Saturday, July 30, 2011

The economic cliff: Part IV (Conclusion)

The financial crises are coming thick and fast today. How many times in just the past 5 or 6 years? Some are more immediate and important than others, but these are fundamental financial issues that have as the root cause the inability of the United States (And other) government(s) in restraining its spending. Don’t think so? It has been more than 2 years since the U.S. has had a federal budget. How can you control spending if you don’t know what you have to work with? Hyperinflation is potentially possible today, with catastrophic implications worldwide. (Think Germany, 1920’s) The Republic is not addressing the issue and I believe that the time has passed that it can recover without the loss of the representative government, as we know it today. Government does NOT allocate the national wealth more effectively than when privately owned. If you believe that statement, you are on one side of this issue. If you do not then you are on the other side. This is a black and white issue similar to abortion. When was the last time you changed your mind on either of these issues? This is not likely to occur more than once in your lifetime, if ever. The catalyst here is the financial instability of the United States. The impact is likely to be worldwide and I don’t see much of the world changing its mind on either issue either. It is human nature.

The Republicans forced a showdown back in 1995 and got a political black eye that certainly cost them seats in 1996. President Obama can easily figure to obtain this type of support if it came down to it. And he may also figure that he has an ace in the hole. The 14th amendment can be interpreted to allow the President to go ahead and lift the debt limit anyway. An end-run like the way that Health Care was passed. Pass the bill so that the population can find out what is in the bill. This same passage of Heath Care has stimulated a resistance to the growth in government spending. Hence the impasse concerning raising the debt limit, AND raising taxes. (The two events are NOT alike, but I link them because the passage of the Health Care bill provided the motivation to fight raising the debt limit to the very end.)

A major problem is the actual working of the Republic. If you don’t have anything, (Or very little) would you not vote for someone who is going to raise taxes on those that do and then allocate at least some of that money to you? Would it not be in your best interest to build a larger amount of people who don’t have anything so that they will also vote for you? I am certain that many do not actually think this way. Many are caught up in the belief that it is morally correct to allocate wealth from the ‘rich’ and give to the poor. (Think of Robin Hood) Although we all like to think that Robin Hood was good, he did rob people. In a fairy tale, nobody gets hurt. In reality, people are killed and wealth stolen by those who personally gain from the act and at the same time, builds dependency of those who receive the wealth to those who are ‘stealing’ it. Not exactly the principals on which our country was founded upon.

No matter how this plays out, the United States is still in deep do-do. The interest on the debt is only just becoming unmanageable. If the interest rates can be kept low, we will be able to put off the day of reckoning a little. It cannot be for long. This may provide the last ditch window for real CHANGE. If interest rates go up, hyperinflation is a very real concern. I believe this to be the most likely scenario, although many other outcomes are possible. In any case, the day has to come where the spending of national resources of the United States reaches critical mass. Seeing as the United States is the largest economy in the world, this makes it a worldwide problem. The fact that these crises are coming closer together leads me to believe that if we do not force the issue this time around, it is going to happen despite what we do then. An ounce of prevention is worth a pound of cure. The problem is that the ounce of prevention will likely prove to be too little, too late.

Wednesday, July 27, 2011

Democrats are surrendering?

I heard and watched James Carville On CNN last night (7/26/11) say that the Democrats were attempting to surrender and the Republicans were refusing to accept. A moment later, he claimed that Democrats were getting a positive polling percentage of 60-40 or 70-30 on the debt issue. (I don’t doubt, but this is unconfirmed) If this is true, why would he claim his side to be surrendering when they held all the cards? They would be raising the bet, not folding or surrendering.

I did not believe that President Obama was signaling any surrender in last night’s national address. I saw him attempting to plead his case. Like the attorney that he is with plenty of fight left in him.

Hey! I have an idea! Let us pass a law that balances the budget by reducing the spending of the United States federal government and no new taxes. They can figure out what the bill says after it becomes law. For me, this debt issue is backlash for the passage of health Care. I am probably not alone.

No wonder I have never seen my country so badly divided. This is even worse than Vietnam. And this is on President Obama’s watch. Some moderate who is ‘reaching across the aisle’.

This is one reason why I believe that the Republic is in danger like we have not seen since the U.S. Civil War.

