There is a common theme used in the media to deride the popular protests sprouting worldwide. The theme is “they don’t even know what they’re protesting for” and it is repeated everywhere by people who are confident their next paycheck is coming, and the infrastructure that produces it is going to stay in place. Well, Jack, what the fuck do you know?
I guess a better way to put it might be to say “does anyone know how good, or how bad it really is?” If your point of view is on the receiving end of a pink slip, it’s bad. If your point of view is the economy, it’s really bad. But why? Debt and the Federal Reserve are all of the sudden popular issues. They’re the whipping boys. It’s obvious that something is out of balance.
Here’s how bad it really is. The system is designed to work this way. What is being experienced now is the winding up of the last debt supercycle. We are in for years of “correction”. Much of the private debt amassed in the past decade is now being transferred into government debt through bailouts and buyouts. Public debt. Debt which inflates the economy. All US citizens and all world citizens who are in any way tied to the US economy (the rest of the planet) pay through inflation.
Protesters upset that Goldman Sachs got to make huge profits by trading stocks (with money borrowed like a traditional bank) need to realize that was just a side benefit for another small select group of self-appointed elites. A calculated game which benefited nobody except Goldman Sachs, but permitted after Bill Clinton annulled the Glass-Steagall Act in 1999. The real news is that we are all still playing along. (Then again, what else are you going to do? Well you could Occupy Wall Street…)
Let’s go back to the debt here. I’m going to focus on the US because we are the underpinning of the world economy, many countries still tie the value of their currency to the dollar because they use the dollar as a reserve currency. That means that their internal economy is directly affected by the value of the dollar. The bad news for them is that the US Government debt has not been repaid, not one penny for 51 years. The last time US Government debt has gone down on a year-over-year basis is 1960. All that money in Obama’s new jobs plan to hire teachers and cops because their local towns can’t otherwise afford them, that’s great to keep the system working the way it is now. But if you want to change the system, what to do?
Most of the mountain of debt that the US Government as accumulated — 97% to be exact — was acquired since August, 1971. This marked the end of the Bretton Woods era, the terminal delinking of all fiat currencies from any and all hard assets. It was the beginning of hyper-insolvency. How fast is the inflation hitting us? Well, it isn’t that long ago that the entire world GDP was one trillion dollars. Now, the US Government alone owes $14 trillion in debt.
But why? The biggest culprit should be obvious. To fight wars, you need to command resources. To fight better, you need to command more resources than you could possibly afford through legitimate means. History has proven that wars are won with debt. War is about wrestling control, after all it’s only human nature to want control. Here’s what happens when one army fights within the confines of the king’s gold while another fights with “unlimited” resources funded by debt notes. The guys with more resources win. The only way to command enough resources to fight someone whose subjects are willing to be paid in notes is to pay your own subjects with your own notes.
So let’s get back to the US debt. We think we know why. It’s ultimately to fund US domination over the world. The world, quite literally, pays through debt and inflation to keep the US on top. Now we face corrections for all this debt. Someone has to lose. Forget “balancing the budget”, all that a “balanced budget” means is that the US Government didn’t spend more money than congress allowed for it that year. What stops congress from allowing for spending more money than the government takes in? Nothing (except a supposed “debt limit” that gets raised every so often). Even with a balanced budget, the US Government alone borrows nearly half of what it spends. Who cares if the budget is balanced when the government can only pay 50 to 60% of it before going into debt? A truly balanced budget would cut 40 to 50% of expenditures so that debt spending isn’t required. As well, implementing that balanced budget doesn’t mean that we start paying off any debt. It only means we stop accumulating new debt.
While other countries around the world face “austerity” measures, we will not be hit nearly so hard. Let me repeat. We are the underpinning of the world economy. Most countries trade in values based on the US Dollar. As the dollar inflates, everyone pays. The austerity for our debt is worldwide. Greece and many countries to follow will not be so lucky. Over three past fiscal years, US debt grew by $1.5 trillion per year. That is more than three times the annual debt increase of any previous year in US history. What would it look like if the US Federal Government was actually going to stop this out-of-control train? We’ll never know. The supposed wrangling now over the budget and debt falls one and half trillion dollars short of anything that resembles a true debt balance. The best that Obama could come up with saves hundreds of billions of dollars…over 10 years. Why even bother?