Discussion: How Soon Will the Final Global Economic Collapse Arrive?
"It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world."
- Thomas Jefferson to Antoine Louis Claude Destutt de Tracy, 26 December 1820
Incompetence by any other name is not adequate in describing what, how and why the Obama administration and the Democratic Party engage in what they do. No party stoops so low with regards to election season than this party, a party whose grassroots are large urban area community organizers (Obama was one, for example) and corrupt labor union bosses and their clandestine allies within the organized crime syndicates. And though this is true, terrorism as sponsored by the Obama administration is now playing a role in intimidation by way of physical harm and fear tactics. Would it be at all surprising should this "Zombie Apocalypse" initiative funded by the Department of Homeland Security prove to be related to the Ebola outbreak which Obama has funded and brought to our very doorsteps? The criminal element that imbues the the Democratic Party cannot now nor ever be underestimated, and in one fashion or another, continue without a permanent solution to the problem.
When a Democrat declares his or herself a liberal, should this not stand to reason that it is a bastardization of the true father of Western political thought John Locke's classical liberalism? Liberal only makes voters feel that voting Democrats into office will grant the liberty, but then again, what has that party ever known or embodied of liberty that it cannot achieve through force and intimidation? The Democrats cannot survive as a political entity without inner city labor and trade union bosses, community organizer and organized crime, and they surely could not fare very well had wealthy bank magnets controlled policies within the Federal Reserve. Socialism, which is the appropriate term today for the Democratic Party, can only be bankrolled by the many millions and billions donated or funded in stealth by their wealthy benefactors. George Soros himself caused the London Stock Exchange and the Bank of England to nearly go bankrupt after he undercut the Pound Sterling on Black Wednesday, 16 September 1992. To consider how this worked, I will provide you Investopedia's article on Soros, and why more than simply funding 30 known global press syndicates that the world should fear him:
How did George Soros "break the Bank of England"?
By Andrew Beattie AAA |A:In Britain, Black Wednesday (September 16, 1992) is known as the day that speculators broke the pound. They didn't actually break it, but they forced the British government to pull it from the European Exchange Rate Mechanism (ERM). Joining the ERM was part of Britain's effort to help along the unification of the European economies. However, in the imperialistic style of old, she had tried to stack the deck.Although it stood apart from European currencies, the British pound had shadowed the German mark in the period leading up to the 1990s. Unfortunately, the desire to "keep up with the Joneses" left Britain with low interest rates and high inflation. Britain entered the ERM with the express desire to keep its currency above 2.7 marks to the pound. This was fundamentally unsound because Britain's inflation rate was many times that of Germany's. (Keep reading about this in Stop Keeping Up With The Joneses - They're Broke.)Compounding the underlying problems inherent in the pound's inclusion into the ERM was the economic strain of reunification that Germany found itself under, which put pressure on the mark as the core currency for the ERM. The drive for European unification also hit bumps during the passage of the Maastricht Treaty, which was meant to bring about the euro. Speculators began to eye the ERM and wondered how long fixed exchange rates could fight natural market forces. Spotting the writing on the wall, Britain upped its interest rates to the teens to attract people to the pound, but speculators, George Soros among them, began heavy shorting of the currency.The British government gave in and withdrew from the ERM as it became clear that it was losing billions trying to buoy its currency artificially. Although it was a bitter pill to swallow, the pound came back stronger because the excess interest and high inflation were forced out of the British economy following the beating. Soros pocketed $1 billion on the deal and cemented his reputation as the premier currency speculator in the world.For more on George Soros, see The 5 Most Feared Figures In Finance.This question was answered by Andrew Beattie.
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The European Exchange Rate Mechanism (ERM) is the reason why Margaret Thatcher was deposed as Prime Minister. Into her position was John Major, who opposed the Thatcher standard of avoiding ceding British sovereignty to a federal Europe, and the end of a period where the Tories were truly a conservative party by our standard. The reason was clear in Soros' intent since in 1997, Labour for the first time in 18 years not only took Parliament, it routed the Major government that had turned Downing Street and Westminster into a brothel. Tony Blair rose to power as the prime minister, and while the Pound Sterling remained and is now far stronger than the Euro, Soros truly aided Thatcherism because Blair stated he believe free enterprise alone would create prosperity in Britain. Therefore, another example of monetizing and devaluing the coinage nearly bankrupted an entire nation, but was revived by a communist sympathizer.
Some might gather this is happening today, as Europe is actually deflating in terms of the Euro as interest rates are now in the negatives. What this means, for lack of any easier explanation, is that banks in Europe must pay for applicants to take out a loan. Inflation is microscopic, but national deficits continue to rise even under Austerity because individual nations within the Eurozone continue to employ socialist models of economics. What has this model manufactured and how has it damaged Europe's economy? Read the graph below and do not have a stroke at your horror.
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How could any of these models continue to lower interest rates where there are no measurable ones that do not require banks to pay out when it literally takes massive losses with each loan granted? This is a term I liken to being called Casino Economics, and with the Eurozone, they hedged there bets and they lost all their chips. As these are part of an article from The Telegraph, I will provide for you the actual details and the obligatory link citation:
A key gauge of deflation risk in Europe is flashing red, dropping to record lows on fears of fresh recession and lack of decisive action by the European Central Bank.
The sudden lurch downwards came as Bank of America warned that France’s debt ratio could rocket to 120pc of GDP within five years, unless the EU authorities take radical steps to reflate the region’s economy. Italy’s debt could threaten 150pc even earlier.The 5-year/5-year forward swap rate monitored closely by traders plummeted beneath 1.77pc on Friday morning as a global growth scare drove European stock markets to a 12-month low.“This rate is the most important market signal on the planet right now. Everybody is watching the chart, and it has just gone off a cliff,” said Andrew Roberts, credit chief at RBS.Bond markets echoed the refrain, with yields on 10-year German Bunds falling to an all-time low of 0.88pc on flight to safety, though the bond rally can also be seen as a bet by traders that the ECB will soon be forced to launch full-blown quantitative easing.Mario Draghi, the ECB’s president, has adopted the 5Y/5Y rate as the bank’s policy lodestar, used to distill expectations of future inflation. Any fall below 2pc is deemed a risk that expectations are becoming “unhinged” and could lead to a Japanese-style deflation trap.Mr Roberts said the ECB’s plan for asset purchases - or “QE-lite” - does not yet add up to a coherent strategy. “We don’t think they can boost their balance sheet by more than €165bn over the next two years by buying asset-backed securities (ABS) and covered bonds together, given the haircut effects. The sums are trivial,” he said.RBS estimates that the inflation rate has already dropped to below 0.1pc in the eurozone if one-off tax rises and fees are stripped out, and this measure may turn negative in October. “Deflation is already knocking on the door. We think it could happen as soon as next month given the latest fall in food prices,” said Mr Roberts.“We are reaching the end game in Europe. If they don’t launch real QE and start reflation by the end of the year or soon after, the consequences are too awful to contemplate,” he said.Ruben Segura-Cayuela, from Bank of America, said low inflation has become “the biggest threat to the dynamics of public debt” in the eurozone, warning that debt ratios risk “spiraling up” even at levels of around 0.5pc.France’s debt will keep rising from 93pc to 102pc of GDP by 2016, even in the best of circumstances. It will reach 117pc under a “lowflation scenario”, and 120pc if there is no further fiscal tightening. Spain’s debt will hit 113pc under similar circumstances. “What worries us is that we are not even stress testing for deflation,” he said.Bank of America said the ECB may have to take far more radical steps, pledging to violate its own 2pc inflation limit deliberately in order to break out of the vicious circle. “A commitment to keep nominal rates low for a long period does not necessarily work, and alone does not guarantee a recovery. The situation in the euro area might require more forceful action, a nominal anchor that implies the central bank committing to overshoot its inflation target,” it said.This is almost impossible to imagine, given the political character of the eurozone. Any such move would breach EU treaty law.It remains far from clear what the ECB intends to do. On Thursday, Mr Draghi vowed “new measures” to head off deflation if necessary, but traders are looking past the rhetoric for hard facts. The ECB’s balance sheet contracted by €10bn last week, falling back to levels of early July. Mr Draghi has yet to flesh out his vague plan to boost it by €1 trillion.The US Federal Reserve, the Bank of Japan and the Bank of England all set clear timetables, spelling out exactly how many bonds they would buy, and the scale has been much larger in proportion to GDP. The ECB has merely given pledges, and these have since been qualified by the Bank of France, and have been openly attacked by the Bundesbank.Germany’s five economic institutes - or Wise Men - said the ECB’s asset purchases will add “hardly any” extra stimulus to the real economy and may be unworkable in any case. They said there are not enough private securities that can plausibly be bought, and noted that a previous scheme to buy €40bn of covered bonds had run into the ground.Analysts are watching German politics just as closely as ECB language. The rise of Germany’s AfD anti-euro party raises the political bar even further for full-fledged QE, and eurosceptics have announced their intention to file cases at the German constitutional court to block asset purchases once they begin.The court has already ruled that the ECB’s backstop measures for Italian and Spanish debt (OMT) “manifestly violate” the EU Treaties and are probably “Ultra Vires”, which prohibits the Bundesbank from taking part. Pending cases on QE would raise questions over whether the Bundesbank might have to step aside on asset purchases.The current circumstances are very different from July 2012, when Mr Draghi had the full political backing of the German finance ministry for his OMT rescue plans. This time he must battle critics across the whole political spectrum in Germany.Giulio Mazzolini and Ashoka Mody, from the Bruegel think tank in Brussels, said the eurozone seems to be tipping into a “debt-deflation cycle” as rising debt and deflation feed off each other, yet the authorities remain paralyzed and still refuse to face up the gravity of the threat. “Even now, ECB officials regard deflation to be unlikely,” they said.
