Friday, October 23, 2009

The Public Debt

Seven banks failed today. The FDIC is technically insolvent along with many of the banks that it insures. The real estate market is being completely propped up by the FHA and first time home buyer "tax credits" and extremely poor underwriting standards. All of these problems along with the cost of Medicare, Medicaid, Social Security, stimulus, war, and overall bad policy are going to force the government's hand in raising the national debt limit within just a few weeks. In fact, next week, the government will be selling well over $100 billion of bills, notes, and bonds.

Today the national debt stands at approximately $11.9 trillion. By the end of next week, it will likely stand at over $12 trillion. The current debt ceiling is about $12.1 trillion. In a manic scramble to pretend to save their butts, congress critters will pass a resolution to raise the debt ceiling to some ungodly number like $13 trillion, kicking the can down the road.

Every policy being taken by the feds has been guided to save big banks and capital conglomerates, but the net effect has been so negative that it has stifled the incentive for people to start businesses and create wealth. Who can blame individuals when the feds confiscate 30-40% of the income that people create? The entire policy of the Obama administration has been to create more bureaucracy to suck in more tax dollars from more people and distribute to friends. Obama is no friend to the middle and lower classes as he conned them into believing. He is nothing more than a slick talking stock broker who has stolen from the people who want to work but won't do it or can't do it because value creation is being snuffed out.

People think that it will get better. Unfortunately, they are misguided, illogical, or hopelessly optimistic. The only way things can get better is if Capitalism is embraced for the moral purpose it embodies: creating value for people. Today, capitalism is looked at as evil whereas theft from taxpayers to pay banker bonuses, car maker bond holders, GE Capital executives, tax cheating Treasury secretaries, and other corrupt practices is looked at as necessary to save the "system". Where is the irony in that logic?

The "system" that is being saved is one of cronyism, corporatism, fascism, and collectivism where one is almost forced to lie, cheat, and steal in order to survive. This brings out the worst qualities in humans as they throw law and morality out the door. Instead, this "system" should be thrown out in favor of protection under the common law and a cooperative morality. This brings out the best in humans and only then are people effective in pursuing value creation.

The environment of the day can not be fixed until bad debts are cleared out. Growth will not occur until people are released from the bonds of debt slavery. Republicans and Democrats are of the same ideology, it's just that one tells you its ideology up front and the other lies to you and tells you it believes in capitalism and free markets. I believe in people. The source of all the wealth that had been accumulated the last 200+ years has been from people being able to make their own way unencumbered by autocrats and dictators and centralized planners who figure people to be too stupid to take care of themselves. Sadly, these people have leeched themselves into every aspect of people's lives and convinced people that they are too stupid to take care of themselves.

The idea that people claim to know exactly what the "Public Interest" is strikes me with the thoughts that these people have delusions of grandeur. The only "Public Interest" is the protection of life, liberty, and the pursuit thereof. Anything else goes against the ideas that this country was founded on.

While the timing of such events are impossible to predict, the conditions make me confident that we will see a hyperinflationary episode; a currency crisis not unlike Weimar Germany, Zimbabwe, or Argentina. The politicians will not accept a reduction in their power that comes with fiscal responsibility. The facts are simple despite what you are being told. People are saddled with too much debt. The government is stepping in and buying up as much debt as possible to provide price supports to prop up failed mega banks. Everything else is collateral damage. The one and only solution to this whole mess is simple:

1. End the massive government spending and strictly limit the public debt to zero unless in times of declared war
2. End the Federal Reserve and move to some type of commodity backed money
3. End the confiscatory and fraudulent taxes on incomes, corporate and personal
4. Enforce the original intent of the constitution, common law, and the 10th Amendment and return the power of governance to the people and their local needs.

With these simple steps, America can return to prosperity and hope for a better future for her children. Hope and change is what America asked for; America just picked the wrong man for the job.

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