Hard Times

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children wake up homeless on the continent they conquered."

Thomas Jefferson

Has that little-voice-in-your-head been telling you that things are horribly wrong, despite the anointed one telling us that everything will be fine? It looks like that little voice may well be right. You know big trouble is heading our way when Comptroller General David Walker recently quit in frustration because as the government's top accountant had warned that the country’s finances are going over a cliff and no one is acting to stop it... we’re about to see history's largest debt bubble pop under the weight of national bankruptcy.

The Outstanding Public Debt as of 15 Jan 2009 stands at $10,617,631,827,683.86. That debt has continued to rise at an average of $3.40 billion, every single day, since September 2007! With the estimated population of the United States being 305,461,697 people, each citizen's share of this debt is $34,759.29. That’s nearly thirty five thousand dollars in debt, for every man, woman, and child in this country, including those still in diapers! You also might want to remember, that’s in addition to whatever personal debt you owe to the bank, mortgage company, credit card company, rich uncle, or whoever! A lot of folks like to think that we owe all this government debt to ourselves, and quite a bit of it is. But, how much is owed to foreign interests? Try $2.4 Trillion on for size! Of the $9.2 Trillion in Federal government debt outstanding at the end of 2007, approximately $5.1 Trillion was owed to the public (foreign and domestic) in the form of treasury bonds and T-bills. Of that $5.1 trillion, nearly half was owed to foreign countries. This means that every single one of us owes $7,973 in federal debt to foreign interests. A family of 4 owes $31,893 to foreigners, 25% of that to Japan, 20% to China, and those numbers are growing every day. In July 2007 the US comptroller general said that; "Foreign interests have more control over the US economy than Americans, leaving the country in a state that is financially imprudent. More and more of our debt is held by foreign countries – some of which are our allies and some are not. The huge holdings of American government debt by countries such as China and Saudi Arabia could leave a powerful financial weapon in the hands of countries that may be (make that “are”) hostile to US corporate and diplomatic interests.” Foreigners own about "$9 trillion of U.S. financial assets, including 13% of all stocks, 13% of agencies, and 27% of corporate bonds", according to Gillespie Research/Federal Reserve. In addition, foreign interests already own quite a bit of our real estate, and a lot of our mines and factories as well.

To get the economy through the recent election, Congress, the Treasury, and Federal Reserve have enacted a whole series of emergency actions. In addition to artificially suppressing the price of gold and silver with the Exchange Stabilization Fund, they have already printed and pumped over a trillion more Monopoly Dollars into the U.S. financial system. When that "stimulative" effect wears off (and it soon will), the American public will find themselves up the proverbial watercourse, without the proverbial means of propulsion! How many Americans have a large part of their savings in the bank? How many Americans have invested their money in corporate stocks? How many Americans have purchased overpriced real estate? How many Americans are retired or disabled, or both? If, or rather when, the government goes bankrupt, do you really think all that “money” will be worth anything? Will those social security checks continue to be sent out every month? Where is the money going to come from for disability checks? No more welfare checks either, or food stamps. How are people going to survive? How are they going to pay the rent, cover the utilities, or buy food? … and there are a lot of Americans totally dependant on those retirement checks. Well, how about whatever they’ve managed to save? Paper money will be little more than so much low grade toilet paper I’m afraid, and we haven’t used silver coins since the mid 1960’s. Unless you own a gold mine (or perhaps an oil well) you might want to polish your trading and/or bartering skills. The rural areas will be hard hit, but what will happen to our cities? Food riots perhaps? And the winters are going to get mighty cold without electricity, coal, or heating oil.

Post WW I Weimar Germany found itself saddled with astronomical war reparations payments which effectively bankrupt their government. To some extent Germany printed large amounts of fiat money to deal with the crisis, which allowed them to pay some war loans and reparations with essentially worthless paper marks. Circulation of that paper money skyrocketed, and Germans soon discovered that their banknotes were worthless. The value of the Mark dropped from 4.2 per US dollar at the outbreak of World War I, to 1 million per dollar by August 1923. The main cause of such hyperinflation is a massive and rapid increase in the amount of printed money that is not supported by growth in the output of goods and services, and that soon results in a complete loss of confidence in the money. In 1923-24 Germany, the price of a loaf of bread could easily exceed a few million marks! Hyperinflation wipes out the purchasing power of private and public savings, distorts the economy in favor of hoarding, and causes the hard currency monetary base to flee the country. People will soon find that they can burn a few bales of money to help keep the house warm, but it has very little nutritional value. Now, in addition to the nearly trillion dollar bank bailout, the automaker bailout, and the proposed bailout of the various state governments, along with all the mandatory pork of course, I understand that Mr. Obama wants yet another economic “stimulus”, by some reports having as much as a thousand dollars sent to every American citizen. Where does the government plan to get all that money? By borrowing it from foreign countries of course, rather than by biting the bullet and slashing government expenditures. We’re in deep trouble because our lawmakers consistently think the US treasury and the taxpayers pockets are a bottomless bag of money for them to lavish on pork barrel projects and their corporate friends. Hey guys, when you’re in over your head, stop digging!