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In reading this article, ladies and gentlemen, socialism has caused the world's banking infrastructure to reach the brink of total collapse and bankruptcy. Purchasing bonds or further securities will do no good at all because there is not enough money to do so per this article. The Federal Reserve, like with the Bank of England, will be printing off more worthless money which will have an even more disastrous effect than simply deflation: hyperinflation. Why hyperinflation? Consider that prices will adjust accordingly as it will take more money to purchase a unit of a product or service while the exchanges do not provide for adequate adjustments to real wages, and you understand why Obama is attempting to sell nationally a massive increase in minimum wage. To place any barrier on the natural rate of wages is not only dangerous, but creates barriers for business and therefore, total economic growth. I need not reference you to the Seattle catastrophe as now their $15/hour minimum wage is driving small businesses out of business and causing large companies and corporations to layoff or cut employees' hours. Once you include Obamacare's mandate for coverage at 30 hours per week, no one will be working beyond 29 hours except for certain exceptions.
What is Janet Yellen, the most unqualified and clueless Fed Chairperson in history, doing on this matter? Well, let me provide you the details from several resources:
SEPTEMBER 2014 US INFLATION
U.S. consumer prices turned higher in September after dipping in August for the first time in 16 months. Shelter, medical care and food prices led gains while falling energy expenses helped in keeping overall consumer prices in check.The Consumer Price Index, rose 0.1% in September after decreasing 0.2% in the prior month, according to a U.S. Labor Department report released Wednesday, October 22, 2014.Food prices rose for a ninth straight month, up 0.3% compared to 0.2% previously. Meats, poultry, fish, and eggs continued to drive-up grocery bills, rising 0.7% after a 1.5% increase in August. Notably, beef and veal climbed 2% in September and have advanced 16.7% since January.Stripping food and energy expenses, the so-called core inflation rate also rose 0.1% in September after being little changed in August.12-Month Change in Consumer PricesIn the September 2013 to September 2014 period, the inflation rate rose 1.7%, the same as in August. Core consumer prices also rose 1.7%, which was the same as the prior month.Below are major consumer prices by category and their month-over-month changes. The final column offers year-over-year changes. The prices for these items are gathered and published by the Bureau of Labor Statistics (BLS) each month.US Inflation: Mar – Sept 2014 Consumer Prices (%)
Mar 2014 Apr 2014 May 2014 June 2014 July 2014 Aug 2014 Sept 2014 12 Month All items 0.2 0.3 0.4 0.3 0.1 -0.2 0.1 1.7 Food 0.4 0.4 0.5 0.1 0.4 0.2 0.3 3.0 Food at home 0.5 0.4 0.7 .0 0.4 0.2 0.3 3.2 Food away from home 0.3 0.3 0.2 0.2 0.3 0.2 0.3 2.7 Energy -0.1 0.3 0.9 1.6 -0.3 -2.6 -0.7 -0.6 Energy commodities -2.0 1.9 0.6 3.0 -0.3 -3.9 -1.1 -3.3 Gasoline (all types) -1.7 2.3 0.7 3.3 -0.3 -4.1 -1.0 -3.6 Fuel oil -2.9 -3.0 -1.4 -1.7 -0.7 -1.2 -2.1 -3.2 Energy services 2.6 -1.9 1.4 -0.4 -0.4 -0.6 -0.2 3.5 Electricity 1.1 -2.6 2.3 0.2 -0.3 0.1 -0.7 2.8 Utility (piped) gas service 7.5 0.3 -1.7 -2.6 -0.4 -2.8 1.6 5.8 All items less food, energy 0.2 0.2 0.3 0.1 0.1 .0 0.1 1.7 Commodities less food, energy .0 0.1 0.1 0.1 .0 -0.1 .0 -0.3 New vehicles .0 0.3 0.2 -0.3 0.3 0.2 .0 0.3 Used cars and trucks 0.4 0.5 -0.1 -0.4 -0.3 -0.3 -0.1 -0.4 Apparel 0.3 .0 0.3 0.5 0.2 -0.2 .0 0.5 Medical care -0.3 0.3 0.5 0.7 0.3 -0.1 0.5 2.9 Services less energy 0.3 0.3 0.3 0.1 0.1 .0 0.2 2.4 Shelter 0.3 0.2 0.3 0.2 0.3 0.2 0.3 3.0 Transportation 0.2 0.7 1.0 0.1 -0.7 -0.6 0.1 1.4 Medical care 0.3 0.3 0.3 .0 0.1 .0 0.1 1.7 The following paragraphs offer the summary report of the Consumer Price Index by the Labor Department’s BLS as published on Wednesday, October 22, 2014.Summary of Consumer Prices for September 2014
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1% in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7% before seasonal adjustment.Increases in shelter and food indexes outweighed declines in energy indexes to result in the seasonally adjusted all items increase. The food index rose 0.3% as five of the six major grocery store food group indexes increased. The energy index declined 0.7% as the indexes for gasoline, electricity, and fuel oil all fell.The index for all items less food and energy increased 0.1% in September. Along with the shelter index, the index for medical care increased, and the indexes for alcoholic beverages and for personal care advanced slightly. Several indexes were unchanged, and the indexes for airline fares and for used cars and trucks declined in September.The all items index increased 1.7% over the last 12 months, the same increase as for the 12 months ending August. The 12-month change in the index for all items less food and energy also remained at 1.7%. The 12-month change in the shelter index has been gradually increasing, and reached 3.0% for the first time since January 2008. The food index has also risen 3.0% over the span, while the energy index has declined 0.6%.Food Inflation
The food index rose 0.3% in September after increasing 0.2% in August. The index for meats, poultry, fish, and eggs continued to rise, increasing 0.7% after a 1.5% increase in August. The index for beef and veal rose 2.0% in September and has now risen 16.7% since January. The index for dairy and related products increased 0.5%, its tenth increase in the last 11 months.The index for other food at home also rose 0.5% in September, with the index for sugar and sweets increasing 1.6%. The index for nonalcoholic beverages, which declined 0.2% in August, rose 0.2% in September. The fruits and vegetables index also turned up in September, rising 0.1% after declining in August. The index for fresh fruits rose 1.3%, while the fresh vegetables index fell 1.1%. The cereals and bakery products index declined in September, falling 0.4%. The food at home index has risen 3.2% over the past year.The index for meats, poultry, fish, and eggs has increased 9.4% over that span, with the index for beef and veal up 17.8% and the pork index up 11.4%. The fruits and vegetables index has increased only 0.9% over the last 12 months, the index for nonalcoholic beverages has risen 0.2%, and the cereals and bakery products index has declined slightly, falling 0.1%. The index for food away from home rose 0.3% in September and has increased 2.7% over the last 12 months.Energy Inflation
The energy index fell 0.7% in September, its third consecutive decline. The gasoline index, which declined 4.1% in August, fell 1.0% in September. (Before seasonal adjustment, gasoline prices fell 2.1% in September.) The electricity index also declined in September, falling 0.7% after rising slightly in August. The fuel oil index decreased as well, falling 2.1%.In contrast to these declines, the index for natural gas turned up in September, rising 1.6% after falling in each of the 4 previous months. The energy index has fallen 0.6% over the last 12 months, with its components mixed. The natural gas index has risen 5.8% over the span and the electricity index has increased 2.8%. However, the gasoline index has declined 3.6% and the fuel oil index has fallen 3.2%.All items less food and energy
The index for all items less food and energy rose 0.1% in September after being unchanged in August. The shelter index accounted for most of the increase, rising 0.3% in September. The rent index increased 0.3% and the index for owners’ equivalent rent rose 0.2%. The medical care index also advanced in September, increasing 0.2%.Within the medical care component, the index for medical care commodities rose 0.5%, with the nonprescription drugs index increasing 1.5%. The index for medical care services rose 0.1%, with the index for hospital services advancing 0.3%. The indexes for alcoholic beverages and for personal care both rose 0.1% in September. Several indexes were unchanged in September, including those for new vehicles, apparel, recreation, and household furnishings and operations. The index for airline fares continued to decline in September, falling 0.5%, and the indexes for used cars and trucks and for tobacco both fell 0.1%.The index for all items less food and energy has risen 1.7% over the last 12 months. The shelter index has risen 3.0% and the index for medical care has increased 2.0%. Indexes that have declined over the last year include airline fares (down 3.0%), household furnishings and operations (down 1.4%) and used cars and trucks (down 0.4%).Not seasonally adjusted CPI measures