Sunday, July 24, 2011

Norway terrorism

Sorry, this attack in Norway will postpone the discussion of the financial problems in the U.S.

The recent terrorist attack in Norway could be (Among other things) a backlash to the Islamic invasion of Norway and Europe. I have believed for a long time that is it not possible to defeat Islamic jihad without organized violence. (Warfare) Some issues do not have any other solution. Example: It was not possible to stop Hitler without warfare either.

I personally have chosen to pressure my government into waging warfare against governments that support Islamic nationalism. He chose a path that I find repulsive. I am not living there, where he is much closer to the scene. It is much easier to remain calm and selective when you are far away. Wars bring out the best and worst in people. Not everyone can be restrained, particularly when under stress. Athough we are not perfect, I still believe that our societies in the 'West' are far better at restraining themselves from this type of action than ANY Islamic society.

Saturday, July 23, 2011

The economic cliff: Part III

The stimulus that was passed in 2009 was supposed to stimulate the economy, kind of like what happened in 1977-78. It was supposed to save the United States from ‘falling off an economic cliff’ and fall into deep recession or even depression as prices contracted. (Like what happened in the 1930’s)

It did not do so primarily because our relative financial condition is so much weaker today. Back in the 1930’s, the United States government (As well as the State, city and local levels) did not have the expenses that we have today. (And even in 1977) Most of that excess cash in the stimulus went to pay off those existing commitments. The hyperinflation that was expected has not yet really begun, although disturbing signs are becoming more and more apparent. (Just look at commodity prices, an important leading indicator.)

The main point is that the economic cliff we were saved from in 2009 is back, and the fall is looking to be greater than before. This is because the basic underling issue is that the United States is continuing to spend far more than it takes in. Our national resources have been shrinking for decades. The debt is so large now that the interest coming due is becoming unmanageable. This is like the homeowner who has been borrowing against his/her home for years and the equity is about paid out. Our county is no longer the rich one that was built during the 19th century and the 1st half of the 20th century. As a direct result, we can expect a much lower level of productivity and corresponding lifestyle. And this is IF we take correct action. If not, we can expect unrest and violence internally. (Think Greece and other countries that have had to implement CHANGE) This could easily spread, as economic issues are a very real cause of warfare as nations fight over limited resources. In other words, this economic cliff is much closer and it looks like a longer fall than we have seen in a very long time. Can it be no wonder that the division in our country is so bad? Economics is a basic cause of warfare. This is only one more reason why the war going on is going to become much, much larger before it is over.

Wednesday, July 20, 2011

The economic cliff Part II

Our economy was built on the principal that in order to built wealth; capital from profit is re-invested. Just like the way that an individual can become ‘rich’. Spend less than you make and invest the rest in assets that go up in value. Successful companies are able to re-invest, ones that fail cannot. How well this concept worked was seen as our country prospered like none ever did before. And we impacted the entire world with positive CHANGE. We are not doing this today. Through taxation, our government is limiting the ability of companies to perform this vital function. The money drawn from companies through taxes is spent on much lower productive endeavors. (Entitlements are the worst offender, being paid to not do any productive activity) In addition, the higher cost of doing business has encouraged capital into moving out of our country, a process that has been going on for decades. What is a bigger problem is that our government debt is being sold overseas. This capital outflow is more easily controlled than that which is privately owned. Yet this outflow of debt is continuing to accelerate. Interest on this debt is spiraling out of control.

Think of your mortgage. During the first few years of payment, the principal is paid off at a VERY slow rate. Most of the payment is interest. The last few years are almost entirely of capital re-payment. This is the basic economic theory that our country ran upon until the mid-20th century. Since then, the United States has been spending more than it takes in. (Reversing the mortgage, if you will) Taking your mortgage example, you now lose your job. Now you don’t make enough to maintain the house, let alone feed everyone. How long could you maintain this, even if your home was completely paid off?

You would borrow against the value of your home. As time went on, the interest on your debt would become so high that you could not even make payments on the interest, leave alone the re-payment of the capital that you have borrowed. You no longer own the house you live in. This is close to where we are today. And we have enough people in our country in denial to prevent a valid solution.

