Posted on 10/14/2008 11:42:34 AM PDT by BGHater
It has been long understood that our federal government is going deeper into debt, consistently raising the debt ceiling and demonstrating no fiscal restraint. In recent years, debt ceiling increases have been placed in “must pass” legislation as a means to guarantee that Republicans as well as Democrats would vote for them when Congress was under Republican control.
We also know our nation’s “negative savings rate” reflects the habits of private citizens, showing those habits to be not tremendously different than the habits of the public sector. Yet, the signs of decline are becoming ever more apparent. So apparent, in fact, that it seems unlikely that bailouts or other gimmicks will have even short term success. More inflation, and creating moral hazard by bailing out egregious offenders, is a recipe for disaster. These activities can seem to provide some short term relief, but it seems we are now at a significant crisis point, where monetary policy gimmicks don’t provide the band-aids they did in the past.
Not only is our nation on the verge of bankruptcy, but so are its people and private institutions. We are now repeatedly hearing about businesses “needing to access the credit market to make payroll.” This is an unmistakable sign of more dire consequences ahead for the economy. If businesses must borrow just to make payroll, this is evidence of a severe undercapitalization that cannot be sustained, even for the short run.
Couple these facts with items such as the explosion of the “pay day loan” industry and the unmasking of the false sense of economic well-being is nearly complete. These pay day loan companies use preferred access to easy credit to inject cash into the hands of the working poor. They are nearly always set up in lower-income neighborhoods. These people, who are struggling to buy food and pay rent, get addicted to the credit drug. Their standard of living is only further depressed by the interest payments on these loans that make them profitable to their providers. Thus, the recipients are left even less capable of paying for items such as food and housing in the long run, without using this credit again and again.
These people are often the very ones being paid by businesses who “borrow to make payroll.” This is the dark underbelly of the fiat money, borrow and spend economy this nation has been building. As the government takes over more and more functions of the economy many see the rise of socialism as an antidote to this failure of “capitalism”. However, the fact remains that our economy has been increasingly running on debt, not capital. Capitalism does not exist without capital and debt is not, has never been and will never be a form of capital. Only now are we seeing the more dire implications of an economy without capital.
Bump
The debt = wealth attitude of America is incomprehensible to me.
Ron Paul, on the money as usual here. I only wish he could spread his economic wisdom to his national security buffoonery.
Don’t Blame Me. I voted for Ron Paul.
. . . and , as you know, no one can see what his/her paycheck prefers that they notsee ( woops, my bad, I spelled notsee as one word, notsee, but then again, it actually has become one word, hasn’t it, notsee, especially in this case, notsee, or more realistically, notsees, as in more than one notsee).
Ron Paul is spot on with this, his national security ideas were less then ideal, but I did like his message.
Does anyone think that Pres Paul would be spending trillions in Bank Buyouts?
Well, hopefully the current economic crisis will help the nation builders among us to realize: You cannot have a fierce foreign policy if your economy is built on a deck of cards.
In addition, I would withdraw our military from counties that use it to socialize their own defense. Make Germany, Japan and South Korea pay for their own military defense. That will make them consider the choices they have with regard to their own budgets. How are they going to pay for Universal Healthcare and Government Subsidies for their own private industries if they have to actually have a real defense budget? Might level the playing field for American companies as well.
Is it a small wonder that the 3 countries that fiercely compete with the US in automobiles and high technology goods have their military defense subsidized by us?
Even Canada and Mexico know they are protected by the US Shield. Make sure that they are contributing somehow.
The National Security Hawks would have a conniption fit though.
As a small business owner, I knew if I had to borrow to cover expenses I was not successful and would move on.
So far so good.
During the Great Depression the government demanded that businesses use all their excess capital to fund their programs which left nothing for the future. How soon will this happen?
Your a funny Man.
No, I don’t think he would have favored it or would have brought the idea up.
Any chance Sen. McCain will mention cutting Gov’t as part of his economic plan?
Ping to read later
I know it was a typo but I’m afraid our military will be in “counties” under Obama.
No, he would not. I have long admired the RCA he presents of this country’s fiscal woes. Indeed, his national security posture lacks luster, as does the delivery of his message (verbal, that is).
Been reading Von Mises for a while, myself. Its time for this country to take ownership of the mistake Keneysian Economics has been, and move forward.
In listening to our candidates speak about what they are going to fix when asked a question about the fiscal crisis, it strikes me that they only address symptoms. Which tells me they do not recognize the problem. ...Which means they will not be able to fix it, regardless of party affiliation.
This is not a problem, when Obama gets in he will just “spread the wealth around” and we won’t need any more payday loan shops. The poor will get out of debt with their pennies from heaven, oops I mean from D.C.
What if our national security is intimately connected to our economic policy?
At the same time the ICI says there is over $13T in retirement savings. So do we have a real savings problem as individuals? Probably not, but let’s sound the alarms anyway.
DO I favor the govt sticking its nose into EVERYTHING- absolutely NOT!
There’s been a few times when I’ve had to borrow small amounts to make payroll...didn’t consider it a losing proposition as the final payments for various jobs were tied up—negating any cash flow I had—and those final payments wouldn’t be realized unless I borrowed to finish the job...a matter of having multiple projects going, all of them having completion dates around the same time...and I’m small...so I imagine larger companies see the same situation multiplied.
I’ve also borrowed knowing that I could turn a profit when it was all said and done, and I did...not disagreeing with you, or Ron Paul, just information, fwiw...didn’t I meet you at a gas station?...you were on your way to Wally World in a station wagon?
Nope, wasn’t me.
Sorry! I don’t shop much at Wally World. But you can probably catch me at the local Thrift Shop. (It’s an affliction I developed from being self employed a long time.)
There is no national security nor freedom nor liberty nor rule of law if we are bankrupt and/or socialist.
Because the Wall Street and the federales have colluded to destroy the (private) federal reserve “dollar”, we are going to have high inflation in the coming years. Of course, our bureaucrats will redefine inflation and CPI so as deny what is obvious to 98% of the population, but the bread lines, welfare rolls, unemployment and probable civil unrest will tell the real story.
The real buffoons are political leaders who speak of freedom and liberty in the same breath as they extol the miraculous outcomes brought about by socialist interventionism domestic and/or foreign. These fraudsters should be impeached, recalled and if necessary prosecuted for destroying the Republic.
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