The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.7% over the last 12 months to an index level of 238.031 (1982-84=100). For the month, the index rose 0.1% prior to seasonal adjustment.The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 1.6% over the last 12 months to an index level of 234.170 (1982-84=100). For the month, the index rose 0.1% prior to seasonal adjustment.The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 1.5% over the last 12 months. For the month, the index rose 0.1% on a not seasonally adjusted basis. Please note that the indexes for the post-2012 period are subject to revision.Next CPI ReleaseThe CPI release date for October 2014 is Thursday, November 20, 2014 at 8:30 a.m. (EDT).
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To bribe the general public come election time, the federal government will ensure that gas prices plummet, which they are. But what few people grasp is how the costs for food and shelter are spiking dramatically to where people are not able to afford what they once could. Thus the initiative propped by Michael... er, Michelle Obama to install guidance devices in grocery stores to tell consumers what she wants them to purchase may not be so coincidental considering these prices continue skyrocketing.
With regards to interest rates? Those are plummeting dangerously close to Eurozone levels.
United States Fed Funds Rate 1971-2014The benchmark interest rate in the United States was last recorded at 0.25 percent. Interest Rate in the United States averaged 6.04 Percent from 1971 until 2014, reaching an all time high of 20.00 Percent in March of 1980 and a record low of 0.25 Percent in December of 2008. Interest Rate in the United States is reported by the Federal Reserve.
And of course, due to deflation, concerns arise over a strong dollar.
Fed Raises Concerns Over Strong Dollar
Minutes from Federal Reserve’s last meeting showed policymakers are concerned about recent dollar appreciation and the effects it might have on growth and inflation. FOMC minutes also highlighted divergences among the Committee’s language and the risk of a market misunderstanding.
Extracts from the minutes of Federal Open Market Committee meeting held in September:
During participants' discussion of prospects for economic activity abroad, they commented on a number of uncertainties and risks attending the outlook. Over the intermeeting period, the foreign exchange value of the dollar had appreciated, particularly against the euro, the yen, and the pound sterling. Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector. Several participants added that slower economic growth in China or Japan or unanticipated events in the Middle East or Ukraine might pose a similar risk. At the same time, a couple of participants pointed out that the appreciation of the dollar might also tend to slow the gradual increase in inflation toward the FOMC's 2 percent goal.
In their discussion of the appropriate path for monetary policy over the medium term, meeting participants agreed that the timing of the first increase in the federal funds rate and the appropriate path of the policy rate thereafter would depend on incoming economic data and their implications for the outlook. That said, several participants thought that the current forward guidance regarding the federal funds rate suggested a longer period before liftoff, and perhaps also a more gradual increase in the federal funds rate thereafter, than they believed was likely to be appropriate given economic and financial conditions. In addition, the concern was raised that the reference to "considerable time" in the current forward guidance could be misunderstood as a commitment rather than as data dependent. However, it was noted that the current formulation of the Committee's forward guidance clearly indicated that the Committee's policy decisions were conditional on its ongoing assessment of realized and expected progress toward its objectives of maximum employment and 2 percent inflation, and that its assessment reflected its review of a broad array of economic indicators. It was emphasized that the current forward guidance for the federal funds rate was data dependent and did not indicate that the first increase in the target range for the federal funds rate would occur mechanically after some fixed calendar interval following the completion of the current asset purchase program. If employment and inflation converged more rapidly toward the Committee's goals than currently expected, the date of liftoff could be earlier, and subsequent increases in the federal funds rate target more rapid, than participants currently anticipated. Conversely, if employment and inflation returned toward the Committee's objectives more slowly than currently anticipated, the date of liftoff for the federal funds rate could be later, and future federal funds rate target increases could be more gradual. In addition, some participants saw the current forward guidance as appropriate in light of risk-management considerations, which suggested that it would be prudent to err on the side of patience while awaiting further evidence of sustained progress toward the Committee's goals. In their view, the costs of downside shocks to the economy would be larger than those of upside shocks because, in current circumstances, it would be less problematic to remove accommodation quickly, if doing so becomes necessary, than to add accommodation. A number of participants also noted that changes to the forward guidance might be misinterpreted as a signal of a fundamental shift in the stance of policy that could result in an unintended tightening of financial conditions.
Federal Reserve | Joana Taborda | joana.taborda@tradingeconomics.com
10/8/2014 7:28:06 PM
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Our rate of interest is again a miniscule 0.25%, and do note that any further deductions will result eventually in an eventual negative rate. What we are preparing to witness, ladies and gentlemen, is the final crash of not only global stock exchanges which continue to plummet as well due to the return of financial and tech bubbles, but the failure to haul under control loan regulations to the point of exacerbating the Clinton era standards which led to the financial collapse of 2007-08. In discussing this, I will refer you to Bloomberg Businessweek:
Bill Clinton's drive to increase homeownership went way too farPosted by: Peter Coy on February 27, 2008Add President Clinton to the long list of people who deserve a share of the blame for the housing bubble and bust. A recently re-exposed document shows that his administration went to ridiculous lengths to increase the national homeownership rate. It promoted paper-thin downpayments and pushed for ways to get lenders to give mortgage loans to first-time buyers with shaky financing and incomes. It’s clear now that the erosion of lending standards pushed prices up by increasing demand, and later led to waves of defaults by people who never should have bought a home in the first place.President Bush continued the practices because they dovetailed with his Ownership Society goals, and of course Congress was strongly behind the push. But Clinton and his administration must shoulder some of the blame.In writing this blog entry, I’m following the lead of Joseph R. Mason, who is a finance professor at Drexel University’s LeBow College of Business, a senior fellow at the University of Pennsylvania’s Wharton School, and a consultant at Criterion Economics. Here is a link to a piece that he wrote on Feb. 26.The Clinton-era document that Mason cites—“The National Homeownership Strategy: Partners in the American Dream”—was hiding in plain sighton the website of the Department of Housing & Urban Development until last year, when according to Mason it was removed (probably because the housing bust made it seem embarrassing to the department). Mason credits Joshua Rosner of Graham Fisher & Co. with saving a copy of it before it was expunged.The National Homeownership Strategy began in 1994 when Clinton directed HUD Secretary Henry Cisneros to come up with a plan, and Cisneros convened what HUD called a "historic meeting" of private and public housing-industry organizations in August 1994. The group eventually produced a plan, of which Mason sent me a PDF of Chapter 4, the one that argues for creative measures to promote homeownership.The very worst idea in the plan, which fortunately never gained approval, was to let first-time homebuyers freely tap their IRA and 401(k) retirement-savings plans with no penalty to scrounge up a downpayment. That, HUD estimated, would have "benefited" 600,000 families in the first five years.Plenty of other ideas in the plan did become reality, though. Knowing what we know now about the housing bust, the earnest language in the document seems faintly ridiculous. Here's an excerpt. Read it closely and you can see the seeds of disaster being planted:For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership.Note the praise for "creativity." That kind of creativity in stretching boundaries we could use less of. Mason puts it well: "It strikes me as reckless to promote home sales to individuals in such constrained financial predicaments."
