hand is worth. This can wipe out the savings of a lifetime in a relatively short period. Imagine spending billions of dollars just to buy a loaf of bread. Sound far-fetched? Well, guess what? That has happened in the Weimar Republic, which was crushed under debts from WWI and decided to pay it off by printing more money. It could happen here, too, and all the money you've scrimped and saved could become worthless in a short order.
2) Your taxes will skyrocket. We've been conned into thinking that we can fund a massive government on the backs of the rich. This is simply not so. It's not working today and it's not going to happen in the future. We cannot tax the rich enough to pay off our debt or even enough to keep the government going long-term. Even if we could, the rich have the resources to flee the country for greener pastures if they're being taxed into oblivion. The middle class? Not so much.
What that means is the more desperate the government gets, the more the average American is going to be hammered with new taxes. How much more of your income can you afford to send overseas to pay China for the money they've loaned us to keep PBS, Planned Parenthood, and the National Endowment of the Arts going? What about if the country goes bankrupt and your income tax rate shoots up fifty percent? How are you going to pay your mortgage? How are you going to feed your kids? When the government runs out of cash and it can't borrow any more money, then it will start leveling massive taxes on the American people.
3) Your life could be in danger. If the government goes bankrupt, you'll have an extremely angry, confused, and frustrated populace that has little faith in its leaders -- combined with a horrific economy and a reduced ability of the government to keep order. Under those circumstances, widespread rioting and violent crime seem entirely plausible.
When Argentina had its crisis, violence went up 142% and "young men began looting supermarkets."
Here's some of what happened during the German hyperinflation of the currency in Weimar Republic after it started printing money night and day,
The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee. Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug.
4) Your payments from the government will dramatically decrease or stop altogether. Contrary to what some people believe, Medicare and Social Security are paid out of the same fund that pays for everything else. In other words, if the government goes bankrupt, there is no money set aside to pay for these programs. So, if you're receiving Social Security, Medicare, welfare, food stamps, or any other similar programs, those checks could stop or be slashed down to nothing. That seems unthinkable to people, but if the government doesn't have any money, then it can't pay it out to people. As they say, "You can't get blood out of a turnip."
5) You will have a dramatically reduced standard of living. If taxes and inflation escalate dramatically, both of which are very likely if we go bankrupt, economic activity will slow to a crawl and we'll go into a depression. We're not talking about a "This is the worst economy since the Depression" situation that we hear every time there's a mild downturn in the economy; we're talking about a REAL depression. Businesses will close left and right, the stock market will tank, unemployment will soar to heights not seen since the thirties, and the government won't be in a position to help very much.
If that happens in a country like America, where people have been so prosperous for so long, it's going to produce utter misery. It's not a lot of fun to be poor under the best of circumstances, but it's much worse to go from having a comfortable life with a bright future to growing vegetables to eat in the backyard and wondering how you're going to keep warm in the winter.
Can any economics historian tell me if this was the way they were originally planned? If not, then who changed this and when?
And we forgot about all of that in the 80s-2000s....
You are right, inflation makes debtors wealthier and lenders poorer, some just cannot picture how it works. It also tends to make necessities cost a lot more while some luxuries become cheap. Those who have little or no discretionary income cease buying unnecessary items which reduces demand for such things and may cause the nominal price to actually drop while necessities like food skyrocket. Recent examples are such collectibles as Barbie dolls, I know people who were buying them as “investments” twenty years ago and now have a roomful of nearly worthless dolls still in the original boxes. They paid enough for one doll to buy lunch for a week and now need to sell a dozen dolls to buy one fast food lunch.
What I and probably you SHOULD HAVE DONE is to borrow to the limit ten years ago and buy gold and silver. This is easily seen in hindsight. Looking forward there is no reason to believe that inflation will do anything other than worsen, this means that paying off a mortgage now is to give up money which still has some value now to avoid paying the same amount in worthless dollars later. Doesn’t sound so good, does it? The only way to hang onto real estate WTSHTF is to own the proper tools, the proper tools are made by companies such as Remington, Smith and Wesson, Glock, KelTec, Hornady, Ruger etc. buy tools and food and try to insure that you have a safe water supply, the first requirement of survival is good water. It is much easier to store a year’s supply of food than a year’s supply of water.
Fixed it.
Idiots like you think Trump will save them. No need to change what was correct the first time.
So what horse are you backing, bucko?
bttt
“It is much easier to store a year’s supply of food than a year’s supply of water.”
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Fortunately I have a large swimming pool which even when the level is lowered in the Winter contains upwards of 40K gallons. I am told by those in the know here on FR, that I can easily render this chlorinated/conatiminated water potable with a number of easily obtained filtration systems. Agree?
Yes, I am coming around to the inflationary argument of paying the mortgage LATER with (grossly) devalued dollars. Inflation appears to be inevitable, though some tout a deflationary scenario.
“”Madness is rare in individuals - but in groups, parties, nations, and ages it is the rule.” — Friedrich Nietzsche
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Or as Dispair.com puts it: None of us are as dumb as all of us.
bttt
Don’t count on it . Way to many folks are getting seriously annoyed with the way things are going, and idiot race hustlers try doing a pogrom/race war those of us who have been to Uncle Sugars trade schools will be happy to show them that ain’t none of our loved ones going on any damn cattle car anywhere.
I personally would not want to visit that upon another human being, but there are historical precedences for such a thing...
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