Showing posts with label Inflation. Show all posts
Showing posts with label Inflation. Show all posts

November 21, 2023

$1 Wow

(Credit Photo: Andy Blumenthal)


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July 2, 2022

Contradictions, Corruption, and Lies

Please see my new article in The Times of Israel called "Contradictions, Corruption, and Lies."

The list of “nonsensicals” in our society could go on and on (and I won’t even get started with all the Covid mandates and chaos), and you have to ask yourself what type of country (and world) we are leaving to future generations: A world that is full contradictions, corruption, and lies!
In the end, we can’t live with the double-talk and lies that we are being fed or the political grandstanding and corruption that takes the place of real humanity and progress. This leaves us to find truth and faith in the good and love that is G-d and to act from His word and not the phony media or corrupt politicians that seek to lead us continuously astray.

(Credit Photo: Andy Blumenthal)

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June 18, 2022

It’s The Economy Stupid

Please see my new article in The Times of Israel called "It's The Economy Stupid."
It is incredible that our leaders, economic advisors, and near endless pundits didn’t see what was surely coming down the road in terms of an overheating economy, inflation, and a spiraling national debt now over $30 trillion and growing. Despite economic signals even visible to the layman, the Fed continued to promise to hold the interest rates near zero “for years” to come. The cheap money and free-wheeling government spending became an avalanche with almost no adult in the room willing to stand up and say, “Stop the money madness! Government handouts are not free!”
Aside from the recklessness with which our economy has been handled, let’s not forget that there is a proxy war going on between the superpowers in Ukraine for the last four months, including a frightening blockade on grain shipments (i.e. food terrorism) to tens of millions of people. Further toward the east, China is upping the ante vowing to “fight until the end” for sovereignty over Taiwan. And in the middle, Iran is dismantling the IAEA nuclear monitoring cameras, adding high-speed centrifuges, increasing uranium enrichment, and threatening Israel and the West. Let’s just say all is not copacetic in the world, while a congressional select committee continue to focus on what happened on January 6, 2021 with the U.S. Capitol riots.

People are not blind, deaf, and dumb to what’s going on with the childish gamesmanship, politics of hate, and plenty of recklessness that is driving much of the national debate and (in)action in the country. 

(Credit Photo: Blink O'fanaya; adapted from https://www.flickr.com/photos/blinkofanaye/14913895723/)

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May 13, 2022

No News Is Good News

No news is good news. 

Unfortunately, most of the news these days is bad news.

  • War
  • Terrorism
  • Global tensions
  • Threats of WMD
  • Political dysfunction
  • Inflation
  • Trade deficit
  • Ballooning debt
  • Sinking economy
  • Global warming
  • Social divisions
  • Rampant crime
  • Chaos at the border
  • Pandemic
  • Care giver shortage

Only good news is usually technology and acts of compassion, caring, personal sacrifice and sometimes true heroism!  ;-)

(Credit Photo: Andy Blumenthal)


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January 1, 2022

A 2022 New Year of Eggs

New Years 2022. 

Congratulations!

But I wouldn't call it "eggcellent," because there is a lot of world instability and fear looming on the horizon.

Are we looking at competition, conflict, and even possible areas of collapse or a much rosier outcome in the order of things?

  • From Russia to China and Iran to North Korea. 
  • From Al-Qaeda to ISIS and Hamas to Hezbollah and Islamic Jihad
  • From WMD to Cyber 9/11 and EMPs to Hypersonic ICBMs
  • From Covid to the Economy and Inflation to National Insolvency

Like a bunch of eggs. 

Will it be a year of Broken, Scrambled and Mashed or Sunny Side Up and Eggs Over Easy? 

Either way, we had better hope and pray that we don't get fried and burned.  ;-)

(Credit Photo: Andy Blumenthal)


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November 24, 2021

Loads of Skittles

50 cents (used to be 25, 10, 5).

20 calories per piece! 

At least it's colorful.

And fruity.  ;-)

(Credit Photo: Andy Blumenthal)


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August 17, 2021

Disastrous Politics

This Afghan withdrawal and the Taliban overrunning the country is a complete fiasco. 

