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Matters can not, and will not, get better…the country is gone, it is no longer
alterable…Past Fed actions have already released the inflation genie into the system. When he decides to explode no one can predict, but an explosion is inevitable…[and then we will have] rioting in the streets. [Let me explain our cuurent situation, what is developing and what will eventually unfold.] Words: 1075
So says ”Monty Pelerin” (a pseudonym derived from The Monty Pelerin Society) in edited excerpts from his original article* as posted at www.economicnoise.com.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.)
Pelerin goes on to say, in part:
Courses of Action to Alleviate Economic Situation
The U.S. government has reached the point where it cannot pay for its level of spending via tax revenues or market-based Treasury sales. There are only three courses of action available to the Federal Government.
- Raise Taxes – This option cannot raise enough money to close the gap. Attempting to raise taxes could exacerbate the deficit by dampening economic activity. US corporate income tax rates are now the highest in the world. If anything, taxes should be lowered.
- Cut Spending – This is the proper solution. Government has grown past the point where the productive sector will or can support it. Spending should be cut back to the point where deficits are eliminated.
- Print Money – This is the political solution and exactly why the Federal Reserve bought 61% of Treasury Bonds last year. It is not a real solution and it is highly dangerous. Each purchase of Treasury Bonds by the Federal Reserve increases the base money supply. Any time the Fed expands its balance sheet it adds an asset and creates money/credit. Since 2008 the Federal Reserve has almost quadrupled its balance sheet. That puts into the system the potential for 300% price inflation.
The Current Reality
Politicians never want to cut spending [#2 above] and almost never want to increase taxes [#1 above] unless it can be done as class warfare aimed at punishing the few to get the votes of the many. It is exactly this type of behavior, with special emphasis on the spending part [#3 above], that has put the country into the impossible situation it is in.
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What is Developing
We have reached the point where government can no longer meet its obligations with traditional financing. The U.S. government became a real Blanche du Bois, “living off the kindness of strangers.” Now the strangers are no longer interested in supporting Blanche’s profligate spending. Furthermore, they have incredible needs themselves and are busy with their own printing presses.
Credit markets are closing. Past Fed actions have already released the inflation genie into the system. When he decides to explode no one can predict, but an explosion is inevitable unless government spending is cut by almost 1/3 and the Fed begins to reverse the excess money in the system. Neither one will happen until it is too late.
What Will Unfold
#1 According to one new survey, approximately one-third of all Americans are not paying their bills on time at this point.
#2 The U.S. housing industry is bracing for another huge wave of foreclosures in 2012…
#3 The Citigroup Economic Surprise Index, a key indicator watched by many economists, is on the verge of heading into negative territory.
#4 We are supposed to be in the middle of an economic recovery in the United States, but bad news just keeps pouring in from major companies. For example, Yahoo is firing thousands of workers and Best Buy is closing dozens of stores.
#5 Richard Russell says that the “big money” is starting to quietly exit from the financial markets….
#6 Goldman Sachs is projecting that the S&P 500 will fall by about 11 percent by the end of 2012.
#7 All over the country, local governments are going into default and we have not even entered the next recession yet.
#8 The U.S. government will add more to the national debt in 2012 than it did from the time that George Washington became president to the time that Ronald Reagan became president.
#9 The Federal Reserve is desperately trying to control interest rates. The Fed purchased approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011. This is the only thing that is keeping interest rates in the United States from soaring dramatically…
#10 Researchers at MIT are projecting a “global economic collapse” by the year 2030 if current trends continue.
In my opinion, number 10 is the height of optimistic folly.
*http://www.economicnoise.com/2012/04/06/how-the-country-dies/
Editor’s Note: The above article has been has edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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