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When it comes to your earnings and the capacity to acquire prime rate mortgages or loans regardless if you qualify, my advice to you is that friends never let friends vote for Democrats. Socialists really do make a mess of the nation's finances.
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Global Debt in the Face of Deflation and Negative Interest Rates: The End of Political Economies
In misattributing the popular quote not from Margaret Thatcher, "The problem with socialism is that you eventually run out of other people's money." When governments pay down deficits, most of it involves chipping away at massive interest totals adjusted to inflation. In nearly six complete years of the Obama presidency, our deficit has increased by some $8 trillion dollars. Today, you may extrapolate that figure to understand that our total deficit is a higher percentage than what we are taxed, or in other words, our economy has contracted because expenditures as a total now live on credit. I refer to this as casino economics, again. The boom/bust cycle for capitalist economies like ours will be our undoing as we continue to spend what do not have.
But America is not at all the worst off regarding national debt. Japan's total is more than double our percentage. Below is the information provided by Economics Help. The problem now will be placed for most of you into the proper perspective.
List of National Debt by Country
- This is a list of the gross National debt that countries have. National debt refers to the amount of total government debt a country has. This is also referred to as ‘public sector debt’.
- It is compiled using data from the IMF, Eurostat and CIA agencies.
- Note: National debt is different to ‘External debt‘ – External debt includes all the debts a country (both private and public sector) owe to foreigners.
- In Q1 2014 – Net US debt was 74% (debt held by private sector). Gross US debt was 103% (this includes intra-governmental holdings
- Updated October, 2014
List of National Debt by Country
General gross government debt. Mostly using CIA from April 2014.Debt levels for 2013.
Pos Country Debt % of GDP Read more 1 Japan 226 Japan debt 2 Zimbabwe 202.4 3 Greece 175 4 Italy 133 Italy debt 5 Iceland 130.5 6 Portugal 127.8 Portugal debt 7 Ireland 124.2 Ireland debt 8 Jamaica 123 9 Lebanon 120 10 Cyprus 113 11 Sudan 111 12 Grenada 110 13 Singapore 105.5 14 Eritrea 104.7 15 Belgium 102.4 16 Puerto Rico 96.5 17 Spain 93.7 Spain debt 18 France 93.4 France debt 19 Egypt 92.2 20 United Kingdom 91.1 UK debt 21 Barbados 90.5 22 Antigua and Barbuda 89 23 Canada 86.3 Canada debt 24 Cabo Verde 86.2 25 Saint Kitts and Nevis 83 26 Germany 79.9 27 Hungary 79.8 28 Jordan 79.1 29 Sri Lanka 78.4 30 Saint Lucia 77 31 Morocco 76.9 32 Austria 75.7 33 Malta 75 34 Belize 75 35 Netherlands 74.3 36 United States 71.8 US debt 37 Slovenia 71.7 38 Albania 70.5 39 Dominica 70 40 Saint Vincent and the Grenadines 68 41 Israel 67 42 Aruba 67 43 Croatia 66.2 44 Sao Tome and Principe 65.5 45 Uruguay 62 46 El Salvador 62 47 Serbia 61.2 48 Bahrain 61.2 49 Guyana 59.9 50 Brazil 59.2 51 Syria 58.9 52 Mauritius 68 53 Finland 56.5 54 Fiji 56.2 55 Slovakia 55.5 56 Costa Rica 55 57 Pakistan 54.6 58 Malaysia 54.6 59 Kenya 53.5 60 Ghana 53.1 61 Montenegro 52.1 62 Seychelles 51.8 63 India 51.8 64 Tunisia 51 65 Malawi 50.8 66 Nicaragua 50 67 Ethiopia 50 68 Philippines 50 69 Czech Republic 48.8 70 Vietnam 48.2 71 Poland 48.2 72 Burundi 47.6 73 Yemen 47.1 74 Dominican Republic 47 75 Denmark 47 76 Mozambique 46.7 77 Laos 46.3 78 Bosnia and Herzegovina 45.9 79 Thailand 45.9 80 Argentina 45.8 81 South Africa 45.4 82 Cote d’Ivoire 45.2 83 Tanzania 42.7 84 United Arab Emirates 41.7 85 Sweden 41.5 86 Andorra 41.1 87 Honduras 40.6 88 Ukraine 40.6 89 Lithuania 40.2 90 Panama 39.8 91 Colombia 39.6 92 Latvia 39.2 93 Bhutan 38.9 94 Taiwan 38.9 95 Djibouti 38.6 96 Romania 38.6 97 Senegal 38.4 98 New Zealand 38.4 99 Armenia 37.7 100 Mexico 37.7 101 Trinidad and Tobago 37.1 102 Turkey 36.6 103 Georgia 36.3 104 Bolivia 36 105 Cuba 35.9 106 Korea, South 35.8 107 Hong Kong 35.6 108 Macedonia 34.3 109 Venezuela 34.2 110 Switzerland 33.8 111 Curacao 33.2 112 Australia 32.6 113 Congo, Republic of the 32.1 114 Zambia 31.8 115 Belarus 31.5 116 Sierra Leone 31.1 117 Guatemala 31 118 Bangladesh 30.9 119 Uganda 30.7 120 Qatar 30.6 121 Chad 30.5 122 Mali 30.5 123 Norway 30.1 124 Benin 29.7 125 Papua New Guinea 28.1 126 Nepal 28 127 Namibia 27.2 128 San Marino 25.8 129 Indonesia 24 130 Rwanda 23.5 131 Ecuador 23.2 132 Gabon 23 133 Luxembourg 22.9 134 China 22.4 135 Anguilla 20 136 Nigeria 19.3 137 Iran 18.7 138 Bulgaria 18.4 139 Botswana 17.9 140 Cameroon 16.7 141 Moldova 16.6 142 Paraguay 15.7 143 Kazakhstan 15.6 144 Peru 14.9 145 Angola 14.7 146 Chile 13.9 147 Algeria 13.2 148 Saudi Arabia 12.2 149 Equatorial Guinea 11 150 Kosovo 9 151 Russia 7.9 152 Uzbekistan 7.6 153 Azerbaijan 7.5 154 Gibraltar 7.5 155 Tajikistan 6.5 156 Kuwait 6.4 157 Estonia 6 158 Wallis and Futuna 5.6 159 Libya 4.8 160 Oman 4.4 161 Liberia 3.3 Sources:
- CIA factbook – National debt by Country
- Public debt, International Monetary Fund, April 2012
- Eurostat pdf.
Some selected levels of Public Sector debt in different countries:
- Canada National debt gross debt 85% of GDP (2012) – In Canada there are two measures. Net federal debt involves only central government. (38% of GDP).
- UK National Debt 67% of GDP (UK) See (UK national debt for more details.)
Further Reading
- Why is Japan able to borrow so much at low interest rates?
- How much can a government borrow?
