Spending v Systemic Reform
The primary reason we are doomed is because those in government by and large still do not see that they are the problem and that the theories and mantras spewed out in press sound bites portray a world that no longer exists. The whole theory of Marxist-Socialism is that we can raise taxes on the rich and corporations to pay for the programs of the poor. The implicit presumption is a closed economic system as if there were no outside world. It fails to account for the migration of capital and is as practical as speeding laws or how about adultery that remains a crime in many New England states based upon the old Puritan moral values embodied in the whole Scarlet Letter story. Capital can simply leave taking employment with it. There is no practicality in the dogma. I hate to tell anyone who has not yet noticed, but this is a global economy these days. A
Roman Emperor tried to eliminate prostitution and decreed that a prostitute could not be paid with a coin that bore the image of the emperor. Solution? They created tokens that could be purchased and then given to a prostitute who redeemed them. You cannot simply pass laws against human nature and expect them to actually work. All you do is create an underground economy.
Speaking to people on Capitol Hill reveals a tremendous impasse. We have NOT even defined the problem making any hope of a solution fantasy. The only consensus is that the economy is still in trouble. The Democrats regret NOT stimulating (spending) enough, and the Republicans believe we have a spending problem that reduces confidence in government. This is why there seems to be no solution.
Copyright July 14th, 2011
Neither side has even begun to address the problem of – WHAT IF the whole economic theory of managing the economy is just dead wrong? What if this is NOT a spending problem, but a systemic structural problem at the very core?
We seem to begin with the presumption that borrowing is normal and this is just the way things are done. This presents a problem that can destroy civilization as we know it. The Republicans see this as a spending problem, so they draw the line in the sand and argue against raising the debt ceiling and that there must be spending cuts. Yet they do not understand the mechanics of what they preach.
If we freeze the debt ceiling and move to cut spending, as noble as this sounds, it would create a Great Depression. Why? We would create a Great Depression by eliminating spending on everything tangible along with the 20% of private income that is dependent upon state spending (inter alia; welfare, unemployment, pensions, and disability). Interest expenditures would crowd out all other spending since there would be no default. The Democrats think just spending money will somehow stimulate the economy, but
fail to realize what happens when you are not spending new money (inflationary in theory) but borrowing money from foreigners. In the end, since 40% of the debt resides in foreign hands, that interest would be exported from the economy creating a cash shortage and economic depression because interest expenditures being exported will never stimulate the domestic economy.
The Republicans actually believe that by reducing spending, confidence will be restored, and the economy will boom. This fantasy emerges from the lack of questioning the core system and how it is actually operating. Nice theory, but where’s the beef? However, there is no precedent for this wish list. The Democrats regret not stimulating (spending) enough and see that as the problem. They fail to see the massive exodus of interest leaving the country is a problem, and they too are not questioning the perpetual model of constantly borrowing to sustain the system.
Unfortunately, there is no hope whatsoever of sitting down and solving the problems. The debate just has not reached the level of systemic reform. Therefore, until the shit-hits-the-fan, we cannot expect anything but more economic crisis on the horizon. How do you bail out countries by lending them more just to keep the Investment Bankers happy going to solve anything long-term? The debt will increase. The economic implosion of government continues and the fuels unemployment to come.
We are being driven in a cab and the driver has no license because he can’t read to take the test. The Debt Crisis is continuing because nobody has yet figured out that just perhaps the system is in dire need of reform because it is broke! Oh ya! The Investment Bankers won’t let that happen because they sell the debt for all the countries.
11 comments:
The one problem with this analysis is that it assumes that the show known as Congress, the President, and politics in general is actually trying to make things better. These people appear to be idiots because what they are doing is obviously destructive to anyone with a brain. The spending cut/tax hike blame game hijinks banter back and forth is all a show. These people are not really playing a game of tug of war to try to make the country better through their own party's beliefs. They are all bought by the international banking cartel. They are paid actors more than anything. They do what they are told to do by the elite world shadow government. Most analysts like Martin who see the looming debt crisis criticize elected officials as though they were morons who haven't a clue that their idiocy is killing the nation. These are not stupid people. They are actually smarter than the likes of those writing these critical articles because they have acted well enough to make them believe they are stupid and not intentionally ruining America. It is done on purpose. That is why nothing in the long run ever really changes and things continue to get worse.
I don't think Martin thinks any of the boys in Congress are really doing anything more than kicking the can, towing the party line or just praying for miracles. Most are smart people just looking out for number 1. Martin Armstrong is convinced he can fix this mess given the opportunity so it's not in his interests to call anyone out publicly.
I guarantee you behind closed doors they are all positioned to bail to foreign shores and behind closed doors they discuss the reality of the situation. Like the average guy who knows there is something wrong they still have to continue doing their job on a day to day basis. That job is to supply hopium and theater to masses.
There are probably only a handful of congress critters who actually believe either party line. The rest are just career criminals only interested in self.
Just like Wall St only thinks as far as next quarter the Congress critter only thinks as far as the next election. I view them all as traitors to this nation. If they can keep the present situation going it buys them time.
I saw some interesting poll numbers the other day which indicated that 35% plus on both sides of the political divide think there is a serious problem with the deficit. The number was higher on the Republican side obviously. So at minimum 1/3 of the nation is at least dimly aware things are bad.
I honestly think people are waking up to reality but there are hard core Repubs and Democrats who will never alter their opinion. These people in my opinion are dangerous.
The comments are better and more reflective of reality than the article. I think Armstrong has been in prison too long and needs the information provided by the internet to see the true big picture which your comments show and are way in advance of his understanding.