The United States is a big country after all, and even today we’re quite wealthy in many ways. But when all those foreign debts are called in, with what do we pay them? Our gold reserves are totally insufficient, and our fiat money is only worth what they think it is, and certainly not what we’d like to think its worth. I suppose we could sell Yosemite National Park to Japan as a theme park, and China could get a few dozen national forests to subdivide into homesites for their excess population. But watching the Saudi’s haul the Statue of Liberty away for scrap will be a bit hard for this American to take.

US Break-up?

Back around 1985 I read a magazine article reportedly drawn from a CIA report, that predicted the break-up of the Soviet Union in the then not to distant future. This prediction was based on a number of factors including among others, social unrest, widespread government corruption, and massive overspending. At that time such a collapse was nearly unthinkable to Soviet citizens and to most Americans as well. Yet the Soviet collapse began early in 1985 when after years of wasteful spending economic growth was at a standstill. Failed attempts at reform, a stagnant economy, and the endless war in Afghanistan led to widespread public discontent. The increased political and social freedom instituted by Mikhail Gorbachev allowed public criticism of the regime. Several of the SSR’s began resisting Moscow’s control, which weakened the central government. The trade gap finally emptied the treasury and led to national bankruptcy. All this severely undermined the the Communist Party's power base, particularly after a disintegrating alliance among the Warsaw Pact nations accelerated, leaving the Soviet Union unable to depend upon its client states. Most of us can remember what finally happened in 1991.

And now it would seem that the Russians are returning the favor. A professor at the diplomatic academy of Russia's Ministry of Foreign Affairs said “the U.S. will break into six parts because of the nation's financial crisis.” "The dollar isn't secured by anything," Igor Panarin said in a recent interview. "The country's foreign debt has grown like an avalanche; this is a pyramid, which has to collapse." He continued with “the financial crisis will worsen, unemployment will rise and people will lose their savings -- factors that will cause the country's breakup.” "Dissatisfaction is growing, and it is only being held back at the moment by the elections, and the hope that President- elect Barack Obama "can work miracles," he said. "But when spring comes, it will be clear that there are no miracles." Panarin’s prediction is that the U.S. will break up into six parts - the Pacific coast, with its growing Chinese population; the Southwest with its Hispanics; Texas, where independence movements are on the rise; the Atlantic coast, with its distinct and separate mentality; the poorer central states with their large Native American populations; and the northern tier, where Canadian influence is strong.

For seriously predicting the break-up in June or July of 2010, Panarin has become a media celebrity. Hardly a day goes by without another interview for the KGB-trained, Kremlin-backed senior analyst. Few Americans paid any attention to his views until the Wall Street Journal published them on Page 1 of the Dec. 29, 2008 issue, and within hours the U.S. media began an indignant counterattack. Time magazines business and economics columnist Justin Fox wrote "The man knows nothing at all about American regional differences." “South Carolina is like Massachusetts?” “Tennessee will join with France? Idaho will find something to love about California? Wyoming will snuggle up to Ottawa? Alabama will happily report to Mexico City? Yeah, right!" I’ll agree with Mr. Fox, Mr. Panarin certainly doesn’t understand our regionalism!

Most Americans aren’t very concerned about some “foreigner” predicting American disunion, revolution, or overthrow of the government, as that happens all the time. Face it, at any given moment we have a number of home grown (generally rural based), movements that want to secede because they feel cheated or powerless in the face of the large voting population of the urban areas, and generally these rural areas are being overpowered by the big cities. An example? Mr. Obama was definitely not elected by the rural folks of this nation. Still, Prof. Panarin is not a fringe or cult figure either. He’s a former KGB analyst, and current dean of the Russian Foreign Ministry's academy for future diplomats, he lectures students, publishes books, and appears in the media as an expert on U.S.-Russia relations. Asked why he expected the U.S. to break up into separate parts, he said: "A whole range of reasons. Firstly, the financial problems in the U.S. will get worse. Millions of citizens there have lost their savings. Prices and unemployment are on the rise. General Motors and Ford are on the verge of collapse, and this means that whole cities will be left without work. Governors are already insistently demanding money from the federal center. Dissatisfaction is growing, and at the moment it is only being held back by the elections and the hope that Obama can work miracles. But by spring, it will be clear that there are no miracles." Humm… I don’t expect to see any miracles either…