- Euro Debt crisis explained
- National Debt, printing money and inflation
Annual Government Borrowing
An important factor is not just cumulative national debt, but, the annual budget deficit. This annual deficit determines the rate of deterioration in the public sector debt.The budget deficit is the total amount the government needs to borrow in a particular year.Budget Deficits by Country in 2012
This shows that the US has one of the highest budget deficits in the world.External Debt
A different statistics is external debt, this the amount of debt a country owes to other countries. It includes both the private and public sector debt. See: list of external debt by countryCredit Ratings
Readers Question
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The private sector is charged with 74% of the private debt. Our total debt in the U.S. is now at 103%, with 29% comprising of public expenditures, in which -3% figure indicates how our government is hemorrhaging money, or spending beyond what the Treasury possesses. This is when our congressmen and senators determine to raise the debt ceiling, which only leads to more spending and increased taxation through the backdoor.
How much of our tax dollars is distributed and spent by our various bureaucracies, and which one has accumulated most of our public debt? That answer is again, ladies and gentlemen, would be the Federal Reserve, the source for all U.S. socialism and all the wars we have fought in the past century. But first, I want to provide you with the breakdown of where America's tax revenue goes and how it is generated, per U.S. Government Revenue:
Our federal government consumes more than 80% of all income tax revenue and is pulling in record levels of our earnings, and yet it is losing money because it now has run dry by over 3%. The policy of tax and spend has never worked, but rather nearly bankrupted our economy and our government on numerous occasions.
Now, how much further can this be broken down? Fear not, for those figures will be below too:
The bane of America's financial collapse were the government-owned corporation Freddie Mac, Fannie Mae and Ginnie Mae. As three state-controlled banks are losing our taxed-subsidized funding to the tune of $1,490,167,000,000 - the three as a trio comprising more than the $1,316,700,000,000 owned by Beijing - America should be more concerned about defaulting not to the Chinese government, but to the American people on whose taxed wages our very lives and capacity to subsist and to prosper have be mortgage, literally.
How much of our tax dollars is distributed and spent by our various bureaucracies, and which one has accumulated most of our public debt? That answer is again, ladies and gentlemen, would be the Federal Reserve, the source for all U.S. socialism and all the wars we have fought in the past century. But first, I want to provide you with the breakdown of where America's tax revenue goes and how it is generated, per U.S. Government Revenue:
Note where our largest piece of the pie is by a large percentage: Income taxes. We are paying 40% of the American labor force's total earnings into the Treasury, thereby stifling the means for which we might be capable of paying more through either a lower income tax figure or the total abolition of all direct geometrically measure taxed wages. The more our government spends, the more we are taxed; likewise, the more we are taxed, the more government feels free to spend and spend freely. When one checkbook runs out, our government believes through more and heavier confiscatory taxation, it can purchase a new one and just spend frivolously until the next debt ceiling crisis threatens to bankrupt our Treasury and further lower our credit rating.
We see the means for which the federal government acquires tax revenue, and it is our earned income which is being hit the hardest and repressively. I want to share also how it trickles down to our state and local levels of government, and why each level needs to focus more on creating jobs independently so that none is so beholden to the federal government as to subsist solely upon its dispensations or, worse still, fall prey to the sharks through political blackmail and extortion:
And now the statistical figures to corroborate with the color coded map:
| State | Total IRS Tax Collected  | Business Income Tax | Individual Income & Employment Tax | ||||
| All states combined | $2,855.1 | $312.0 | $2,462.2 | ||||
| California | $334.4 | $35.6 | $291.1 | ||||
| Texas | $249.9 | $33.9 | $195.5 | ||||
| New York | $231.9 | $25.4 | $201.7 | ||||
| Florida | $141.2 | $8.2 | $129.9 | ||||
| Illinois | $137.1 | $16.2 | $117.3 | ||||
| New Jersey | $128.1 | $19.1 | $105.7 | ||||
| Ohio | $124.7 | $12.1 | $108.5 | ||||
| Pennsylvania | $120.4 | $11.9 | $105.3 | ||||
| Minnesota | $90.7 | $18.1 | $71.6 | ||||
| Massachusetts | $90.5 | $6.0 | $82.8 | ||||
| Georgia | $74.3 | $10.4 | $60.6 | ||||
| Virginia | $71.4 | $10.5 | $60.2 | ||||
| Michigan | $68.9 | $4.9 | $63.3 | ||||
| North Carolina | $66.1 | $7.0 | $58.7 | ||||
| Washington | $59.9 | $4.2 | $54.5 | ||||
| Maryland | $56.3 | $2.7 | $53.1 | ||||
| Missouri | $54.4 | $6.8 | $46.2 | ||||
| Tennessee | $53.9 | $5.5 | $47.0 | ||||
| Connecticut | $53.7 | $6.9 | $45.5 | ||||
| Indiana | $51.0 | $3.6 | $46.4 | ||||
| Colorado | $46.5 | $5.1 | $40.3 | ||||
| Wisconsin | $46.4 | $5.0 | $40.7 | ||||
| Louisiana | $40.2 | $1.5 | $38.1 | ||||
| Arizona | $36.8 | $2.9 | $32.2 | ||||
| Oklahoma | $30.1 | $3.6 | $22.9 | ||||
| Arkansas | $28.8 | $7.5 | $20.6 | ||||
| Kentucky | $27.7 | $2.3 | $25.0 | ||||
| Oregon | $25.7 | $1.7 | $23.7 | ||||
| Kansas | $24.7 | $2.7 | $20.4 | ||||
| District of Columbia | $24.5 | $1.6 | $22.8 | ||||
| Nebraska | $23.8 | $7.7 | $15.9 | ||||
| Alabama | $23.8 | $1.1 | $22.3 | ||||
| Iowa | $21.2 | $1.3 | $19.6 | ||||
| South Carolina | $20.4 | $1.2 | $18.9 | ||||
| Delaware | $20.1 | $5.8 | $13.9 | ||||
| Utah | $17.7 | $1.5 | $15.5 | ||||
| Nevada | $15.9 | $0.9 | $14.7 | ||||
| Rhode Island | $13.0 | $3.3 | $9.7 | ||||
| Mississippi | $10.4 | $0.5 | $9.8 | ||||
| New Hampshire | $10.0 | $0.3 | $9.4 | ||||
| Idaho | $8.7 | $0.5 | $8.1 | ||||
| New Mexico | $8.5 | $0.2 | $8.1 | ||||
| North Dakota | $7.6 | $0.9 | $6.6 | ||||
| Hawaii | $7.1 | $0.4 | $6.5 | ||||
| West Virginia | $6.8 | $0.4 | $6.3 | ||||
| Maine | $6.7 | $0.3 | $6.2 | ||||
| South Dakota | $6.3 | $0.2 | $6.0 | ||||
| Wyoming | $5.3 | $0.1 | $5.0 | ||||
| Alaska | $5.3 | $0.2 | $5.1 | ||||
| Montana | $5.0 | $0.2 | $4.7 | ||||
| Vermont | $4.0 | $0.3 | $3.7 | ||||
| Notes: actual guesstimated1 estimated
Data Source: IRS SOI Tax Stats
| |||||||
And there you are, and as expected, the larger states tend to rise highest at the top for tax revenue, which they should.
Our federal government consumes more than 80% of all income tax revenue and is pulling in record levels of our earnings, and yet it is losing money because it now has run dry by over 3%. The policy of tax and spend has never worked, but rather nearly bankrupted our economy and our government on numerous occasions.
Now, how much further can this be broken down? Fear not, for those figures will be below too:
The most disturbing graph is the one reading ad valorem, which entails ownership of property at face value. Once one realizes that America is a property owning democracy, the idea of more taxation entails that all tiers of government can regulate what transpires on our land, in our homes and businesses, to the point where after enough is taxed, these crucial icons of personal wealth and collateral can for all intents and purposes be nationalized or absorbed by any level of our government. And as all taxation is in some manner confiscatory by nature, who we vote for in choosing liberty or a codependent lifestyle will ultimately determine how much we own, what we earn in our wallet and eventually, how much the government owns us, nor the other way around. It therefore stands to reason that as government dictates the standards of any living wage - for example in the U.S., the disputes over an hourly minimum wage - the greater the likelihood that the freedom to excel, to succeed and to be an individual of merit so far as our talents may take us will eventually be collectivized and our dreams for fame, fortune and capacity to expand our businesses large or small to create new jobs and economic growth will be stifle. Today, Barack Obama has almost succeeded in his quest to unify the classes by narrowing the gaps... only so far as the bottom 90% are poorer than ever before while his supporters, the crony capitalists, are now far wealthier as a economic oligarchy than ever before in our history. Most profited off Wall Street or the technology and entertainment merits which are heavily subsidized and their products subsidized and granted corporate welfare. It therefore explains further why the Obama economic lie is only based upon a casino economic model.