- 20 years of blood and treasure: $2,000,000,000,000, and 2,500 lost US military personal and G-d knows how many casualties (oh, about another 20,000)!

Now complete and utter chaos, and a turnover to terrorism.

Reminiscent of Iran's overthrow of the Shah and the U.S. hostage crisis for 444 days and when we lost Vietnam and the helicopters frantically evacuating US embassy personnel from the rooftop. 

BTW, what happened to our "Red Lines" on chemical weapons in Syria?

Where are our inherent values and the dependability of who we are and what we stand for?

Now we are once again emboldening Iran, North Korea, China, and Russia. 

Moreover, US Admiral says China is within 6 years of potentially taking Taiwan (guess where most of the computer chips are made and we already have a shortage)!!!

On top of this we have the Delta variant of Covid (and fears of worse coming) for this 1.5 year long pandemic with the CDC mask on again/off again non-sensical guidance. 

Then we have a $1,200,000,000,000 infrastructure bill and a $3,500,000,000,000 social welfare bill in the works to put on top of the US already almost $29,000,000,0000,000 national debt

Any ideas what that will do to the value of the US currency in the world and inflation rearing its ugly head.

I am starting to see a run on food and home stables in the stores again with items sold out.

Consumer confidence is shaking and the stock market is teetering off at a very high precipice. 

Oh, don't forget the border crisis which is getting out of control again. 

What the F*** is going on here?  ;-)

(Credit Photo: Andy Blumenthal)


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April 27, 2021

Motif For The U.S. Economy


This seems like it could be a major theme of the U.S. economy. 

"Buy Now, Pay Later!"

And then...

"Foreclosure"

You can't borrow infinitely.

It eventually has to be repaid. 

Where will the money come from?  

Print more.

Worth less!  ;-)

(Credit Photo: Andy Blumenthal)


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March 26, 2021

The Fallacy of Bitcoin

 


Bitcoin is a failure waiting to happen.

It is being sold as a hedge against not only inflation, but also doomsday!

However, Bitcoin is not gold which can be sold or bartered in a true doomsday scenario.

Bitcoin is a digital cryptocurrency and as such it is dependent on technology.

In a doomsday scenario, there is a great chance for the interruption for extended periods of time of our technical infrastructure whether through terrorism, war, cyber attack, or an electromagnetic pulse. 

Even with Blockchain distributed ledger, there is a high probability that you will NOT be able to access or trade Bitcoin from any digital wallet if the infrastructure is severely or broadly damaged. 

Your gold watch, ring, or coins will still hold value as currency, but your Bitcoins will be useless!

If you think losing your password to access Bitcoin is a problem, what happens where you can't access the Internet.

A digital doomsday is not as far fetched as you may think and the vulnerability of Western Civilization, in particular high-tech countries like America have much at stake. 

If you think Bitcoin will be your hedge again a major disruption in our way of life you are caught in the greater fool theory.  ;-)

(Credit Photo: Pixabay


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February 12, 2021

Forecast 2021 By Andy Blumenthal




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April 30, 2020

Predicted It Right In 2017

This was such a funny photo I found of me from 2017.

Holding a book called The End of The F*cking World.

Little did we know back then Coronavirus was coming our way.

One thing that is amazing to me is the incredible lack of responsibility when it comes to our fiscal (tax rates and spending) and monetary policy (interest rates and money supply). 

For example, we've spent almost $3,000,000,000,000 (i.e. trillion) on Coronavirus Relief/Recovery. 

And there is another package in the works to borrow and spend more money. 

This on top of our already tens of trillions of dollars of national debt we already accumulated. 

The crazy thing is that this is going on globally with Europe and Japan and others borrowing and spending without any sanity as well. 

Now here is the BIG QUESTION for you all:

If everyone is borrowing and spending, who are they borrowing from???

Yep, this is called funny money! 

Because it's not possible for everyone to be borrowing and carrying a bottom line net debt at the same time.  

The money has to come from somewhere doesn't it?

The Federal Reserve is "injecting" trillions into the economy and their balance sheet of "loans" to us is going up towards $11 trillion dollars now.  

These injections are short term medicine that may kill the patient down the road by overdose!

Have you ever heard of a Chair of the Federal Reserve that "urges policy makers to spend more"?

