- Guest Blogger Nitzakhon
RUNNING OUT OF FINANCIAL ROAD
If you kick the can down the road,
you delay a decision in hopes that the problem or issue will go away
or somebody else will make the decision later.
Few things more beautifully exemplify the
application of this phrase than its applicability to government
finances.
THE STARK FACTS
From the website US
Debt Clock, we’re pushing $20 Trillion in debt. Think
about that for a second. Put it in scale: a million is a one with
six zeros after it (106); a billion has nine
zeroes (109)… a trillion, twelve zeroes
(1012). This is just the US government’s debt;
not states, not cities, just the feds. And are there any world
governments not in debt, and with aggregate amounts that likely dwarf
the amount of wealth in the world? Consider this report: Global
debt reaches US$ 217 trillion.
Now throw in America’s unfunded liabilities
(which I suspect, but do not know, are not included in the
above world debt figure; they’re definitely not included in
the US debt figure). These are monies the US government has to pay
that it has no clearly-identified way of funding which, by the way,
would be illegal for a private entity – it’s good to be the King,
isn’t it? Depending on which estimate you read, and I’ve heard
it as being anywhere from $60 T to $123
T, possibly higher…
much higher…
even with the smallest number this is an amount of money that
doesn’t exist in the US to pay it off; it dwarfs the recognized
debt. Doubtless other governments have similar, off-the-books,
issues – if true, that $217 T figure, above, is terrifyingly
optimistic:
“[W]e will have to deal, one way or
another, with the largest twin bubbles in the history of the world:
global debt, especially government debt, and the even larger bubble
of government promises. We are talking about debt and unfunded
promises to the tune of multiple hundreds of trillions of dollars –
vastly larger than global GDP.”
I speculate that even if we strip-mined the
planet down to the Moho,
this could not be repaid.
PIGPILE!
But wait, there’s more! Roads and bridges
are necessary infrastructure, are a multi-trillion
dollar budget item and, like with all such public projects, this
number is doubtless conservative; again, this is just in the US.
How about the water infrastructure, or electrical? For example
(links in original, bolding added):
One trillion dollars to upgrade older water
pipes? And that's only the most urgent and immediate need?
How many more trillions will be required to fix non-urgent,
non-immediate problems? When you put that sort of money
together with the
sums bandied about to repair other elements of our infrastructure,
plus that needed to upgrade
and secure our electric grid . . . the figures become even more
mind-boggling. We could be looking at multiple trillions of
dollars over the next couple of decades - and that's
just to fix the most serious problems
And leave us not forget the pension crisis;
Illinois’
impending collapse because of public pension commitments is just
the first domino wobbling. From states all the way down to
individual cities, e.g., New
York City, politicians have promised taxpayer monies in return
for public union votes and election help… counting on the fact that
the can will be far enough down the road so they can safely retire
before the bill comes due. And again, doubtless other nations have
similar issues.
Who will be asked to pay for these commitments
by politicians long out of office? Whether at the federal, state, or
municipal level, it’s you.. through more borrowing to “prime the
pump” that will need to be repaid (and never works), forgiving
loans (someone has to eat the losses), bailouts (paid for by more
borrowing), inflation from running the presses, or higher taxes, or
higher prices as companies get tapped to pay more taxes – it’s
you. Get up, go to the bathroom, look in the mirror. You.
WHAT CAN’T GO ON FOREVER, WON’T
National, and even state, governments are
spending at rates that put drunken sailors to shame. The answer
is obvious – stop spending:
"Obviously, the federal government will
not be able to balance the books no matter
how greedily it taxes us unless it reduces
spending, which will entail drastic reductions in its size and scope.
The alternative is inevitable economic collapse, because if something
cannot go on forever, it won't."
"No one will really understand politics
until they understand that politicians [and, in parallel without the
re-election concerns, career bureaucrats] are not trying to solve our
problems. They are trying to solve their own problems -- of
which getting elected and re-elected [or protecting their power turf]
are No. 1 and No. 2. Whatever is No. 3 is far behind".
I would argue No. 3 is to leverage their
positions gained by Numbers 1 and 2 to feather
their nests as fast and lavishly as possible. Just look at
Barackus Rex, now living a life so extravagant even his fellow
Leftists are scandalized (silly liberal, did you really believe
that “spread the wealth around” BS?). And et tu,
man-of-the-people Bernie
Sanders? And of course, the above are pikers compared to Her
Corruptness, Shrillary.
The Constitution, The People, and long-term
national interests are not even on the gold-silver-bronze podium of
politician and bureaucrat priorities, but fall into the “also ran”
category.
WHAT’S HOLDING IT UP?
In one of the sci-fi short stories by Larry
Niven about known
space – forgive me as I don’t recall which one – there was
a story of a ship that normally had three legs for stability while on
the ground; tripods being stable by definition. In the story one leg
had been damaged; it was not touching the ground and the ship’s
computer compensated by spinning the ship’s gyroscopes faster and
faster. Close to the end of the story, the capability of the ship to
compensate for the instability maxed out, and the entire ship toppled
and crashed. Just before that happened, the good guy asks the bad
guy – whose ship it was – a question: “What’s holding your
ship up?”
