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.
Another approach, and the likely one...
Unleash the dogs of Inflation and
Pauperize the Country.
Confiscate Gold and Silver in the process
I don’t think the issue is as much a food shortage as a break up in the food supply and collapse of our monetary system. Imagine the desperate hordes when the EBT cards stop giving out free food.
Here’s my little tin foil hat thought. God help me if it is even closely associated with reality.
Reagan defeated the Soviet Union, in part, by ratcheting up military spending on the missile defense system in the understanding that the Communists could not economically compete with the United States and would therefore collapse.
Here we are thirty years later, and it appears as if the federal government is doing everything it can to bring about the collapse of the American economy, starting with printing too much money, but also employing a Cloward-Piven strategy of overwhelming the economy by bringing in as many people into the entitlement and welfare system as possible.
It looks like the American left is using the Reagan strategy against the United States, at least to me. The collapse of the system is the goal.
Like I said, this has all the hallmarks of tin foil hat thinking, but I can’t really establish a better motive to explain all the actions that I’m watching. I’m not sure having a big garden in the back yard is going to be a sufficient bulwark against the purposeful collapse of the American system of governance and economy.
I guess I’ll see.
Today I visited a Burger King with a BIG “EBT Accepted” sign. Wonder how things will play out there when the cards fail.
Some months ago I was in a grocery store and saw a woman stalled at one register, arguing with the clerk that she was sure her “card had been loaded” to pay for the merchandise she’d put in her cart. She was there when I went in and was still arguing with him after I’d paid for my groceries and was on my way out the door.
What, and set off another mass protest at our embassy in Libya?
Beyond Collapse: Surviving and Rebuilding Civilization From Scratch (Free 424 Page Book Download)
That's the way I feel too.
Millions of Americans will deserve the tribulation that they have voted for. Unfortunately there are millions who don't, but they will have to endure it until a majority of Americans come to their senses. And there's no guarantee that they will.
Hope I am not being a pain asking too many questions but would you pay cash for the houses?
The interest at the bank is so minimal. On a $100,000 house the return is about $650 a month after rental expenses (taxes, insurance, repair, etc.).
$100,000 return in 3 years from bank: $7689.06
$100,000 return in 3 years on rental house: $23,400.00
A friend said we should use the $100,000 to get three homes by putting down a down payment and then financing the rest. He said inflation on the three houses will be a far greater return.
“I see more and more talk of food storage. What is the fear? Help me understand.”
Simple answer: When trucks stop, there is no more food in the grocery store. Doesn’t matter what causes trucks to stop, when they stop, food is gone.
Travis, that’s a good title for a book, “The Trucks Stopped”.
By now we’ve learned money does grow on trees. The real question is: Is there a free lunch?
” Two months into the Repulican presidents term in 2017, the whole thing will collapse”
I doubt it... more than likely the Republicans will be a lighter version of Democrats - socially they will still be conservative but fiscally they will have to conform or they will be pinned with the the party who is going to throw everyone over the cliff - and never be elected.
I wonder if Obama FDR’d us. The masses now have HealthCare and SS - both will become third rails....
hope I’m wrong
-— The masses now have HealthCare and SS - both will become third rails.... -—
You’re right. But this time it won’t last. The whole system is about to collapse.
The euro bubble will pop first giving the dollar a brief reprieve, the dollar bubble will come shortly afterwards. However, these bubbles may result in WW3.
-— Things finally crashed and stabilized when enough of the citizens refused to even take a Zim dollar and used foreign currency instead. -—
Was the government ever cut back? If the bureaucracy is reduced by 90%, at least something good will come from this.
“But this time it won’t last. The whole system is about to collapse.”
I’ll believe it when I see it.... many experts predicted collapse and it didn’t happen this year.
What has changed to indicate that a system collapse immanent?
I don’t think you will see collapse - you may see inflation if things get a chance to grow.
I think you reckon correctly.
The biggest key is to borrow for a fixed rate, but don’t leverage so much you are cash poor. Always make sure you have enough liquidity for rough times so you don’t lose your loan. When interest rates are at 14% and you have a loan of 4%, banks will look for every reason possible to pull the loan.
The key is the inflation and interest rate differential. If you are willing to bet on inflation during a time of low interest, debt will make you rich and savings will rob you blind. Taxes are also much kinder to income off of leverage than off of savings. If you are wrong and inflation goes below current interest rates, than you lose.
It did not. You got to wonder how he came up with this.
https://en.wikipedia.org/wiki/Money_supply
As of November 17, 2011 the Federal Reserve reported that the U.S. dollar monetary base is $2,150,000,000,000. This is an increase of 28% in 2 years.[26] The monetary base is only one component of money supply, however. M2, the broadest measure of money supply, has increased from approximately $8.48 trillion to $9.61 trillion from November 2009 to October 2011, the latest month-data available. This is a 2-year increase in U.S. M2 of approximately 12.9%.[27]
The rent will also be less able to reflect inflation unless you rent by the month so you will receive inflated dollars monthly but your costs will inflate daily less your mortgage. The killer in hyper inflayion is time yes u can pay ur loan with inlfated dollars but your tenants will also pay u with worthless dollars in the end u will lose more value than u make
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