Guys, you have to consider his position.
He didn't get released with no strings attached.
However, he is also still committed to this country despite the injustice of of the last decade of his life. Despite the craziness we all see around us. If I were him I would have faded into the background and be living on an Island in the Caribbean collecting checks from the odd speaking engagement when I needed my hammock upholstered.
Not trying be sycophantic but he he is an extremely smart guy and if the congress critters are smart they will listen to what he has to say and what we all have to say. Even if they don't act on what he has to say at least it will broaden their understanding so when the TSHTF they know who and what is to blame instead of the pathetic Red/Blue argument. Instead of rolling out more bailouts and propping up people who would as soon burn the world down than lose a bet on a dog fight.
But we all know the congress critters won't. They will keep playing their fiddles while the world burns because it's in their interests in the short term. All we can do is plan for the worst, shut out the noise and hope for the best and go quietly about our daily lives until D-Day.
I don't agree with his position on Gold though. I am in the FOFOA camp of freegold because that is the only rational, just solution I have seen.
Talking to neighbors and colleagues we all sometimes wonder who is inside the "Cuckoos Nest".
Is it us or is it our neighbors?
We are all so sure we are right.
I'm surprised Armstrong wasn't more short term bullish on gold, since it's looking like the June 13 shift he's been emphasizing may very well come about in the form of the collapse of the EU and a domino effect re: currencies and confidence in sovereign debt. I guess a world-historical deflation might come first though, with global trade coming to a standstill, and perhaps the dollar initially gaining strength and gold losing value in dollar terms before boomeranging to the moon. I'm really thinking i need to buy some puts, in case he's right... maybe some way out of the money GLD and SLV puts.
But how many people understand Armstrong's point here that neither "austerity" nor more stimulus/borrowing/QE will solve anything? How do you reform a nation that is structurally FUBAR, in every way imaginable: too much regulation, litigation, taxation, too many unfunded entitlements; too much power in the hands of rent-seekers, like the big banks, who produce nothing of value, and public unions, who can vote themselves the right to everyone else's money. The military is way overextended - but what are you going to do - bring back hundreds of thousands of troops from 140 nations and add them to the unemployment rolls? There needs to be a restructuring, but too many powerful groups (starting with the international banking cartel) would have to act against their own interests for a rational restructuring to come about, so there's no reason to think they will. It's a slow motion train wreck. Even tea partiers who criticize government spending when asked what they wanted to cut, out of the top 10 (or so) categories of government spending, not a single category got a majority of the people against it.
I think Americans are in for an especially rude awakening, because there are two swords about to fall on us. The first is global - this idea of socialistic central planning should be seen as a 20th century experiment that died quickly in Russia and China, but took awhile longer to destroy the United States (but that day is coming). But the second sword that will fall on us, and not on the emerging market nations, is that we are in a profound state of disequilibrium, wherein too many Americans with no skills and a garbage education have 2 cars in their garage, while maybe millions of Chinese dudes with 130 IQs are bicycling to work everyday at sweatshops to make our clothes. It's as if every American, just by virtue of being an American, has dozens of personal servants around the world. Well, that can't last. There has to be a recalibration where standard of living jibes with productivity. That shift will be a lot faster when the dollar is no longer the reserve currency, and it won't be pretty for us in the States.
I dunno GM. We are due for another revolution and I'm hoping it's an energy one to kick start the world.
I hold out hope the holy grail of Tesla's free energy myth is true :) and maybe someone will find his secret research when we storm the offices of JP Morgan :)
BTW I have 7 cars (it's a sickness) and I'll have you know my education was just as crap in Europe.
Read an article not so long ago by the Mogombu Guru and he pointed out that Social Security, Unemployment benefits, State & Federal employees and everyone else who depends on the govt for money makes up 51% of the population. If that is not a tipping point I don't know what is. I'll see if I can find a link to it.
Well, leaving aside that education in America is nothing like what it is in, say, Singapore, or even what it was in Kansas a century ago, I was mainly getting at what I see as the asymmetry between productivity and standard of living globally. The relative standards of living between populations in a globally connected economy should eventually favor the more intelligent and industrious populations, I think. There's just so much "parasitism" and make-work here, and not only in the public sector.
7 cars? Ah, of course ... one for each day of the week :P
Re: free energy - I was thinking that, conspiracy theories aside, the day almost has to come when a cheaper alternative to oil is finally discovered. (Here's a great idea that would seem to be not too far away.) Well if that were to happen, in a sense we would get away with all this "living beyond our means" (gold of course would become practically worthless in the scenario presented in that link.) So, the same way procrastination isn't entirely irrational (because how often do you delay doing something, then realize it would've been a waste of time to do it?), so it's possible that the "hair of the dog" approach (QE to infinity) beats any Austrian school detox, because it buys time for a energy-related game-changer ...
Well one is a 1920's project car.
Number 2 and 3 are family cars for hauling kids around in.
# 4 is a good old fashioned muscle car - Corvette.
#5 is a mid engined 2 seat rag top that corners like a rat on rails - MR2 Spyder.
#6 is a 2 seat pimp mobile with push button retractable hard top - Merc SLK. Good for long drives.
#7 is a filthy busted up Chevy truck that I can park anywhere with the keys in the ignition and no one would steal as I use it as a Gentleman farmer vehicle and trash hauler. It smells pretty bad and looks like feral cats and wild dogs live in it.
See it all makes sense :)
GM,
So we ought to see the rally in gold continue with this close. Do you have upside targets?
Hey Robert, I have an update of that chart in my new post.
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