Simple economics tells us that this will yield at some point an unbelievable inflation.

We are injecting or "printing" more and more money (or electronic bytes of it), and that causes the money to devalue because there is so much of it (supply side economics) with nothing but hot air backing it up (we haven't been on the gold standard since 1971).

There is a DAY OF RECKONING coming when:

- People's savings and wallets will devalue and money will be worth close to squat after RUNWAY INFLATION.  

- Also, what do you think will happen to the stock market and jobs too when people have only loads of valueless funny money and can't buy anymore like they used too--can anyone say MARKET CRASH and UNEMPLOYMENT!

Folks, you heard it here first, the end of the f*cking world is coming--it's called CONSEQUENCES, plain and simple. ;-)

(Credit Photo: Dannielle Blumenthal)
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August 30, 2018

Don't Take Away The Breadcrumbs

So today it was announced that they want to cancel the meager cost of living adjustment (COLA) increase that federal workers were slated to get for 2019. 

A mere 2.1% increase in federal pay (compared with a more than 4% projected increase in private sector pay for 2018) is basically just enough to cover inflation for 2018 forecast at 1.9%.

In effect, without the cost of living adjustment, about 2 million federal employees end up with a net decrease of 2% in their standard of living because of inflation and no pay increase to offset. 

This is on top of the fiscal year 2011 and 2012 federal pay freeze that President Obama prior enacted. 

Why are we picking on the federal workforce when:

1) The U.S. economy is booming at an annual 4.1% increase
2) Of the $10 trillion tax cuts, 20% is being showered on the wealthiest 1%.

Le's just call a spade a spade--the pay freeze (i.e. cut after inflation) is really being driven to downsize government by driving employees out

Many of these are good people, hardworking people, and those that not only serve their nation but also sacrifice for it. 

With midterms around the corner and another Presidental election coming in a couple of years, why would you want to alienate 2 million workers instead of getting respect and even greater dedication?

As was written on this simple pair of blue jeans:
"Don't beat your croutons, you'll get breadcrumbs."  
In this case, don't beat up your federal workforce by taking their meager breadcrumbs, to begin with. 

Instead, let's show our appreciation for federal employees service to their country. ;-)

(Full disclosure: I am a federal employee and am proud to serve.)

(Source Photo: Andy Blumenthal)
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June 21, 2016

It's Getting Mighty Hot

This is a advertisement around Washington DC alerting people to the dangers of global warming.

"I'm Too Hot"

And 

"9 of the 10 hottest years have occurred since 2000."

Wait a second, for some (or many) a little extra heat may be considered a good thing especially if you live up north with generally freezing cold and miserably snowy winters.

So don't just tell us about it getting hotter, but tell us how hot is it actually going to get and what will happen when it does--melting glaciers, rising oceans and catastrophic flooding of cities, weather abnormalities and violent natural disasters, and so on.

We need to move on to the substance of this. 

Just like with the national debt, we keep talking about it going up (and up). 

Well what's so bad about that if we can just print some more greenbacks and pay for more stuff, maybe it's a good--or great--investment in our country and future?

Here again, the message that isn't getting out clearly is what is going to happen when the debt becomes unsustainable and printing or devaluing dollars will not solve the problem and may actually exasperate it by creating run-away inflation, a downgraded or junk credit rating, and higher debt payments possibly tanking our economy and people's savings.

Yeah, we don't want to cause a panic. 

But shielding people from vital information on the dangerous paths we are on will only lead to going further down into the abyss of non-action and potential for cascading calamity. 

Let's face it--it's unpopular to talk anything doom or gloom--financial crises or natural disasters or especially anything with WMD--but if we aren't the adults in the political room, who will be? 

For once, I'd love a leader who tells it straight, who helps us face our own worst nightmares, and actually gets us back on track again, rather than keeps the wool pulled over our eyes for another term or two.

Leadership is lost in rosy glasses, vote counting, pundits called upon to obscure the truth from the people, keeping a false calm, and creating wildly inflated legacies.

These motives for now are stronger than the determination to deal with the threats we face, but not forever, and then the pendulum will most abruptly swing in the other direction, precariously late for the ensuing global effects. ;-)

(Source Photo: Andy Blumenthal)

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December 18, 2015

You're Getting Milked

If you have a pulse and have been to the stores or even shopping online lately (hey, it's the holidays so of course you have), you know that prices are on the rise.

