RECIPE
FOR U.S. ECONOMIC DISASTER
The national debt
is approximately 10 trillion dollars. For fiscal year
2006 Washington bureaucrats spent 55.5 billion on pork
barrel projects, 43.7 billion to defend Japan, 108
billion was granted to Israel and the list goes
on! In addition, the United States currently
spends 1 billion dollars a day to service the national
debt, Medicare reserves will be gone in 2013 and
Social Security reserves will expire in 2017.
All this at a time when the government has already
maximized available credit and required to spend vast
sums to curtail the effects of global warming, defend
a war, build a fence, homeland security and this list
goes on too.
The current United
States note in my opinion is rated junk because when
you subtract the 2% inflation premium and the 9.6%
decrease in value of the dollar from the yield the
real rate of return is negative. This negative
return occurs because the value of the dollar is
declining faster than the rate of interest. Bottom line,
the credit card is maximized.
Add to this a group of
village idiots in Washington and whether they have an
R or a D in front of their name he or she along with
their comrades on both sides of the aisle are going to
continue spending more than they have in
revenues. As an overall group these individuals
have an historical record of compounding not resolving
problems or perhaps you have another explanation how
we got here, in the first place.
It irritates me when I
hear the pundits declare that the debt is only a
percentage of GDP (gross domestic product) a concept
that a large proportion of the voting population does
not understand. Using GDP to justify the size of
the national debt is counting the proverbial chickens
before they hatch and this concept is used to mislead and provide a
false sense of security. GDP represents inventory or
total U.S. production and until we begin to look at
the relationship between revenues and expenses and
make some tough choices the inherent deficits will
continue to add to the national debt. Government
revenue to GDP is approximately 20%.
The last F.O.M.C.
(Federal Open Market Committee) interest rate decrease
has set this country up for $100.00 a barrel oil and
put us in an environment that could lead to
hyper-inflation that feeds upon itself further compounding
economic problems.
There
are several alternatives that the government uses to
finance spending and service the debt load they include:
increasing tax revenues, increasing the money supply
(printing) thereby decreasing the value of the dollar
and raising inflation or selling notes and adding to
the debt. There is no more that can be taken
from the middle class and taxes may be expected to
increase for upper income individuals because our
Washington crooks and keepers of the purse need to go
somewhere to satiate their ravenous appetites for consistently
spending more than they have and that somewhere is up
the economic scale as they continue, and they will
continue to dig a deeper hole. There are
policies that could increase revenues, reduce taxes
and create economic growth but this starts with
eliminating all spending that is not required and
balancing the budget. However, this would require rational
thought a characteristic that the Washington elite
have proven unable to exercise.
To reiterate there is
no more to take from the middle class as a consequence
the source of the funds required to redeem the country
from financial failure must come from those of
wealth. These individuals will resist providing
the required funds and poetic justice shall prevail
when there own greed makes them just as broke as
everyone else and the man with the food ends up with
the gold.
When individuals such
as Ross Perot, Ron Paul (not an endorsement) and David
Walker Comptroller General of the United States
attempt to inform the American public about the state
of the economy they are dismissed largely, because they are not telling people what
they want to hear. The vast majority of the
people are acting as aides de camp to Washington insiders and
the media who is denial and all are allowing another day to pass while economic
problems fester. This economy is more like
Little Red Riding Hood the story once told but
forgotten and not Goldilocks the greatest story never
told as coined by Larry Kudlow.