When I was in high school (1972-1976) my father had told me not to expect anything from Social Security. It would be broke by the time I reached that age. The financial problems were well known even then. In the 1980’s, the Republicans attempted to at least slow the problem down with some fixes. The population of the United States said very loudly: ‘NO!’ The attempt was made again in the early 2000’s but the Republicans got the same answer from the population of the United States. We want our entitlements, even if our financial future is in jeopardy.

Back in 1992, I was working for a bank when the lower levels in Chicago flooded. Our building had water fountains that were unusable for 6 months. During that time, the company inserted water bottles to supply fresh drinking water. After the city water was declared safe to drink, the company removed the bottles. Uproar resulted. At a meeting to discuss this issue, the company said that the 3 buildings that it maintained cost $180,000 a year to supply water in the bottles over what the city water cost. So if the bottles were maintained, they would have to lay off some staff to cover the cost. Out of 40-50 professionals (We were NOT union, we were computer programmers and analysts with college degrees) I was the only person who did not raise my hand to vote for keeping the bottled water. I asked several people later why they voted the way that they did. The reply was: “I don’t believe them.”


Companies have gone bankrupt because a union that represented the workers did not believe the financial trouble was as bad as the management believed. When unions do give in, it is because they finally understand the financial trouble the company is in. Many times, even then what they do is very reluctantly done. The very minimum. This is the same attitude that I see in the Democrat party (And the American public in general) concerning the financial trouble our country is in today. For the most part, a complete misunderstanding of the position we are in and even if understood, a lack of agreement with what it would take to reverse the process. Hence an economic cliff.

Saturday, July 16, 2011

The economic cliff: Part I

In order to understand where we are, I would like to discuss how we got here. This subject is much too large to cover in just three posts, but this is my attempt to grapple with this major issue.

The United States was founded upon the economic theory that the individual can allocate the national resources better than the government. Individual property rights were given priority over just about everything, including the right to vote. We began to see the positive results from this policy almost immediately. (An example is the U.S.S. Constitution, how well it was built and commanded)

Beginning in the first half of the 19th century, the United States began its long run of inventiveness and achievement. The cotton gin and the reaper revolutionized farming and these were only two of the most visible breakthroughs. It is not commonly known that a coinage shortage existed in this country until well into the 2nd half of the 19th century. The base currency was the Spanish real and ‘piece of eight’. This was because our government had such limited resources and controlled so little of the economy that not enough coinage and paper were being minted to supply the expansion of the economy. The 2nd half of the 19th century saw a boom as the industrial revolution caught hold in the United States. (Even with the crippling effects of the Civil War) We invented the phonograph, the electric light, the mass production of steel, and a host of other innovations that had a positive effect worldwide. People began to move to the cities, as it became more practical to make a living besides farming. At the same time, the national wealth was increasing at such a rapid rate that labor began to want a piece of the pie. They began to organize and became a force to be reckoned with. The innovations and breakthroughs continued into the 20th century.

The U.S. invented the airplane, refrigeration, and mass production of the automobile, just to name some of the most obvious ones in the first 2 decades of the 20th century. The crippling effect of World War I did not even touch the United States. Then came the Great Depression.

The Great Depression was the 4th depression to hit the United States. It was the one that hit the hardest and gave birth to the economic theory that countries can spend their way out of financial trouble. Because of the over extension in the economy, prices deflated instead of going up. By spending money, the government can increase the money supply and reverse this process although inflation would eventually become a concern. This is a major reason as to why gold was made illegal to own. Our government did not want resources being shifted into gold.

World War II with its massive spending pulled the United States out of the Depression. After the war, spending was reduced that caused a recession. The Marshall Plan killed two birds with one stone: It helped rebuild Europe and also eased the United States out of the recession by spending at a level that was considerably lower than spending during the war. This helped ease the U.S. off of the dependency from massive spending it had been on. The net effect was to encourage the idea that you can spend your way out of financial difficulty.