And this is amazing, because--

Major factors point to pricing that should be driven down:

- Commodities--which are the basic raw materials from agriculture to oil and gas and metals and mining--are at a more than 16-year low!

- Manufacturing has moved to low cost sourcing countries (China, India, Vietnam, Africa, etc.)

- Technology continues to benefit us in terms of cost-efficiencies from the transformation to robotics and automation.

Yet, we keep on seeing prices move ever higher:

Just a few examples...

- "Housing market is on fire" with existing home prices exceeding the pre-recession peak!

- "Car prices at records highs - and rising"

- "Food prices are sky high"--it's not your imagination.

- Fashion "prices rising so fast"

- Health care spending is "again accelerating"

- "College costs are so high and rising."

Forget the B.S. of the basket of inflation stats your being feed...you know that your bills are going up, while your income is stagnant.

The real question is why is the middle class always getting milked--whose interest does it serve? ;-)

(Source Photo: Andy Blumenthal)
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November 2, 2015

A Feel Good But Deeply Ailing U.S. Economy

Get comfortable with your salary, because it isn't going anywhere positive--payrolls are stagnant!

The Wall Street Journal reports that wages since the recession "have grown slowly, advancing at a pace of about 2% annually" for a total of 12% since 2009.

In contrast, in the 20 years prior to the recession, wages "grew on average better than 3% annually"--that's 50% more increase per year!

Sure some of the increase is now coming in the form of benefits growth, such as time off, subsidized commuting costs, and health insurance premiums, but workers still need to be able to pay their bills. 

For the federal workforce, things have even been worse with pay raises of "just 2% [total] over the last five years" and a proposed 1.3% (with locality pay) for 2016.

Is it surprising then the innovation--one of our greatest strengths--is also drastically slowing in the United States. We are not rewarding risk with reward like we used to--and that changes the whole innovation equation!

Also no surprise then that mergers and acquisition are booming as the key to corporate growth as well as cost-savings through economies of scale are seen as one of the only ways to wring out profit growth in companies bottom lines.

All in all:

While inflation is up an average of 2.13 over the same 10-year period.

- This leaves the average household more than 6% worse off then they were a decade ago...that's a lot of time to be working and getting negative returns on your investment of time and effort.

Combine this with:


Manufacturing down to only 9% of jobs in the U.S. economy

- The country's ongoing spending binge--a national debt that has doubled over 8 years from around $10 trillion to almost $20 trillion by 2017 and interest payments about to take off with rising interest rates.

- Throw in a arms-race with China and Russia and the aging Baby Boomers setting up the economy for dramatic increases in Social Security and Medicare

And the "fun" NOT is only just beginning. ;-)

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August 17, 2013

Economics, Pendulum Style

To combat the recession of 2007, the Federal Reserve initiated an aggressive policy of Quantitative Easing--purchasing federal debt en masse to flood demand for Treasuries and lower interest rates to near zero to stimulate the economy. 

As of June 2013 the Feds balance sheet has swelled to over $3.4 trillion in assets of treasury debt. What happens when the Treasury has to repay those trillions? 

Who is the Treasury going to borrow that money from and at what interest rate? 

Just like raising demand for Treasuries lowered interest rates, increasing the supply of Treasury debt to pay back the Federal Reserve will make interest rates go way up the other way. 

Rising interest rates makes borrowing more expensive--e.g. buying a car with an auto loan is more expensive, buying a home with a mortgage is more expensive--and inflation can skyrocket. 

But what is worse is that despite the recent slowing of the growth of the national debt, many economists calculate the total US debt at a whopping $70 trillion when you include the host of unfunded liabilities including social entitlements such as Social Security, Medicare, Medicaid, as well as government loan guarantees (mortgage, student loan, etc,), deposit insurance (i.e. FDIC(, and the money owed to the Federal Reserve. 

What is really sad about this is that the entire wealth of American families in this country is guess what--also $70 trillion--which means that we are essentially a bankrupt nation:

Family assets of $70 trillion - Family liabilities of $70 trillion = a big fat 0 in the kitty!