Nor is Mr. Panarin alone, another forecaster of doom for the US is Dimitry Orlov, an American who was born in Leningrad and immigrated to the United States at the age of 12. He was a witness to the Soviet collapse in the course of several visits to Russia between the late eighties and mid-nineties. He is an engineer with a BS in Computer Engineering, a leading Peak Oil theorist, and an MA in Applied Linguistics. Mr. Orlov sees many similarities between the collapse of the Soviet Union and the United States today. He states that “many of the problems that sunk the Soviet Union are now endangering the United States as well. Such as a huge, well-equipped, very expensive military, with no clear mission, bogged down in fighting Muslim insurgents. Such as energy shortfalls linked to peaking oil production. Such as a persistently unfavorable trade balance, resulting in runaway foreign debt. Add to that a delusional self-image, an inflexible ideology, and an unresponsive political system.” Not a real pretty picture is it?

We do have a much stronger sense of 'National identity' than did the citizens of the Soviet Union, and with that our country might well survive a total economic collapse. But that identity is weakened every day by “cultural diversity” and uncontrolled immigration. With that, we’re divided today more than anything seen since the civil war era. The US government is rapidly approaching bankruptcy, our middle class is quickly disappearing, and the gap between rich and poor widens daily. The cost of living is climbing like the proverbial “homesick angel”, individual income can’t seem to keep pace, and unemployment is skyrocketing. Our national infrastructure is rapidly wearing out and not being replaced. The long “War on the west” continues unabated. Our constitutional rights and religious beliefs are under continuous attack by the radical left, morality seems to be a dieing trait, which leaves crime and corruption running rampant. Partisan gridlock and bureaucratic inertia stifle any serious attempt to solve our problems. Finally, our dependency on government largess does not bode well for any of us. I certainly don’t know what will happen next, but I do know is that the United States of today is a far cry from the nation that survived the 1929 depression and then went on to victory in WW II.

Do I want to see any of this happen? Certainly not, I like this country, warts and all. Could it happen? Well, yes it could, we are after all in serious trouble despite the promise of “change”, and no “Empire”, American or otherwise, lasts forever.

Civil Disobedience

I’ve never been a fan of Henry David Thoreau despite having been required to read several of his works while in school. Brilliant he undoubtedly was, but he was also a rather strange man. Thoreau was many things, a naturalist, conservationist, sometimes vegetarian, an abolitionist, a hermit and conversely an admirer of civilization, sometimes school teacher, and even an anarchist in the days before that became a popular credo. In 1849, Thoreau published an essay entitled “Civil Disobedience” wherein he proposed his concept of nonviolent resistance to the rule of government. His concept greatly influenced both Mahatma Gandhi and Martin Luther King Jr. in later years. He argues that people should not permit government to overrule their conscience, and that people have a duty to avoid allowing the government to make them the agents of injustice. He was of course motivated by his disgust of chattle slavery. “Civil Disobedience” is quite interesting reading if you can find a copy.

In part, he wrote; “I heartily accept the motto, — “That government is best which governs least”; and I should like to see it acted up to more rapidly and systematically. Carried out, it finally amounts to this, which also I believe — “That government is best which governs not at all”; and when men are prepared for it, that will be the kind of government which they will have. Government is at best but an expedient; but most governments are usually, and all governments are sometimes, inexpedient.”

“That government is best which governs least” is usually attributed to either Thomas Jefferson or Thomas Payne, but it’s also claimed that Thoreau was the first to put it into print. He believed, as do I, that the less government we have, the better off we are. He wanted to carry this to extremes however, in preferring no government whatsoever. I rather like that idea as well, but I also realize that this final stage is a utopian dream and completely impossible if there are more than two people making up the population… and it’s certainly not feasible in any civilized world.

