Is it Really about Money?

By

John Wright

From the onset of the global economic crash of 2008, the primary action of the USA federal government and it’s de facto financial institution, the Federal Reserve, has clearly been to create money out of nothing to keep the other financial institutions (banks, insurance companies), large businesses and the general economy afloat. Massive bailouts were the rule in the USA, presumably to keep otherwise bankrupt businesses/banks from simply folding. Terms like Capitalization and Quantitative Easing were/are used as ways of dissembling to keep the masses quiet about the creation of funny money that would/will/has already occurred. As to the inflationary effects of that policy/program we have seen some significant inflation in food and fuel, but nowhere close to what will be happening within the next two years.

Presumably, giving the banks an open credit line with the Federal Reserve would get the economy rolling again as the little folks borrowed more "cheap" money and provided the necessary "stimulus" to get everything rolling again. It didn’t work because the banks didn’t want to loan money to the little folks who might (and often did) lose their jobs and then default on loans. It didn’t work because all the faulty government assumptions depended on having a job market that simply no longer existed. The only things that did happen were the onsets of major inflation in food and good deals for folks well employed who could take advantage of freebies like the "Clunker" program to stimulate sales of new automobiles.

Where are we today, some four years later? No one in power is telling the truth about the fate of the little common folks who have run out of extended unemployment benefits … while the federal government, already deeply in debt, has continued to accumulate ever more debt. Expenditures for entitlement programs (including food stamps and Medicaid and "disability" for those who simply can’t find jobs) continue to rise while tax revenues do not. And the states and municipalities have encountered such a large reduction in tax revenues due to the very poor job market, and the easily expected resulting mortgage foreclosures, that they have raised the property taxes on those individuals still able to own their properties outright or continue to pay their mortgages, all the while with the value of the homes having been seriously degraded by 35% to 40% on average. This is, of course, absurd.

These actions and results have been accompanied by a sad recognition that multiple countries/governments are overextended in terms of debt to creditors outside their own countries, in the form of "central banks" and, in our case, Treasury auctions. In the USA we have massive federal debt due primarily to borrowings from China, Japan, Brazil and some five other countries. Like Greece, we continue spending far more than we capture in tax revenues, so federal borrowing becomes ever larger. We are, as it were, beyond the tipping point.

The last time I looked at the numbers, our indebtedness total in obligations owed to the citizenry, and funds borrowed from other nations, was around $14 trillion, opposite a Gross Domestic Product that has actually declined to around $18 trillion (some estimates are as low as $16 trillion). Of course, the GDP is artificially propped up in part due to inflation, for consumer demand has fallen along with income, not risen. Along with that is the expected continued deficit spending of around 40 percent of our annual government expenditures/federal budget. As some of us know, the annual federal tax revenue of $1.5 trillion opposite annual expenditures of $2.5 trillion is digging us ever deeper, quickly, into an already giant debt hole. Legislation to correct this problem via spending cuts has been nothing but a bad joke. After much bickering and finger pointing we simply raise the legal debt ceiling of the federal government …, which means your pockets ultimately.

The issue of massive overspending and the long-term consequences of that behavior are quite global, not simply local. Certain countries (USA, Greece, Italy, Ireland, Spain, and Portugal are the obvious examples in the news) are heavily in debt, while some other countries are doing fine as net creditors and manufacturing producers with large export markets. Yet in Europe, the interconnectedness of all the Euro currency countries is putting net producers like Germany and France at great risk. External to that but of ominous note is the current serious recession in Great Britain, which in fact is simply a continuation of the 2008 meltdown. There is no solution in sight other than the tiring comments that nations experiencing massive debt need austerity programs. No shit, Sherlock!

Overall, we have a world that is financially way out of balance, and most of us who take time to think about it find ourselves wondering when the other shoe is going to drop. The issue is that all the debtor governments are lying to their citizens about repaired/repairing economies, as evidenced by ever increasing amounts of government debt, and what that debt implies in forward lowering of standard of living. Yes, expenditures can be tied to entitlement programs, ditto military ventures, but overall without a robust job market with high paying jobs, no formerly "developed" country with a socialist leaning and a world class economy can survive. This is the basis for our fear, for the lying and increased debt and continued creation of money out of nothing lead to only one conclusion, either default or extreme inflation, some of each, and most likely war, financial and/or physical. This reality is the basis of fear in Europe as the weaker countries drag down those who are still net producers and holders of weaker country debts. Take down the Euro and a partially united continent will fall apart, economically and politically. That possibility is actually a high probability, with a return to pre-European Common Market self-serving national behaviors. That is not pretty, and it was the source of our major wars … WWI and WWII.

The entire world is in major financial trouble, which means 1) The common people in troubled countries with major debt and declined economies are going to suffer massively, and 2) The debt holders are going to be screwed, either via default or extremely diluted currency value coming from the debtors. It is a matter of time, and the time is growing short, and that is why anyone in the know who is not wealthy is experiencing a powerful latent anxiety.

