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.

No comments:

Post a Comment