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- First off, are we in a financial crisis? Yes, even worse than imagined.
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- In 2012 we were carrying $16 trillion in Net Public Debt.-
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- We have 310 million men, women and children in the U.S. That means every one is carrying $ 51,613 in public debt. Someone has to pay this debt.
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- We have 149 million tax payers. Many of whom pay zero taxes, but, they do file. If we take this ratio every taxpayer owes $107,383 to pay off the debt.
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- But, that is not the worst of it. That is only “ net public debt”. We still have all the entitlement programs that are unfunded promises, unfunded liabilities. Eventually we will have to pay that to. Brings the total to $100 trillion. Each taxpayer needs to come up with $671,141 today to have everything funded that is on government’s books.
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- Obviously it will take more than one generation of taxpayers to come up with this much money. All this is over and above the normal taxes that fund the government‘s daily expenses.
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- Is this not a financial crisis?
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- Ok, back to what caused it. The government caused it over the last 15 years. The government wanted the banks to offer more mortgages so more people could afford the American dream of owning a home. Home ownership makes better citizens and grateful voters. A perfectly good liberal idea with good intentions. The banks made home mortgages so easy all it needed was a signature on a piece of paper. There was little concern about the ability of the home owner to pay off the loan. Banks sold the loans to the government. Fannie Mae and Freddie Mac now own 90% of all government backed mortgages.
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- More mortgages easier to get meant more buyers, home prices escalated, mortgages were bought up by Goldman Sachs packaged and resold on Wall Street. Everyone was making money.
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- The government’s “ insane policies” caused this housing bubble and it finally burst. Home values fell. Mortgages were worth more that the homes were worth. Home owners defaulted, banks foreclosed, and got into financial trouble themselves owning assets it could not unload. Mortgages tightened up. Home building dried up. The home improvement purchases stopped. The economy went into a tailspin. And, the government was borrowing 40 cents for every dollar to pay for it. The government is still printing money. Interest rates are held near zero. The crisis is far from over.
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- Printing more money, means a cheaper dollar, means prices will rise, means inflation. The government is stealing savings from its citizens. Dollars saved are continually able to buy less due to inflation. Interest rates will eventually rise. Bond holders will loose money. It took us 15 years to get into this mess and it will take 7 more years to get out of it. If government can reverse course in 2013.
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- You can see all these carts at “ CBO.gov” Central Budget Office. However, it is worse than even their presentation because the CBO must assume “static conditions”. Their office can not take into account “behavior changes“. That is left to the economists and pundits to do. But, common sense will tell you when taxes go up, people have less money to spend, businesses have fewer employees they can hire. Business will go off shore and leave the taxes behind. Capital always will flee taxes. These are behavior changes that are not in the CBO charts.
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- Google: www.hillsdae.edu for more analysis on the economy.-
- Google: The CATO institute journal has more.
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- What does the government do to reverse course?
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- Many things: Most important, reduce the spending at the Federal level. The Fed should set priorities of what is most important and what is required by the Constitution. Stop trying to reengineer our society. Many departments should not be funded. Or, if funded they should be reduced from 30,000 federal employees to 30 employees whose only job is to coordinate and facilitate the States with these programs. The Fed should help do the marketing but not the mandated manufacturing that belongs to the States. These expenditures belong to the States where they can not print money. Better, more effective, more efficient, local government decisions will result.
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- 2013 will begin another recession. Taxes are going up. Regulations designed to reengineer society are crippling businesses. Interest rates are held below 1% and inflation is above 2%. Anyone holding money, or retirement funds, is loosing 1% per year. The government is stealing your money. In 10 years you have lost 10% , by doing nothing.
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- In 2013 we should change the Social Security System from “defined benefits” to a “ “defined contributions” system, like a 401K. People should retire whenever they want to collect their money. Under today’s “insane policy” wealthy, white women live to age 88. The average age of black males stops at 63. They pay into the system and never get a chance to use it. While the wealthy, white women are on a Caribbean Cruise. It is an “insane policy”.
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- Healthcare has the same insane policies. Doctors are paid for their services, not for their results. Healthcare should be an insurance, with everyone having co-pays on some scale and have protection against major medical expenses. Read “ Escape Fire” to learn how insane our system is. 50% of doctors said they want out. Doctors get paid $1,500 for stint surgery but only $15 to spend 45 minutes helping a sick patient. You’re the doctor what would you be doing?
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- The government has in law a “ sequester” which is across the board spending cuts. How insane is this. They refuse to pass a budget that would set priorities on what should be funded. Politicians refuse to do the hard work and receive the wrath to set priorities and budget accordingly.
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- Spending is up 22% under President Obama and he says he wants to spend even more. Most of this spending is “unconstitutional” and belongs to the States not the Federal Government. Government steals our money by borrowing more, lowering interest rates so it pays less, printing money to pay for debt, causing prices to rise and “ inflation” to steal the property rights of savers. Government politics trump economic common sense.
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- Greece, Spain, Portugal, Italy, Ireland are all “failed economies” that have gone the same route. Germany has the only surplus in the Euro. Greece has already defaulted on its debt and creditors got 50 cents on every dollar. Spain unemployment is at 25%. The Euro private sector is shrinking. The public sector is still growing. More bailouts are coming and the whole Euro of 17 countries could go under. Sad to watch. U.S Banks are on the hook too.
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- This is certainly a “transformation” ; it is certainly a “ redistribution of wealth”; it is certainly a “financial crisis“. And, the root cause is the government implementing policies with good intentions, supported by dreamy voters who fantasize utopia. An announcement will be made shortly, stay tuned.
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RSVP, please reply with a number to rate this review: #1- learned something new. #2 - Didn’t read it. #3- very interesting. #4- Send another review #___ from the index. #5- Keep em coming. #6- I forwarded copies to some friends. #7- Don‘t send me these anymore! #8- I am forwarding you some questions? Index is available with email upon request. Some reviews are at http://jdetrick.blogspot.com Please send feedback, corrections, or recommended improvements to: jamesdetrick@comcast.net. ---- “Jim Detrick” -- www.facebook.com, -- www.twitter.com, -- 707-536-3272 Sunday, January 13, 2013
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