Posted on 11/24/2012 5:33:22 PM PST by upchuck
[Note: This editorial published on Nov 10, 2012]
We are now rushing down a course that is going to create incredible economic hardships for millions of Americans. The increase in the amount of debt that has been added to our economy is astronomical. And there is no end in sight. We now have over $16 trillion of debt, and with Obama’s policies it will be almost impossible to reverse that course.
Debt is the problem. Big debt is a big problem. There are only four ways to tackle it: increase taxes to bring in more dollars, reduce spending to save dollars, reduce entitlements to save dollars, and/or increase job growth which will result in more overall tax dollars coming in to the government.
Increasing taxes in the immediate future is going to be highly counterproductive in that it is going to put a damper on job creation by removing money from the private sector, which in the long run is the only sure way out of this mess.
Reducing entitlements will most certainly have to take place, but is going to be very difficult due to all the lobbying pressures and the fact that Obama has no intention of doing so. Obamacare will make the situation much worse.
Reducing other spending offers some avenues to help fix the problem, but the impact of such reductions will be smaller and will, again, take time to become effective.
Increasing jobs so as to increase revenues is really the only way out. But this would take quite a number of years to accomplish even with someone who knew what he was doing at the helm. Obama is not that person. He doesn’t know how.
At the very least, after another four years the debt load this country will be carrying will be well over $20 trillion dollars. This is close to an impossible load to bear. Our tax base right now, in a good year, is only $2.5 trillion, and in a bad year is around $2 trillion. That means we have a debt to income ration of 8 to 1 or 10 to 1.
In addition, we are spending about $3.5 trillion per year, which means we are borrowing about 40% of everything we are spending. It’s pretty hard to pay off any debt when you are doing that. And how long can that be sustained?
The crux of this problem is that we are unable to deal with the huge debt without facing massive inflation. The big debt has led us right into the ugly face of inflation, the major problem we face.
Generally speaking the amount of money in an economy should be enough so that products and goods and services can be paid for with the existing supply. If the amount of product goes up, it stands to logic that there should be more dollars printed and put in circulation to go with the demand for those products. However, if a great deal more money is printed than would fill that demand, then inflation will follow. For example, if we say that $100 is equal to 1/10th of an ounce of gold, and you print more dollars and don’t add any more gold to the pile, then each dollar will buy less and less gold as the dollar becomes inflated.
In the past four years, we have done just that. Since 2008, our monetary supply has increased over 300%. This is a great more money than was needed to keep up with any increase in the supply of goods, which certainly did not increase by anywhere near 300%. Unfortunately, a great deal of this money was just wasted. What we got instead was just a lot of debt.
In addition, it needs to be noted that 36% of the debt owed by the U.S. has a maturity of less than one year. That makes it subject to frequent refinancing, which will have a severe impact as interest rates go up. The higher rates will make it necessary to print more money to pay just the interest, which in turn will add to the inflationary pressures.
We are all living just now in a ‘dollar bubble’ which is equal in specter to the ‘housing bubble’ and ‘stock market bubble’ we have recently experienced. We are living in a ‘bubble economy,’ no matter how it feels. It is always hard to see the ‘bubble’ when you are inside it. But it would be prudent to plan for it even if it is hard to see and difficult to believe.
It’s going to happen. Massive, high inflation is coming. There is no stopping it now. The “dollar bubble” is going to pop.
Actually, the value of the federal government’s assets are so immense only a small fraction of them would end up backing a new currency ~
Good question. If you get the answer, please copy me.
What is Boy George doing down there in a crowd of Black Friday shoppers?
I might be able to manage a small garden but a goat or two on the balcony will surely bring a knock at my door from the building superintendent.
How do goats do on an elevator ride by the way?
Who is that?
Ubango’s American destruction is right on schedule. Let no one think this is happening by any other means.
But, goats are friendly.
“Just think! Some sucker is going to “inherit” eight years of Obama’s “wealth redistribution” bull****.”
That will be President Hillary Clinton. There will not be another Republican President.
I'd say you have that exactly correct. You put it very well.
Question is where is the barometer That we can watch to see interest approaching total tax income? Just need two questions answered I think. What are total tax receipts and what is total interest payments as of this date?
I see more and more talk of food storage. What is the fear? Help me understand. Ammo, we have.
That would be like the bums down on the corner then, right?
My guess is that it’s not just buying real estate, it’s borrowing to buy real estate. Your best inflation hedge is long-term debt with a fixed interest rate. That allows you to pay back yesterday’s money with tomorrow inflated money.
That’s exactly what the federal government will do and what they did after WWII. That is the real 5th option. The debt to GDP ratio was higher then than it is now. That crisis was averted through high inflation. Today they have the additional asset of CPI that is a complete lie but keeps social security and welfare payments lower than the real rate of inflation. They are also committed to keeping interest rates low.
My guess is the best real estate is going to be low end housing that is highly durable and secure. Clean it up with a fire hose.
The emphasis being to move your currency, whatever it is, outside of the control of the irresponsible.
Instead of using foreign currency in the US, as was done several hundred times in the Great Depression, people used ‘scrip’. In effect it was a complementary currency to the dollar, used only locally in a tightly controlled manner.
As such it was extremely stable. It was also based in local trust, not federal trust, and the more people who used it, the stronger it got.
I agree 100%. Americans no longer can influence the “elections” in this country. The communists steal our elections and then tell us it’s our fault that we lost because we are “mean-spirited”. The trouble is, the GOPer goobers believe them.
I wish I could believe that will happen.
What I see is people just rolling over and doing nothing. Kind of like the vote fraud, F&F, POTUS may not be citizen, Commie-Care, just to name a few recent ones.
The list goes on and on, administration after administration.
Until we start having interruptions in food, water and electricity, people are just going to roll over.
goats in a high rise ~ make a movie about it ~ a laugh riot to some, terrorism to others ~ use Arab actors
Hmmm, I never thought of that. I’s say that less than 50% of the businesses around here will take checks anymore.
Spend, spend, spend and spend some more!
It's the only way out.
“We will walk into the collapse with “our” guys. It won’t matter then. Game over...”
No, it will be President Hillary Clinton. There won’t be a Republican President.
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