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We read often how China owns the U.S. due to our enormous trade deficit due to them. What people do not know en masse is how the Federal Reserve actually owns the largest percent of all national deficits, some 64% higher than the rising superpower of the orient. For details, read CNSNews to understand how and why:
Fed Owns 64% More U.S. Government Debt Than China
January 16, 2014 - 12:11 PM(CNSNews.com) - The Federal Reserve owned 64 percent more U.S. government debt than entities in the People’s Republic of China did as of the end of November, which is the latest period for which the Treasury has reported on the foreign ownership of U.S. government debt.The $1,316,700,000,000 in U.S. Treasury securities that entities in mainland China owned as of the end of November set a record for China, but it was still $846,966,000,000 less than the $2,163,666,000,000 in U.S. Treasury securities the Federal Reserve owned as of Nov. 27, according the Fed’s weekly balance sheets.
As of January 9, the latest day on the Fed’s last weekly accounting sheet, the Fed had increased its holdings of U.S. Treasury securities to $2,212,924,000,000.
The Fed also owns $1,490,167,000,000 in mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae.
At the end of January 2009, the month President Barack Obama was first inaugurated, mainland China owned $744.2 billion in U.S. government debt and the Fed owned $475.129 billion.
When Sen. Richard Shelby (R.-Ala.), a member of the Senate Banking Committee, took to the Senate floor last week to explain why he had voted against the confirmation of Janet Yellen as the new chairman of the Federal Reserve, he made a point of the fact that the Fed—not the People’s Republic of China—is the world’s largest owner of U.S. government debt.
“In fact, the Federal Reserve’s balance sheet shows the Federal Reserve itself is by far the largest holder of U.S. Treasury bonds,” said Shelby.
“Many hold the misconception in this country that China is the world’s largest owner of U.S. debt. That is not true,” said Shelby. “In fact, the Federal Reserve’s balance sheet shows the Federal Reserve itself is by far the largest holder of U.S. Treasury bonds. With $2.2 trillion in Treasury debt, the Fed holds nearly $900 billion more than China does, if you can think in those terms. The Fed holds more in Treasury bonds than do China and most of the Eurozone combined.
“The rate of acceleration with which the Federal Reserve is purchasing Treasuries should be alarming to all Americans,” said Shelby.
Shelby described the Fed’s massive purchases of U.S. government debt as a “backdoor stimulus program”—one that may have unpredictable consequences.
“Let’s call this what it is: a backdoor stimulus program through monetary policy,” said Shelby. “Very complicated, yes, but very important. It dwarfs even the fiscal stimulus package President Obama rammed through Congress during his first days in office about 5 years ago. President Obama’s fiscal stimulus package totaled $787 billion—a lot of money—and I have just described the Fed’s monetary stimulus package as nearly four times larger and growing.”
Shelby argued that, despite currently low inflation, the Fed’s policy could lead to prices increasing “uncontrollably.”
“This highly unconventional monetary policy poses huge risks to our economy—namely, inflation in the future and a devaluation of our currency,” said Shelby.
“I realize that current inflation expectations are relatively low and anchored,” he said. “However, again we are in completely uncharted territory. Should inflation expectations become unglued, prices could increase uncontrollably. There is simply no playbook that I am aware of on how to deal with such a situation successfully.”
Shelby additionally observed that although the Fed has announced it is going to reduce the size of its ongoing debt purchases, it is nonetheless going to continue making them.
“Yes, I also understand that the Fed has recently announced it will modestly scale back its so-called quantitative easing program,” said Shelby. The Fed will still purchase tens of billions of dollars of securities each month.
“Make no mistake—the Fed’s balance sheet will continue to expand rapidly,” he said.
“How long will this continue? We don’t know,” he said. “How large will the Fed’s balance sheet ultimately grow? We don’t know. Will the Fed be able to contain inflation if it does begin to rise? Again, we don’t know. And when will the Federal Reserve actually begin to unwind the balance sheet—which will be tricky? Again, we don’t know. How exactly does the Federal Reserve plan to unwind the balance sheet? Again, we don’t know, and I don’t believe they know.”
Shelby said that even in-coming Federal Reserve Chairman Janet Yellen, who will take over for Bernanke on February 1, could not answer these questions for him.
“I raise these points because I met with Dr. Yellen in my office and attended her confirmation hearing in the Banking Committee. I received no meaningful answers to any of those questions, only the usual platitudes that so often mark such meetings.”
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Reaganomics Debt vs. the Obama Debacle: Fact and Fiction and Why Reagan Actually Cut Federal Spending
In the history of the United States, perhaps no other period of our economic progression could one point to both a greater conundrum and still an even threatening crises than the phenomenon of stagflation. Stagflation can be summarized as rising unemployment and decreases in real wages coupled with high inflation that destroys entire nations as money becomes worthless while the capacity to work and earn a living disappears. This period can best be exemplified by long gas lines where fuel was rationed due to OPEC's embargoes on global oil supply, Nixon's failed policies of price fixtures and Jimmy Carter's infamous Crisis of Confidence speech where like today with Barack Obama, he blamed America for government's failures.
As Ronald Reagan was elected to the presidency in 1980, he pledged that business as usual in Washington would change; that, it did. Confiscatory tax rates in the neighborhood of a quarter of the wealthiest Americans' income and a total at the bottom as high as today's top wage earners had robbed the people its ability to live comfortably even as Jimmy Carter demanded that more sacrifices be made in the people's capacity to subsist and in creature comforts. Manufacturing had all but died due to labor union strikes closing factories in Detroit and the Rust Belt. President Reagan pledged to cut taxes and to drive down inflation. What he did was cut the top rate to 28.5% by 1988 while inflation decreased plummeted from 13.5% to 4.3% after a brief spike following the stock market crash of 1987. Through index interest rates and raising those totals to near record-high levels briefly, this miracle was made possible, but at the cost of an 82% increase in deficit spending as a result of Congress failing to grant his demand for a balanced budget amendment and the scourge of a decade of unprecedented interest rates inflating the actual debt while he cut government expenditures and growth.
The following graphs will explain how the Reagan deficits skyrocketed not because he increased enormously the rates of public expenditures, but due to his driving down inflation by spiking interest rates which compounded what was to be paid down, per U.S. Government Expenditures:
The graph can be explained in real terms as follows:
The most troublesome issue of the total public debt during the Reagan presidency and why it rose by a staggering 82% was the enormous rate of interest that had accrued. The following table explains more:
As the Federal Reserve was established in 1916, one scant year prior to the first world war, interest rates have comprised of the largest percent of federal debt. What increased so terribly was not actual government expenditures, but the rates of interest upon which securities and bonds were purchased by the federal government. But under the Obama model that has raised deficits to a total higher than composite GDP, it grows more pernicious:
Interest rates, again, are now 0.25%, among the lowest totals in U.S. history. In Europe, as previously stated, sub-zero figures have resulted in banks required to pay loan applicants, and still there is the issue of quantitative easing, which the U.S. has continued. Under President Obama, he has spent with a virtual blank check. And while Ronald Reagan struggled just to pay down the interest rates, Obama's debts are by comparison, pure money:
What did you learn? Public debt increases under Reaganomics were lower than under his successors. While the trend rose, it remained relatively stable until the Obama presidency. But under Obama, the rate of interest decreased, meaning real debt through the American taxpayers skyrocketed, but deflated in interest and inflation. For Obama, the federal government prospered by cutting down the middle man - the Federal Reserve's driving down of interest rates and flooding the market with paper money through quantitative easing. The tradeoff, however, was a dollar that is strong in terms of purchasing power, but buys less per unit as debt skyrockets.
The trend of the deflation of the coinage can be directly tied to rising deficits. Once you read of 2013's figure, what is real GDP is now less than its nominal figure, courtesy of Measuring Worth.com:
The US federal government differentiates between Gross Debt issued by the US Treasury and Net Debt held by the public. The numbers on Gross Debt are published by the US Treasury here.
