We’re in troubled times. I don’t care what the MSM, White House, Capital Hill or the “Messiah-loving” pundits say. They’re wrong. I’ve long since surpassed the idea of partisan blame politics, akin to children in a snowball fight – it’s simply all of them. Those of you that have followed this blogger know that. Unfortunately, the looney liberals can’t see the forest for the trees – even to the point of hugging them. And, the ridiculous right is not terribly far behind.
But, let’s not play games. America, with all of its rich heritage and greatness is, albeit, in the tank. It is what it is – however, by whomever that got us here. We are trillions of dollars in debt with no ability to repay. Our wealth making machinery has all but vanished, having been outsourced to Latin America, India and China through self-defeating “free-trade” agreements – all to the point that we have, at last, truly reached the point of “unsustainability!”
From the CBO: Revenues fell by almost $420 billion (or 17 percent) below receipts in 2008. Total revenues in 2009 were about 15 percent of GDP, the lowest level in over 50 years. Conversely, outlays increased by over $530 billion (or 18 percent) in 2009, to nearly 25 percent of GDP, the highest level in over 50 years. (The rate of spending is growing faster than continuously declining revenues by 3 percent).
Here’s the kicker. Make no mistake. The word has been passed to us – shape up or else! When was the last time a Chinese delegation, numbering more than 200, came to the US? Can’t remember? I couldn’t. It hasn’t happened. Why? Because they wanted some assurances. They wanted to shop. They wanted to make sure they’re getting real assets at the same value of the dollar’s worth when that dollar was acquired – not down 17 percent, as the dollar has fallen just since March. Can you blame them? Hardly. And, they are not by themselves - anyone holding our currency – Japan, Europe or the Arab states, etc, have all expressed deep concerns about the dollar’s decline and openly and secretly have initiated a move to SDRs, a world-wide standard of assorted values to replace the dollar as the accepted world currency. With the dollar’s value declining upwards of about 20 percent this year alone, many countries are quickly and ever so cleverly are moving away from the dollar. How would you or I respond to a 20 percent cut in pay or assets? Substantially, I expect. They are no different.
And, then of course, there is the argument that’s made by some that a de-valued dollar actually lowers our debt. In other words if we owed a $100, and the dollar takes a 50 percent de-valuation, it reduces our debt effectively by half. What China could have bought with a $100, before de-valuation, would now take $200. And incidentally, China holds China 744.2 billion in US Treasuries and more than 1.3 trillion in reserve currency. Japan holds 661.9 billion.
Technically, the dollar has lost more than 50 percent of its purchasing power since 1980 alone. So, what does that mean? A great deal if you were making $10 an hour in 1980! One would have to be making more than $20 an hour to offset the difference in purchasing power. If you’re making $20 now, technically, you haven’t had a raise in about 30 years – and effectively, for all your efforts, purchasing power has actually decreased!
And, the same applies to those countries that hold our currency - one should understand their concern over the dollar – the more they get, the less it’s worth! Now, who wants to be paid like that? But, because of the dollar’s lesser value, it similarly means that we actually owe less since the currency is worth less. Our problem is that we continue to borrow back these dollars exponentially without paying any principle on the debt and only partially paying the interest.
Eventually, unless we suddenly, magically pay off our debts (and we can’t), the road leads to default. And, it will cause a world currency crisis, a trading crisis, or perhaps worse since global trade is based on the US dollar. But, our problems are more serious than most realize. When one truly considers our current level of borrowing and spending compounded by the significant loss of tax revenue since this “Great Recession” started, it’s no wonder we’re in this awful state.
"But for now, as long as these countries trust the United States to keep its promises and protect its money, they continue to hold US dollar investments - notably, US Treasury bonds. But just wait until the United States loses their trust. In a matter of minutes, China could dump enough US dollars to set off alarms all over the world. All of a sudden, dollar holders would rush for the exits - each one trying to get out before the others. In minutes, the dollar market could collapse...taking down US Treasury bonds with it. " LINK
Government will have to make cuts – it is unavoidable; but, our government doesn’t “cut” too well – no matter which party or president is in power. It’s just not in their frame of reference, their mindset or perception of prudence. So, what will they do? Tax of course! They’ve no choice. If they don’t tax more, they have to borrow more. The more they borrow, the less the value of the currency which puts us in an even deeper hole than we already are now. Get the picture yet? We’re trying to fill a hole that can’t be filled – plain, simple.
So, our officials will tax. Oh, they’ll call it anything – something like HCR, green initiatives or even world peace. But, it will still be a tax. It is the only way to offset more borrowing. Consequently, American standards (working American’s first) of living have and will continue to decline. That’s evidenced by what has happened - lost jobs. There will be more taxation at every level. And, the FED is not the only entity facing severe revenue shortfalls. It is state budgets, county budgets and local governments, too. Have you checked you water bill lately? That is one resource that has been, traditionally, lopsidedly low compared to other household expenditures. It will likely go up considerably because it’s the easiest and quickest source to get a substantial increase over other services. But still, everything will go up as there are budget shortfalls everywhere. And, guess who it will hurt the most - the American worker, the worker that carries more and more burden and whose numbers are becoming fewer and fewer.
We've reached the "unsustainability" point. How much more can we tax fewer? Not much. Certainly not enough to offset the gargantuan spending. So, we borrow. We borrow until the generosity of our creditors dries up and they no longer subject themselves to detrimental economic policies. When will that be? Not terribly far away. Perhaps soon. It is, however, inevitable.
It will seem like inflation has hit, but really, it's only more taxation. Unfortunately, that is only the beginning. The worst is still yet to come.
IT'S A TAX!
It’s all a cleverly levied tax. And, government is trying to fill a hole that simply cannot be filled.
Yes, tough times are straight ahead.