Government is usually defined as a centralized authority that does those necessary things for us that we are unable, for one reason or another, to do for ourselves. Understandable, in that while I am quite capable of defending myself and my family against an intruder, I’m going to have a hard time defending the back forty from an outlaw gang! For that, I’m going to need assistance from friends, relatives, and probably the neighbors as well. Somebody’s got to plan and direct the defense, so now we have an improvised and temporary sort of government. How to defend an entire nation? With an Army naturally, and having an army means that we’re going to have a correspondingly larger and more formalized government responsible for training, equiping, and feeding that army. Then to, if I wish to write a letter to someone on the east coast, how do I get it to the intended recipient without having to hand carry it all the way by myself? Passing it hand to hand via the neighbors might work of course, but that seems a somewhat laborous and unreliable method at best. We could of course have a postal service, but that also means more government. Personally I think having some sort of fire protection available is a very desirable thing, but have you ever tried to buy your very own personal fire truck!? (I have, and it’s an expensive proposition! I could have bought a quite nice house for what I spent on that truck.) As long as we have a say in what government we get, the trick is to decide just what “services” we actually need or want, and eliminate everything else. That can get quite difficult in our modern day, as nearly everyone has their own “the government outta” pet idea, and if any three of them can agree, we suddenly find ourselves saddled with even more expensive and self-perpetuating government! And “Government” is self-perpetuating after all, in that it exists only to grow and keep itself “in charge”!

“The government itself, which is only the mode which the people have chosen to execute their will, is equally liable to be abused and perverted before the people can act through it… the work of comparatively a few individuals using the standing government as their tool; for in the outset, the people would not have consented to this measure.”

Actually that’s exactly what does happen, a few individuals generally decide what we’re going to do next, long before the rest of us can say “Hey, wait a minute!” Do you remember the start of the war in Iraq, or even the beginnings of the wars in Korea or Vietnam? Did “we the people” decide that we wanted to go to war, or did a relative few people lead us into them by our noses? For a good many years I’ve listened to the ongoing litany of “War is wrong. War is evil. War is immoral”, and I can well agree with that sentiment despite (or probably because of) having spent part of my life as a soldier. However, I also well know that there are evil men in this world, and that they have “plans” for me and mine. Perhaps not for me personally, but they certainly have plans for this country and its citizens. We do need a means of defending ourselves from those men and their plotting, which means we need some sort of government, like it or not. As long as we’ve got that government we might as well let it deliver the mail, along with the other things we would be hard pressed to do individually. But, that government must be kept under some sort of tight control lest it become a totalitarian monster controlled by home-grown evil men, and promptly enslaves everyone else! (Or perhaps they’d settle for just spending us into the poorhouse?) Our nation’s founding fathers, knowing full well that a direct democracy can’t work for long, chose to give us a representative democracy, whereby every few years we select the individuals who will represent us, “We The People”, not some vested interest, foreign government, or “world opinion”.

What Thoreau failed to mention is that if we are to have any hopes of the electorate making a wise selection from among the candidates, that electorate must be reasonably well educated, well informed, and contrary to much of the liberal bleating, they must have a set of strong moral guidelines. Our current government has pretty well eliminated the education part with the dumbing down of Americas schools in the interest of “self-esteem”, the nation’s mass media certainly can’t keep us well informed without their favoritism showing through, while Hollywood is happily teaching our kids that morals aren’t relevant anymore.

Perhaps the American people should put an end to all this. We can begin by taking charge of our own lives and electing representatives who will eliminate government’s continuous effort at assuming control of our lives. We could return to teaching our children that morality does matter. We could also stop being enthralled by “change” just for the sake of doing something different, and start paying attention to doing what we know is morally right and proper instead of what’s expedient or politically correct.

A Dark Future

Americans are hooked on progress. We’ve grown to expect that tomorrow will be better than yesterday, and that a bright shining future awaits, just around the corner. Faith in "opportunity" and "getting ahead" is an ingrained part of our culture, as are centuries of believing we can overcome any setback or obstacle. However, we may be at the beginning of an entirely new era that will change those expectations. It’s not just the present financial crisis and its effects either, as the crisis facing us today are running neck and neck with other challenges that including an aging population, failing infrastructure, runaway health care costs, falling employment, and an astronomical national debt that imperils our economy and our society. Our next president will have to face the most daunting economic situation in decades, and perhaps the worst since Franklin D. Roosevelt took office in 1933.