To pay back the $70 trillion, it is not realistic that we will simply "grow our way out" of this fiscal mess with a GDP growth rate over the last 20 years of a mere 2.6%.  

Also, we will likely not confiscate people's assets to pay off the debt, rather we will print money--lots of it--so that we end up paying back the trillions of past debt in much devalued future money. 

Head we win, tails you lose!

The problem is that devaluing the dollar will mean that American family savings will become worth less as well--with the risk, at the extreme, of wiping out mass amounts of savings altogether. 

Despite sequestration reducing the rate of our debt growth, the aging baby boomers with the resulting liabilities for their care will soon escalate the debt problem once again. 

David Walker, a former U.S. Comptroller has warned about our national debt problem as well as many prominent economists. 

Like a pendulum swinging from one extreme to the other, the spendthrift ways of the past will by necessity lead to penny-pinching in the future, and inflation rates of near zero since 2007 will lead to hyperinflation after 2014.  

It reminds me of the story of Joseph in the Bible, with the 7 lean years follow the 7 fat years (in Egypt that time)--this is not just providence, but common sense economics. 

Good times will come again when there is a return to the mean and the pendulum hovers near center, but the swings until then can be wide and scary.

Of course, like taking your medicine, the earlier we start to course-correct our nation's finances, the sooner we get healthy again. ;-)

(Source Photo: here with attribution to zzz zzz)

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January 18, 2013

Righting Our National Economy

We made it through he fiscal cliff--whew!  But the economic landscape remains a minefield. 

In terms of our national debt ceiling, we already passed the $16.4 trillion mark at the beginning of the year and are on borrowed time (no pun intended) until about mid-February when we exhaust accounting gimmicks and can no longer pay our national bills. 

Then there is the elusive government budget where we are on a "continuing resolution" that funds the government at the prior years spending levels until the beginning of March; there is no agreement on what the budget should be after that. 

Finally, there is the Sequestration that was delayed from the beginning of the year to March, which will produce across the board budget cuts to government--not surgically, but sweeping cuts that will hit almost all major government spending. 

All of these budgetary and debt issues are highly contentious and politicized and involve substantial policy decisions in terms of tax reform, spending cuts, and even income and wealth distribution. 

As difficult as it is to navigate a mine field, there is genuine fear that our national luck is running out and the sides are digging in such that even if we get over another one of these hurdles (likely by another delay) or even two of these, what are the odds that we get through all three unscathed economically and with our national image and strength intact?

Already in August 2011, S&P lowered the U.S. credit rating because of these unresolved issues and political stalemate around them, and Moody (in September 2012) and Fitch (this past week) threatened the same putting us at risk of higher borrowing costs, inflation, and even recession. 

Bloomberg BusinessWeek (3 August 2011) using game theory seemed to advocate for political compromise--that produces a "deal no one likes" but avoids pure political victory by one party over the other where one party gives in and the other holds out, and also avoids "financial Armageddon" where both sides hold out and can't get any deal done at all. 

In games of "chicken" both sides "entertain the option of killing everyone" until they finally realize this results in mutually assured destruction (MAD). 

In Washington "everyone, however, is playing a game called 'election'" and "the only possible goal in that game is to win the next one"--in this game, the real question--is there the leadership to rise above the politics, the short-term focus, and bring the two sides together in compromise to forge a path through a difficult economic road ahead. 

Truly, there is really only one way ahead and it is through national sacrifice that will spare no one, but may save the country and our ideals and make us stronger in the end. We are at a dead end for kicking the can further--next step must be to right the ship through cooperation and making the tough choices.

Just like the Washington Monument is one, we must become one. ;-)

(Source Photo: Andy Blumenthal)

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November 27, 2012

An Immigrant's Message

It was interesting getting out of Washington D.C. this week and talking to people outside the Capital about what they were thinking.

During Presidential campaigns and debates, I always hear the candidates say, “And let me tell me about (whoever) that I met from (wherever) and they told me (whatever).”

Usually, when I hear these anecdotes, I wonder what the real meaning of these are, given that they are hand-selected by the candidates to prove their points of view.

So I tried it myself in Florida this week to see what people where thinking about Washington and our national predicament—I asked, “What do you think?”