Numbers on various categories of federal debt, including Gross Debt, debt held by federal government accounts, debt held by the public, and debt held by the Federal Reserve System, are published every year by the Office of Management and Budget in the Federal Budget in the Historical Tables as Table 7.1 — Federal Debt at the End of the Year. The table starts in 1940. You can find the latest Table 7.1 in here.
The chart above shows three categories of federal debt.1. Monetized debt (blue), i.e., federal debt bought by the Federal Reserve System2. Debt held by the federal government (red) e.g., as IOUs for Social Security3. Other debt (green), i.e., debt in public hands, including foreign governments.
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What you are reading in this graph is during the Reagan presidency, the phenomenon behind the unsustainable model of social welfare subsidies, where because of rising interest rates attempting to drive down inflation, that figure skyrocketed in terms of what the federal government purchased in securities and IOUs. The green, however, indicates how the manufacturing sector had been decimated by labor unions striking and driving stakes into the hearts of our traditional mass employers' capacity to operate, causing factories to close and engage in corporate flight, and more money spent on imports.
The most troublesome issue of the total public debt during the Reagan presidency and why it rose by a staggering 82% was the enormous rate of interest that had accrued. The following table explains more:
The real risk from government debt is the burden of interest payments. Experts say that when interest payments reach about 12% of GDP then a government will likely default on its debt. Chart 4.05 shows that the US is a long way from that risk. The peak period for government interest payments, including federal, state, and local governments, was in the 1980s, when interest rates were still high after the inflationary 1970s. Of course, the numbers don’t show the burden of interest payments from Government Sponsored Enterprises like Fannie Mae and Freddie Mac, and they don't show what the outlays for interest will be after the end of the current “quantitative easing” and “zero interest rate policy.”A century of federal monetizing through the Federal Reserve has resulted in America's future to become unavoidably mortgaged. Socialism never existed in full until Franklin D. Roosevelt's New Deal policies, and as that failed miserably and devolved the economy lower by 1938 than it had been upon his ascension to the presidency, the focus changed to foreign policy, creating the phenomenon of the welfare/warfare paradigm, or when the economy fully tanks and destructive wars are then waged as troops are promised to be taken care of as a bribe to serve.
Interest rates, again, are now 0.25%, among the lowest totals in U.S. history. In Europe, as previously stated, sub-zero figures have resulted in banks required to pay loan applicants, and still there is the issue of quantitative easing, which the U.S. has continued. Under President Obama, he has spent with a virtual blank check. And while Ronald Reagan struggled just to pay down the interest rates, Obama's debts are by comparison, pure money:
What did you learn? Public debt increases under Reaganomics were lower than under his successors. While the trend rose, it remained relatively stable until the Obama presidency. But under Obama, the rate of interest decreased, meaning real debt through the American taxpayers skyrocketed, but deflated in interest and inflation. For Obama, the federal government prospered by cutting down the middle man - the Federal Reserve's driving down of interest rates and flooding the market with paper money through quantitative easing. The tradeoff, however, was a dollar that is strong in terms of purchasing power, but buys less per unit as debt skyrockets.
The trend of the deflation of the coinage can be directly tied to rising deficits. Once you read of 2013's figure, what is real GDP is now less than its nominal figure, courtesy of Measuring Worth.com:
What Was the U.S. GDP Then?
Download the Results in a Spreadsheet Format
Year Nominal GDP
(million of Dollars)Real GDP
(millions of 2009 dollars)GDP Deflator
(index 2009=100)Population
(in thousands)Nominal GDP per capita
(current dollars)Real GDP per capita
(year 2009 dollars)Plot Series
Plot Log of SeriesPlot Series
Plot Log of SeriesPlot Series
Plot Log of SeriesPlot Series
Plot Log of SeriesPlot Series
Plot Log of SeriesPlot Series
Plot Log of Series1900 20,766 456,861 4.55 76,094.00 272.90 6,003.9 1901 22,484 481,111 4.67 77,584.00 289.80 6,201.2 1902 24,294 505,823 4.80 79,163.00 306.89 6,389.6 1903 26,180 520,584 5.03 80,632.00 324.69 6,456.3 1904 25,928 502,152 5.16 82,166.00 315.56 6,111.4 1905 29,066 558,810 5.20 83,822.00 346.76 6,666.6 1906 31,336 581,661 5.39 85,450.00 366.72 6,807.0 1907 34,178 596,607 5.73 87,008.00 392.81 6,856.9 1908 30,423 532,105 5.72 88,710.00 342.95 5,998.3 1909 32,540 570,565 5.70 90,490.00 359.60 6,305.3 1910 33,746 576,709 5.85 92,407.00 365.19 6,241.0 1911 34,675 595,394 5.82 93,863.00 369.42 6,343.2 1912 37,745 623,289 6.06 95,335.00 395.92 6,537.9 1913 39,517 647,893 6.10 97,225.00 406.45 6,663.9 1914 36,831 598,287 6.16 99,111.00 371.61 6,036.5 1915 39,048 614,598 6.35 100,546.00 388.36 6,112.6 1916 50,117 699,822 7.16 101,961.00 491.53 6,863.6 1917 60,278 682,512 8.83 103,414.00 582.88 6,599.8 1918 76,567 744,069 10.29 104,550.00 732.35 7,116.9 1919 79,090 750,039 10.54 105,063.00 752.78 7,138.9 1920 89,246 743,030 12.01 106,461.00 838.30 6,979.4 1921 74,314 725,995 10.24 108,538.00 684.68 6,688.9 1922 74,140 766,310 9.67 110,049.00 673.70 6,963.4 1923 86,238 867,213 9.94 111,947.00 770.35 7,746.6 1924 87,786 893,916 9.82 114,109.00 769.32 7,833.9 1925 91,449 914,914 10.00 115,829.00 789.52 7,898.8 1926 97,885 974,698 10.04 117,397.00 833.79 8,302.6 1927 96,466 984,111 9.80 119,035.00 810.40 8,267.4 1928 98,305 995,390 9.88 120,509.00 815.74 8,259.9 1929 104,600 1,056,600 9.90 121,878.00 858.00 8,669.0 1930 92,200 966,700 9.54 123,188.00 748.00 7,847.0 1931 77,400 904,800 8.55 124,149.00 623.00 7,288.0 1932 59,500 788,200 7.55 124,949.00 476.00 6,308.0 1933 57,200 778,300 7.35 125,690.00 455.00 6,192.0 1934 66,800 862,200 7.75 126,485.00 528.00 6,817.0 1935 74,300 939,000 7.91 127,362.00 583.00 7,373.0 1936 84,900 1,060,500 8.01 128,181.00 662.00 8,273.0 1937 93,000 1,114,600 8.34 128,961.00 721.00 8,643.0 1938 87,400 1,077,700 8.11 129,969.00 672.00 8,292.0 1939 93,500 1,163,600 8.04 131,028.00 714.00 8,881.0 1940 102,900 1,266,100 8.13 132,122.00 779.00 9,583.0 1941 129,400 1,490,300 8.68 133,402.00 970.00 11,171.0 1942 166,000 1,771,800 9.37 134,860.00 1,231.00 13,138.0 1943 203,100 2,073,700 9.79 136,739.00 1,485.00 15,165.0 1944 224,600 2,239,400 10.03 138,397.00 1,623.00 16,181.0 1945 228,200 2,217,800 10.29 139,928.00 1,631.00 15,850.0 1946 227,800 1,960,900 11.62 141,389.00 1,611.00 13,869.0 1947 249,900 1,939,400 12.89 144,126.00 1,734.00 13,456.0 1948 274,800 2,020,000 13.60 146,631.00 1,874.00 13,776.0 1949 272,800 2,008,900 13.58 149,188.00 1,829.00 13,466.0 