The mid-20th century has been the peak of United States innovation. The automatic transmission was one of the smaller examples. United States medical advances led the world from the early 20th century until today. The computer has revolutionized modern life. We invented atomic power, the most important energy discovery of the age. These are the accomplishments of an environment that private capital built up over centuries can achieve. Don’t think privately held companies are that important? England may have given up on this theory today, but the Supermarine Company built the Spitfire on a gamble (During the depression) that the government MAY have bought it. It helped save the country. This applied to other aircraft types as well. When Germany was facing defeat in early 1945, private companies (Krupp being the most obvious) held assets that were helpful in rebuilding. The PEOPLE will take care of their house better than ANYONE else will. When was the list time you washed a rental car? The economic theory that the United States was built upon is based upon human nature and the fact that people will take better care of things when they own it, or ‘have skin in the game’. We have moved away from this theory. The United States government now spends more than ½ of the entire GDP of our country.

President Carter is an excellent example of this ideology. During the election in 1976 the U.S. was in recession. When debating then President Ford, Jimmy Carter said: “The economy needs to be stimulated.” He delivered. The economy rebounded followed by a significant rise in inflation within a few years. The problem is that the basic economic theory of the country was changing.

The idea that you can spend your way out of recession and depression relies upon a basic amount of economic wealth present before the spending begins. We no longer have nearly as much wealth to draw upon as we have in years past.

Wednesday, July 13, 2011

President Obama is not listening

I watched part of President Obama’s comments about the debt limit on CNBC yesterday. (7/11/11) I wish that I were more comfortable when I listen to our President. The way that he speaks is so calm and soothing that it gives the impression that he listens and actively considers all sides. But WHAT he says does not give this message at all.

I was particularly disturbed by his comments about the Republican resistance to his proposal to raise taxes. President Obama was implying that it was irresponsible for the Republican leadership to give in to the fringe elements within their party and hold a hard line against raising taxes. Accusations frequently can tell more about the accuser than the accused. The disdain he holds for the Republican actions was not hidden very well. Yet at the same time, is this not what he himself is doing?

The Republicans were elected saying that they would fight any and all tax increases. They are holding to their ideology. President Obama does not agree with this ideology and is fighting it to the best of his ability. Is this not what Republicans are doing as well? And it is irresponsible to fight for what they believe in? Disdain for others views and beliefs leads to lack of listening and a feeling of superiority. The passage of Health Care demonstrates how that very same leadership knows what is best for us. I have an idea: Why doesn’t he sign a bill that does what he wants and the public can figure out what it does later? Oh, because he needs help getting that bill on his desk. Now that is listening and consideration for the other views that conflict with his. No wonder our country is so divided.

To top all of this off, I thought that President Obama had saved us from falling off an economic cliff? That in 2009 when the ‘stimulus’ bill was signed that we were saved from the disaster that had been left to him by ex-President Bush? Now we face a new economic disaster if the debt ceiling is not raised? And of course, President Obama knows the right thing to do, better than those who hold opposing views. This is why he is fighting all the way to the end and may have to enact the 14th amendment, in order to get around the ‘irresponsibility’ of the Republicans. Only if he can’t get enough of what he deems necessary. After all, extreme situations call for extreme measures. That economic cliff has come back and we just may have a constitutional crisis on our hands in order to deal with it. I guess the ‘fix’ in 2009 was only temporary. Like so many other ‘solutions’ that our government offers. This economic cliff is because of ex-President Bush and the Republicans. After all, their economic policies are ‘irresponsible’.

I understand the concerns about the limits on the national debt. I understand why many believe that it should be raised. I am willing to make a deal in that limits upon spending and taxes are mandatory with any allowance in raising the debt ceiling. My views are in conflict with our President. And I am irresponsible for pressuring my representatives to fight for my viewpoint? I have another idea:

Why does the House not pass a bill that gives me what I want and President Obama can figure out what it does after he signs it? This is why I have dug in on my viewpoint. Not because I am unwilling to compromise. It is because I am unwilling to compromise with the Obama administration. If you don’t listen, you can’t continue to expect the other side to listen. The backlash from the Obama administration and what it has been doing has not really even begun yet. You know what they say about payback. It can be a real bitch.

Saturday, July 9, 2011

The Republic is in danger

“We need to pass this bill (Health Care) so that YOU can find out what is in it”.

This is the corrected quote. I had mistakenly inserted US instead of YOU. As my wife pointed out, the change is actually for the worse.