Well let me start by saying that I didn’t talk to as many people as a presidential candidate does—that’s for sure—but I also wasn’t looking a tag line for my next rally or speech.

So here are a few things I heard from everyday people, most of them immigrants or children of immigrants.

One person I spoke to was from Haiti and had settled in Florida.  So I asked what his concerns were.  He told me about the suffering back in Haiti after the earthquake in 2010 and how so little (relatively-speaking) had been rebuilt.  So far, I wasn’t really shocked at anything he said.  But then he went on to tell me how people in the Haitian community believed that the cause of the catastrophe was (no, not mother nature, but rather) that the U.S. government was testing new weapons in the Caribbean (from underwater submarines) and that this (accidentally) triggered the devastating earthquake in Haiti. 

I asked what made them think this, and he told me how the people back in Haiti had witnessed U.S. response efforts and how zones were “mysteriously closed off” and the event was handled in tremendous stealth.  I asked was it just him whom thought this?  And he told me that this was a widely held belief by the people there. 

Well, this was not like anything I had heard in the any of the candidate speeches during the election.  Maybe this guy was just an oddball, crazy, and telling wives tales about the going-ons in the Beltway, and everyone else was just feeling rosy.

So I spoke to someone else, a cabdriver from Romania living here for nearly 30 years – old enough to remember his country of birth but experienced enough to compare life there and here. He told me that he felt the people in Washington D.C. did not really care about him or others in the country. I asked what he meant by that.  He questioned our leaders of many decades (with the exception of two in the last 40 years—which I won’t name to protect the others), and he said that the others are basically just in it for themselves.  

With regards to the “fiscal cliff,” he said, “No one is willing to make the real decisions that the country needs.”  He went on to add, “Unfortunately, politics has become just a profession.” Moreover, he said that “People aren’t even thinking short-term [let alone long-term], they’re just not thinking at all!” 

This immigrant said he was worried generally about the future of the country and warned of what he believed was civil unrest to come, because he felt nobody was really dealing with our serious financial problems. He said that he had lived through a thousand-percent inflation back in his home country, literally, and that he felt we were going down the same road. Matter-of-factly he said, “Washington has bankrupted this country.”

Again, this was very different from the spin on most of the news shows these days, where the real estate recovery (however slight), consumer confidence (rising but on the edge with the rest of “the cliff”), and healthy personal and corporate balance sheets are all the rave. “What, me worry?” is the dominant attitude, not only about the “fiscal cliff” and the well known $16 trillion deficit, but also the other $86.8 trillion in national debt for entitlements, which according to the Wall Street Journal (27 November 2012) is not readily discussed. 

My wife spent time talking to a woman less about politics, but more about her life predicament. Her husband passed away after 27 years of marriage, and she was just eking out a living primarily on the survivor benefits. She was living in a trailer, and having trouble finding a job. (“There is a lot of age discrimination out there,” she said.) She said she was lonely, despite her boyfriend, and that what mattered to her was just having some nice people in her life to talk with.  Her current plans were to continue monitoring her boyfriend’s activities on dating sites—he didn’t realize she could do that – and visit Bulgaria. There, she would meet the family of her late father, who unbeknownst to her had a child with a mistress that she only learned about upon his passing. She was angry at the doctor who prescribed her hormones, which she is certain gave her breast cancer, and she indicated that if she could do it over again she wouldn’t have listened so unquestioningly to what he said. For her, alternative healing such as attending a “drumming circle” was helpful, especially in calming all “the chatter “and worry on her mind. 

While she didn’t talk about the country per se, this lady was clearly having a tough time in life and although she smiled frequently, the pain she felt was clear not only by the stories she told, but by the look on her face. 

So, these were some stories that I heard—a little different from campaign fodder—but very telling in a way about what REAL people out there are thinking and feeling—versus the sound bites. 

Now, we need to figure out how to dispel the negativity out there and help people and the country get it together.  It’s not enough to bicker, but we need a grand vision, a genuine strategy to get there, and the ability to articulate it to the masses—sacrifice will be needed, it’s time to get down to it and be real for at least the third time in 2 generations. ;-)

(Source Photo: Andy Blumenthal)

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November 16, 2012

Either Way A Fiscal Cliff

Okay, so here's the dirtly little secret...

