Wednesday, April 13, 2011
1. Life goes on as we know it.
2. Our money collapses.
Notice that "life goes on" is an extreme option, this is the 100% best case scenario and it is highly unlikely. Right now real inflation is heading towards double digits http://www.shadowstats.com/ while Government Approved inflation numbers are around 2% http://www.inflationdata.com/inflation/. This is typical of a government with its head in the sand and a populace that is unprepared to deal with real issues.
Anyone remember Stagflation? Well the cycle STARTED around 1972 with OPEC market manipulation and didn't END until the mid 1980s. Well boys and girls, this time the cycle STARTED with the dotcom burst, was exasperated by 9/11, dropped into a deeper cycle by the housing bubble, and that is the "stagnant" part of the economy.
The "inflation" portion started in 2006 with the election of a Democrat controlled Congress. Money is being spent, but any financial adviser will tell you that simply spending money is a poor indicator of economic health. Keynesian economics have never worked to pull a country back from a recession. The sole successful Keynesian policy in history was the rearming of Germany under Hitler.
So here we are, in debt up to our eyeballs. We have to borrow money to pay for discretionary spending, ALL discretionary spending. Why? because we have no money left after the mandatory spending social programs that eat up 100% of all Federal Revenues.
Let me put it this way. The FBI, ATF, DOD, DOJ, FAA, ICE, USM, DOEngy, DOEd, EPA, IRS, CIA, and the rest of the alphabet soup agencies, all their budgets are on borrowed dimes that adds to future MANDATORY SPENDING in the form of interest payments.
As anyone who has ever run into trouble with interest payments on credit cards will tell you, you might be able to swap your debt around for a little while, but unless you STOP SPENDING and start PAYING DOWN the debt eventually you will go BANKRUPT.
And when a nation goes bankrupt their currency becomes worthless.
So, the Current Administrations call to "Raise the Debt Ceiling" is a call to destroy currency. The US Dollar can lose its status as a "reserve currency" overnight and become worthless internationally as well as domestically. It happened to the German Mark, it happened to the Russian Ruble. It happened to the Mexican Peso. It will happen to the Dollar.
We can't raise taxes out of this mess (see Hauser's Law and the Laffer Curve) so either the Government is trying to make our money worthless to break China's financial hold on us (unlikely, that would require cunning genius instead of proven idiocy) or like the Wiemar republic,http://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic simply printing money willy nilly until the debt is paid. Either way, we the people lose.