So if and when the Republicans get the White House, the Senate and the Congressional House, they can pass a bill that changes Social Security in any way that they want and the public (YOU) can figure it out later. How about a bill that enforces the law that property owner’s votes are worth 5 and non-property owners are worth 1? After all, property owners have ‘skin in the game’. YOU can find out what the bill says after it is passed. Just think of the possibilities! WE can pass whatever WE want. No need to listen to YOU, as WE really know what is best.

Silly example, but dangerous. This is why I say that the republic is in danger like we have not seen since the U.S. Civil War. And I don’t hear anyone talking about how we are all getting along. (Democrats and Republicans) I get lots of agreement when I say that I have never seen our country so badly divided. The fighting at the state level (Wisconsin representatives walking out of the state is only one example) is only an example of what is happening at the federal level.

I thought that President Obama was going to ‘reach across the aisle’? That compromise and listening to each other would bring in a new era of cooperation?

This should not really be a surprise. When how you speak appears to be moderate and at the same time, what you are saying is NOT moderate, not listening followed by digging in then followed by fighting should be expected.

Thursday, July 7, 2011


The U.S. is going the way of Rome

A subject this large would take many volumes. This post can only be a very general summary at best. These are only a few general subjects designed to stimulate thought.

I have noticed many similarities between the Roman republic and the United States. As with any comparison, many differences also exist. What I find most compelling is how human nature led the Roman evolution. So too the United States. One thing that does NOT change is Human nature.

Rome became the most rich and powerful government in the world at that time. Once it attained that stature, it began to turn upon itself. It began with the economic decline caused mainly by changing the fundamental economic principals that had been proven so successful. Priorities changed. People became less concerned about building and more concerned about protecting what they already had. The values that had proved vital to the building of the economy and army changed over time. We have all read about how the decadence in Rome became part of it’s undoing. Too much free time allows for deviant behavior. When it becomes acceptable, it becomes part of the problem.

One major difference between the U.S. today and Rome is that throughout it’s history, Rome protected the property owners. This is one of the reasons why it lasted for so long. The leadership understood where the source of economic strength originated and attempted to protect it. We are not doing so today. We are penalizing property owners at our economic peril. Rome did go though periods like this and many times these periods saw marked declines in economic and military power.

Exposure of babies on the mountainside was a preferred way of rid one of unwanted babies. Abortion provides us with a modern way to do this without having to go through childbirth. (Romans did not have the medical ability to do this without killing the woman.) The avoidance of responsibility in this most important human function was a contributing reason for the eventual decline and fall of the civilization. This was eventually outlawed, although it was common for long periods of time. The key here is the avoidance of responsibility for ones actions. After all, who really wants to pay for their mistakes? It is only natural to attempt to minimize the cost of any action that you take.

The Roman army became less and less Roman as time went on. In general, this was in step with avoiding responsibility as Romans paid others to do their work for them. This kept the numbers in the army up and maintained strength for a long time. A long-term problem is that like economics, if you have no skin in the game, your interests are different. Sometimes it was politically profitable to obtain a military defeat.

All civilizations evolve. They change over time and like everything alive, they eventually die. Civilizations like Rome come around only once in a while. While the United States is very different from the Roman republic, the thing that we share is that we are human.

Saturday, July 2, 2011


The silence from the White House about Syria is deafening. Maybe President Obama is working behind the scenes. With the involvement in Libya about defending the ‘innocent’ civilian population, I would have thought that the violence going on in Syria today would show up on President Obama’s radar screen. More importantly, Syria is a sponsor of international Islamic terrorism. Not to mention how Syria is linked to Iran, another sponsor of Islamic terrorism. And now Turkey is threatening to engage in open conflict with Syria. This is a far more dangerous situation that what was about to transpire in Libya, (The crushing of the rebels) yet we hear and see nothing.

I suspect that at least part of the reason is that Syria is a much more dangerous opponent that Libya. It is always wise to assess your potential enemy in relation to your interests. However, with the draw down in Iraq, Afghanistan and the minor amount of involvement in Libya, the United States has additional forces that would be available if needed. I doubt that lack of forces is a deciding factor. It must be something else.

I have been saying for many years now that the beginning of ending the war against Islamic nationalism and terrorism begins with ending the current governments of Iran and Syria. These are two of the largest state sponsors. President Obama obviously disagrees. Unless he is doing things behind the view of the public, he is taking the opposite course. At this point, all I can say is that time will tell.