Still, while the American economy has a history of defying the “worst case” predictions of the pessimists, we should note that we’ve never been in quite this sort of situation before either. Usually an economic downturn can be reversed by engaging in a “splendid little war” for a year or so which seems to work wonders for big business and particularly for the arms industry. Today, that isn’t working at all, although we’re engaged in two “little” wars. Our national debt has reached levels never before experienced by any nation in history, well beyond our citizens ability to pay it off, and we’re now going beyond the national bankruptcy stage! Unemployment is heading for record levels, not because John Q. Citizen doesn’t want to work, but because American jobs are being sent overseas. The flood of illegal immigrants seems to be slowing down though, with illegals now returning home in search of work! The average age of our workforce is rapidly heading for retirement, and it’s getting harder to find a “husky young lad” who’s willing to work. The last time I looked, farm prices were depressed to the point it wasn’t economical to even harvest a crop, although because of record high food prices there are hundreds of thousands of Americans going hungry every day! Irregardless of the temporarily low price of oil, our energy costs are astronomical and show no sign of coming down. The “Big Three” automakers are on the verge of going broke while the annual income of any one of them far exceeds the gross income of most of the world’s nations. The banking industry seems to think its fine for them to be thirty dollars in debt for every dollar they hold in assets, while the “bailout” programs appear to be doing little more than adding fuel to the fire. All in all, we’re looking at a dark and dismal future.

Admittedly, I don’t really know what to do about our economic straits either, but I’ll bet there’s a whole herd of economists running around with bright ideas, and no two of them will agree on anything. Our government certainly doesn’t know what to do either, else they wouldn’t be looking for solutions from the very people who caused the problem in the first place! Armed with credit cards, Americans brought home endless iPods, cell phones, and SUV’s, ignoring their declining incomes and shrinking savings. Banks lent huge amounts of money to homeowners with dubious credit, convinced that real estate prices could only go up. Essentially, big business and Wall Street have failed us, aided by a government that insists on a massive tax and spend agenda that the American people can no longer afford. I would suggest that our government go on a severe austerity campaign, and it probably wouldn’t hurt if the American people did much the same thing.

The Great Depression lasted a bit more than a decade with unemployment averaging 18 to 24 percent. Rural areas were hard hit, but the farms were still producing (and people were still working on those farms) so at least country folks could feed themselves. Life in the cities was a bit different though, with most factories closed or severely cut-back, the urban areas saw those high unemployment rates, little money in circulation, and found that it’s rather difficult to grow a kitchen garden in an apartment house. The problems were real, the times were hard, but the nation pulled together and survived. Today’s economic situation is quite similar to 1929 in many ways. Our current economic melt-down is again driven by greed and fear more than any real shortage, and it shows no sign of slowing down either. Everyone dumps stocks while they can because everyone believes that everyone else will sell, forcing the prices down. But it ignores the real power behind the mayhem, "deleveraging", which I understand is economic speak for cleansing the financial system of too much debt. That is going to severely affect the little guy who’s up to his ears in credit card bills! Nor is this strictly an American problem, as our troubles have exposed a global network of business and bank dealings that have the entire world economy skating on thin ice. If government can’t get a handle on things shortly, about the only people who will escape relatively unscathed will be the poor folks living in third world countries! (Living at a subsistence level does have its advantages I guess.)

For the time being our left wing government is living in a fool’s paradise. All the fine sounding plans to save the world from global warming are going to be expensive as all get-out, and we can’t just order industry to do something about it without paying for it in one way or another. Energy independence? Yup, that would help… if we start producing our own oil. Sure we could switch to “Green” cars, but what will it cost to convert our entire energy distribution industry to an environmentally friendly system nearly overnight? Free, socialized medical care? Uh-uh, if congress passes that, the taxpayers are going to get stuck with yet another huge bill! We know that three programs for the elderly dominate the federal budget: Social Security, Medicare, and Medicaid. These programs now cost over forty percent of the annual budget, and as baby boomers retire it’s liable to double. The one and a half trillion dollar (currently estimated cost) bailout might make things look like government is going to save the day, but is it going to solve anything in the long run? Probably not if we consider that the Dow Jones industrial average held at under 1,000 for most of 1982, averaged about 2,500 by 1989, and almost 10,500 in 1999. But did that huge increase reflect a truly increased valuation, or were we just playing a numbers game with the Monopoly money issued by the Fed? Feeling wealthy in those boom times, Americans borrowed and spent well beyond their abilities to repay… now it’s time to pay the piper, and we don’t have the wealth to cover the tab. The United States will remain a wealthy society I’m sure, but we’re about to have a head on collision lack of valuate and government spending for everything from retirement benefits to defense issues. “We the People” are going to have to make some hard choices pretty soon, and make sure the government abides by them.

So, what do we, as individuals, do about this mess? Well, I for one have been on an austerity campaign ever since I retired. Now I guess I’ll have to look for even more fat to trim. If I can cut back on the expenses by even a few percent perhaps I can save a few dollars more for that proverbial rainy day. I’ll have to keep reminding myself that "Luxuries" soon become the "necessities" that I surely can’t afford.