I fear the world, not
just the US, is nearing that point financially (on the video, at
1:15, quote: “…the economy, according to the CBO, shuts down in
2027…”).
“The brutal reality is, we're teetering on the edge of
national bankruptcy. Yes, I know, the federal government can
simply 'print money' to pay off the national debt if it wishes; but
that will also cause so much inflation as to render our currency
meaningless. Think
Weimar Germany.”
A world in which "we do these things
because they're easy" has one end-state: collapse. Believing
that debt has no consequence, that the status quo is permanent, that
all the promises based on soaring debt can be paid--it's all an
appealing fantasy, magical thinking at its most enchanting. Believe
these fantasies at your own risk.
DESPERATE MEASURES
I have no doubt that people who are really
watching and not deluding themselves with fantasies of some magical
growth formula turning this around are getting desperate. Desperate
people do desperate things. Even unethical things. Even illegal
things. Consider this
excerpt from a 2012 essay about Wisconsin (bolding added):
Wisconsin, a posterchild for the
national and international trends of democratically elected
governments to feed upon their own to sustain the ideal of achieving
the universally secure life, had found over the last ten years the
supposed promise of guaranteeing security to all had
become an unholy burden. Locked into having to produce a
balanced budget by a constitution written years earlier by a more
fiscally responsible and mature citizenry, increasingly unethical
fiscal tricks were required to assure the entitled their unfettered
cut of the budget. Multiple elevations in the tax rate for both
individuals and businesses eventually proved insufficient to feed the
multi-billion dollar requirements of entitlements and the democrat
Governor Doyle did the only rational thing felt he could given the
inseparable link of the entitled to the health and power of his party
– he stole. First hundreds of millions from
the transportation funds exclusively set aside through energy taxes
to maintain the transportation system, and then from health care
professionals and patients through the state’s malpractice
fund. When that didn’t prove to be enough, he took
what he could from a one time subsidy from the federal government’s
stimulus funds, and retired, leaving the whole stinking
pile for the next governor to deal with. The election of 2010
between Scott Walker, a fiscal realist, and Tom Barrett, mayor of
Milwaukee, who promoted a further expansion of unsupportable tax
mechanisms, was Wisconsin’s first dip into the cold water of fiscal
reality and stunned every one with electorate’s decision to go with
the adult in the room, and promote Walker to Governor.
Governor Scott Walker made progress on that and
the parasites fought him tooth-and-nail; I predict that as soon as
he’s gone from office, they’ll revert (as they will at the
federal level if the Democrats get back in the driver’s seat). It
wasn’t enough. It
can never be enough. We
cannot tax our way out of this. As British Prime Minister
Margaret Thatcher said, sooner or later you run out of other peoples’
money.
As the cracks start, there will be other
desperate measures to keep stability going. One thing bandied about
has been to federalize
401k plans; essentially, they’d seize the entire private
retirement wealth of American workers and hand out IOU slips in
return. Officially
denied, and scorned
by the Left as paranoia, there are trillions of dollars of retirement
wealth in private hands; just the sort of thing to keep the American
ship from crashing for another few years… assuming the world
doesn’t drag us down anyway.
The last time I brought it up online, someone
actually replied “So what if they do? Your account will be backed
by the full faith and credit of the US government; you don’t trust
them?” When I replied that I did not, I was… swallow and put
your drink down… is that drink down?... excoriated by a
screaming-militant Leftist for not being patriotic.
Another sign of desperation will be a renewed
push to go to a cashless society – one in which no transaction
or income, at any level, will go untaxed.
A VORLON PROVERB
Multiple people around the Conservative
blogosphere have opined and commented on what to do. Certainly,
having cash
and other trade goods on hand is a good idea; another column with
other advice thoughts here.
Being prepared with food and water is a good idea too – even if
you have, say, a month on hand you’re better prepared than most
(the conventional wisdom I’ve read is that 90-120 days of survival
will be needed before things get stabilized after a crash). Guns and
ammo to hold what you’ve got. A joke I saw goes like this:
I asked my financial advisor what he’s
buying. He replied “Canned goods, guns, and ammo.”
Speaking of, financial people and other
well-off folks really are prepping:
Survivalism, the practice of preparing for a
crackup of civilization, tends to evoke a certain picture: the
woodsman in the tinfoil hat, the hysteric with the hoard of beans,
the religious doomsayer. But in recent years survivalism has expanded
to more affluent quarters, taking root in Silicon Valley and New York
City, among technology executives, hedge-fund managers, and others in
their economic cohort.
Ideas about prepping in myriad flavors abound;
seek out those far more knowledgeable about it than I. But there’s
one basic point…
The Vorlons
were an ancient alien species from the TV show Babylon
5 (fantastic show!). They had several proverbs, and one
applies perfectly to the amount of road that’s left. The crash,
it’s coming… and it can’t be stopped.
Prepare yourself.
L’nitzakhon! (To victory!)
No comments:
Post a Comment