As in the Great Depression the illusion of having recovered economies by virtue of stock market recovery is a poor joke. The necessary jobs are not available to employ the common citizens sufficiently well to generate the tax revenue needed to have a balanced budget. It is really that simple. This time around, however, we are saddled with massive government debts, unlike the financial health of the USA federal government during the Great Depression.

The need to reduce the costs of entitlement programs like Medicare and Medicaid to put them in line with tax revenues has no apparent "kind" solution. The massive expenditure side for the USA in entitlement programs reflects nothing other than the reality of the growing number of recipients, those due for benefits based in income contributed, and former younger working age contributors now in serious trouble re. unemployment, and those due for nothing, having contributed little or nothing. The latter people are not net national economic contributors, and are thus of no value whatsoever in helping the economy. They simply consume, using what is now other people’s money, and they generate none. They are a drag on the lives of those people who do work, and this results directly from earlier irresponsible government spending re. entitlement program legislation and "turn the other way" work allowances for illegal immigrants. It goes back a lot of decades.

To be fair, part of this increasing population of entitlement recipients is a matter of technology eliminating the need for most of the largest segment of society, the common laborers. Part of it is the so-called "baby boomer" retirement population effect. Part of it is the offshoring of higher paying manufacturing and white collar jobs to countries with very low pay scales, along with free trade agreements with no forced trade parity. Part of it is the benefits consumed by illegal aliens, who while working for a pittance contribute essentially nothing to tax revenues yet cause very high cost to the society via their offspring. Part of it is the discontinuity between the cost of goods vs. their price, especially in the medical/pharmaceutical areas. In other words, business greed is rampant, and not only in healthcare. (Can you even imagine a sane country permitting the existence of for profit health insurance companies that contribute zero in delivering essential medical services and products?) Similarly, financial greed is rampant in our banks that give out only 1% interest on CD’s yet charge 14% and higher in credit card interest.

There is no leader. There is no politically viable group of people with a reasonable answer to solving the above list of massive problems. Worse, there will be no leader, and, there will be no group of people able to resolve our financial problems, in terms of abilities, motives and authority. We are awaiting financial default and collapse, and they will happen, and the impact on the lives of all of us in the USA will be disastrous.

Simply being well employed or well off financially now is no reason to be complacent, for the larger population of those who will suffer the most will cause those people to seek you out and steal your possessions and kill you. At the best, martial law will be in effect across the entire nation, simply to maintain some semblance of order. Yet the amount of damage that will be done by angry citizens will, well, let me be clear … It is at this time incomprehensible, as we have never seen civil unrest of any magnitude at all in our entire national history. That is going to change. And lest you think only about local issues do note that massive civil unrest will happen in all the presently debt-ridden countries. If you doubt the effect of a failed economy on citizen behaviors simply take a good look at the countries of the Middle East and the toppling of governments and severe punitive government responses to civil unrest. Do you believe that the common citizens there were demonstrating for democracy? Get your head straightened out, now! They were failing economically, and it had/has nothing to do with the presence or absence of democracy.

Can you possibly believe that we are immune to what is happening elsewhere as well as within the USA? If you believe we are "too big to fail" simply remember the Titanic. It was built to be unsinkable, but it did. So will we. In short, I did not say we might fail, I said we will fail.

All of these issues sound like money issues. All of the national, indeed global attention seems to be focused on capitalization and stimulation. It is illusory. Money is not and has not been the issue at all. The issues are these: 1) Non-contributory population segments that experience uncontrolled growth, and 2) Technology creating ever larger segments of non-contributors, and 3) Governments and businesses that have long abandoned leadership responsibility for the progression/actual advancement of Humanity. These are in fact the only real issues, the true underlying issues, and the first two are not discussed at all in the media. They are not part of any political platform. Continuing to ignore them will destroy us. Continuing to allow governments and businesses to exist that fail to behave responsibly towards the citizens is guaranteed destruction. We are at our day of reckoning and we are pretending it is not so. Yet some of us are worried to death, and rightfully so.

We have been coming to this point for well over 100 years. Now we have to face the hard realities implied. To reduce consumption and cost overall you have to reduce entitlement populations, especially those of low and non-contributors. That is the only way to conquer the debt problem without civil or even global war. How that might be accomplished is scary and it will happen, likely through war. To control greed, individual wealth limits must be imposed and must be combined with an end to free trade agreements, and there must be a global program aimed at the destruction of monopolies. To control the out of control financial institutions, the central banks and the Federal Reserve, no country can be permitted to expand its currency … especially the USA given that the dollar is the world reserve currency. To do otherwise is suicidal. Do these things and the apparent "money" issues of today will simply go away. Yes, actually they will do exactly that.