The "Fiscal Cliff" that everyone is supposedly working on to avert--is really unavoidable!

Yes, the Sequestration that was put in place that eliminates the broad-based tax cuts from a decade ago and reduces spending across military and domestic government spending--can be replaced by more surgical tax increases and spending cuts. 

But with a National Debt of more than $16 trillion dollars and one which has been trending up over a trillion dollars a year, we have gorged ourselves and spent beyond our means for too long--and the time to pay up is fast approaching.

For example, critical entitlement programs like social security and medicare are running out of funds and will not be able to cover benefits by 2033 and 2024, respectively.

What is even worse though is that the money you have been paying into "the system" from your payroll taxes for decades hasn't been put aside in trust for you, but has been spent on other things--sort of like robbing Peter to pay Paul. And now what?

At a time when national competitiveness is suffering, jobs are going overseas, test scores in science and math are trending down, and we have the lowest percentage of Americans working in 30 years, we are saying that we've essentially spent our last dime decades ago and have been doubling down with more and more borrowing--that we don't really know if we can ever pay back. 

While we would like to "grow" our way out, by having more people working, earning more, and paying more into the system, our growth projections of slightly more than 2% next year and a historical average from 1947-2012 of just 3.25%--this seems more than wishful thinking. 

More likely, as the percent of our national debt to GDP continues to rise and our national credit ratings are are at risk of falling, interest rates will start to rise first slowly and then faster to elevated levels to compensate for the increased borrowing risks, and we will see inflation rear it's ugly head--it is ugly because inflation will mean your savings are worth less or potentially even virtually worthless. 

This will make the $16+ trillion deficit also worth less, so we pay it back through inflation as Germany did with hyperinflation after WWI, and the essential wiping out of our personal savings. Viola, deficit paid down, but pay attention to at what personal costs! 

Unfortunately, the fiscal cliff is here and will happen whether spending is cut here or there and taxes go up on some or everyone. This is just the negotiation of how to spread the pain and spin the tale. 

And either way the fiscal cliff is going to hurt, because you have to cut spending and increase taxes leaving people with even less money in their shrinking pocketbooks, and if you don't, the credit agencies will continue cutting our national credit rating leading to higher interest rates on the debt and higher inflation--so either way, our creditors will get their pound of flesh. 

In the E.U. now, we are seeing the effects with countries from Greece to Spain, Portugal, Italy, Ireland, and more reeling from the impact, but this is only the beginning, because the lending spigot instead of being turned off, has been opened up further to kick the can down the road. But who will be the lender of last resort, when there is no one that can reliably pay it back?

In the end, you can't raises tax or cut your way out of decades of financial mismanagement, overnight. In the corporate sector, we say Chapter 11--what do you say for Western civilization? And what do we tell our children and grandchildren?

(Source Photo: Andy Blumenthal)

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May 15, 2012

Getting Off The Debtor Highway


I.O.U.S.A. (2008) is the best explanation of our nation's financial problems and the deep severity of these that I have ever seen.

This video is a 1/2 hour condensed version of the full almost 1 1 /2 hour award-winning documentary.

David Walker, the former Comptroller General of the U.S. (1998-2008) is the star of this movie.

The documentary, with Walker's steadfast warnings, describes the 4 ominous deficits that are driving this country to Financial Armageddon:

1) Budget Deficit

2) Savings Deficit

3) Trade Deficit

4) Leadership Deficit

What is incredible is how rather than listening to Walker's exhortation, when the National Deficit was $8.7 trillion in 2007, just 5 years later now, there is a deficit going on nearly double that of $15.7 trillion.

We are facing a financial ticking time bomb that could result in huge inflation, economic stagnation, and the undoing of our economic and national security.

Moreover, towards the end of this year, we are facing the economic one-two punch of rising taxes and reduced national spending that could easily send our economy spiraling into recession or even depression.

Add to that rising interest rates, a financial crisis in the  European Union, a continued housing crisis and high unemployment at home, and a true economic reckoning is at hand.

Watch I.O.U.S.A. and become proponents for financial discipline for ourselves and for the country.

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