1950 300,200 2,184,000 13.75 151,684.00 1,979.00 14,398.0 1951 347,300 2,360,000 14.72 154,287.00 2,251.00 15,296.0 1952 367,700 2,456,100 14.97 156,954.00 2,343.00 15,649.0 1953 389,700 2,571,400 15.16 159,565.00 2,442.00 16,115.0 1954 391,100 2,556,900 15.30 162,391.00 2,408.00 15,745.0 1955 426,200 2,739,000 15.56 165,275.00 2,579.00 16,572.0 1956 450,100 2,797,400 16.09 168,221.00 2,676.00 16,629.0 1957 474,900 2,856,300 16.63 171,274.00 2,773.00 16,677.0 1958 482,000 2,835,300 17.00 174,141.00 2,768.00 16,282.0 1959 522,500 3,031,000 17.24 177,130.00 2,950.00 17,112.0 1960 543,300 3,108,700 17.48 180,760.00 3,006.00 17,198.0 1961 563,300 3,188,100 17.67 183,742.00 3,066.00 17,351.0 1962 605,100 3,383,100 17.89 186,590.00 3,243.00 18,131.0 1963 638,600 3,530,400 18.09 189,300.00 3,373.00 18,650.0 1964 685,800 3,734,000 18.37 191,927.00 3,573.00 19,455.0 1965 743,700 3,976,700 18.70 194,347.00 3,827.00 20,462.0 1966 815,000 4,238,900 19.23 196,599.00 4,145.00 21,561.0 1967 861,700 4,355,200 19.79 198,752.00 4,336.00 21,913.0 1968 942,500 4,569,000 20.63 200,745.00 4,695.00 22,760.0 1969 1,019,900 4,712,500 21.64 202,736.00 5,031.00 23,245.0 1970 1,075,900 4,722,000 22.79 205,089.00 5,246.00 23,024.0 1971 1,167,800 4,877,600 23.94 207,692.00 5,623.00 23,485.0 1972 1,282,400 5,134,300 24.98 209,924.00 6,109.00 24,458.0 1973 1,428,500 5,424,100 26.34 211,939.00 6,740.00 25,593.0 1974 1,548,800 5,396,000 28.70 213,898.00 7,241.00 25,227.0 1975 1,688,900 5,385,400 31.36 215,981.00 7,820.00 24,935.0 1976 1,877,600 5,675,400 33.08 218,086.00 8,609.00 26,024.0 1977 2,086,000 5,937,000 35.14 220,289.00 9,469.00 26,951.0 1978 2,356,600 6,267,200 37.60 222,629.00 10,585.00 28,151.0 1979 2,632,100 6,466,200 40.71 225,106.00 11,693.00 28,725.0 1980 2,862,500 6,450,400 44.38 227,726.00 12,570.00 28,325.0 1981 3,211,000 6,617,700 48.52 230,008.00 13,960.00 28,772.0 1982 3,345,000 6,491,300 51.53 232,218.00 14,405.00 27,953.0 1983 3,638,100 6,792,000 53.56 234,333.00 15,525.00 28,984.0 1984 4,040,700 7,285,000 55.47 236,394.00 17,093.00 30,817.0 1985 4,346,700 7,593,800 57.24 238,506.00 18,225.00 31,839.0 1986 4,590,200 7,860,500 58.40 240,683.00 19,072.00 32,659.0 1987 4,870,200 8,132,600 59.89 242,843.00 20,055.00 33,489.0 1988 5,252,600 8,474,500 61.98 245,061.00 21,434.00 34,581.0 1989 5,657,700 8,786,400 64.39 247,387.00 22,870.00 35,517.0 1990 5,979,600 8,955,000 66.77 250,181.00 23,901.00 35,794.0 1991 6,174,000 8,948,400 69.00 253,530.00 24,352.00 35,295.0 1992 6,539,300 9,266,600 70.57 256,922.00 25,452.00 36,068.0 1993 6,878,700 9,521,000 72.25 260,282.00 26,428.00 36,580.0 1994 7,308,800 9,905,400 73.79 263,455.00 27,742.00 37,598.0 1995 7,664,100 10,174,800 75.32 266,588.00 28,749.00 38,167.0 1996 8,100,200 10,561,000 76.70 269,714.00 30,033.00 39,156.0 1997 8,608,500 11,034,900 78.01 272,958.00 31,538.00 40,427.0 1998 9,089,200 11,525,900 78.86 276,154.00 32,914.00 41,737.0 1999 9,660,600 12,065,900 80.07 279,328.00 34,585.00 43,196.0 2000 10,284,800 12,559,700 81.89 282,398.00 36,420.00 44,475.0 2001 10,621,800 12,682,200 83.75 285,225.00 37,240.00 44,464.0 2002 10,977,500 12,908,800 85.04 287,955.00 38,122.00 44,829.0 2003 11,510,700 13,271,100 86.74 290,626.00 39,607.00 45,664.0 2004 12,274,900 13,773,500 89.12 293,262.00 41,856.00 46,967.0 2005 13,093,700 14,234,200 91.99 295,993.00 44,237.00 48,090.0 2006 13,855,900 14,613,800 94.81 298,818.00 46,369.00 48,905.0 2007 14,477,600 14,873,700 97.34 301,696.00 47,987.00 49,300.0 2008 14,718,600 14,830,400 99.25 304,543.00 48,330.00 48,697.0 2009 14,418,700 14,418,700 100.00 307,240.00 46,930.00 46,930.0 2010 14,964,400 14,783,800 101.22 309,776.00 48,307.00 47,724.0 2011 15,517,900 15,020,600 103.31 312,034.00 49,731.00 48,138.0 2012 16,163,200 15,369,200 105.17 314,246.00 51,435.00 48,908.0 2013 16,768,100 15,710,300 106.73 316,465.00 52,986.00 49,643.0
Note: Current data is only available till 2013.As stated below, these data may be used for non-profit educational purposes if proper credit is given. However, users are prohibited from publishing more than five years of these data in electronic or print documents without specific permission. Anyone is allowed to publish electronic links to these data. Citation
Samuel H. Williamson, "What Was the U.S. GDP Then?" MeasuringWorth, 2014URL: http://www.measuringworth.org/usgdp/
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When deficit spending skyrockets while the coinage deflates, disaster strikes. Deflation, therefore, is far worse for the financial infrastructure than actual inflation, which is far easier to control under present standards. As interest rates deflate and debts rise, the battle to pay down debt becomes nearly impossible to achieve. As the world economy now faces this fate, the choices are as follows:
- Default on the national debt and declare bankruptcy, thereby destroying the nation's credit rating internationally;
- Forgive all debt and restructure the entire monetary system and fiscal policy;
- Engage in austerity economics, which entails that taxes be raised, interest rates driven down to artificial lows, monetary supply through quantitative easing implemented while expenditures are cut to where all debts are paid down.
Barack Obama is attempting the latter, but like the Eurozone, he has failed miserably in one respect. As taxes have been increased, interest rates driven to near zero percentile while monetarism implemented through turning on the printing presses, he is still incurring more and more debt, though currently at a lower rate. But once Obamacare takes full effect, even austerity will fail to pay down debt, and instead, our figure will skyrocket to unprecedented figures when adjusted to deflation. If the Federal Reserve drives down interest rates into the negative percentages, there will be no more securities or bonds to purchase and quantitative easing, for all intents and purposes, will reverse the trend into hyperinflation.
Hyperinflation and the Death of Capitalism in America
To understand hyperinflation, one need only to reflect upon life during Weimar Germany during the 1920s prior to the rise of Adolf Hitler in 1933. Crashing economies typically result in warfare, which accompanies per usual the destructive bookend of social welfare expenditures. What you will read from Forbes published in April 2014 will frighten you, and should, since renowned economist Marc Faber correctly predicted the Stock Market Crash of 1987 and financial crash of 2007:
Is U.S. Hyperinflation Imminent?
IntroductionAccording to renowned economist Marc Faber, hyperinflation in the U.S. is a certainty within the next 10 years. Mr. Faber has correctly predicted some of the most important financial events in the modern era including, the stock market crash of 1987; the rise of oil, precious metals and other assets in the 2000′s; and on Fox News in February 2007, he said a U.S. stock market correction was imminent. The market peaked six months later. Is Mr. Faber correct this time? Is U.S. hyperinflation imminent in the next 10 years?NOTE: For more on Marc Faber, CLICK HERE (his company website) and also HEREIn this article, we will discuss the effects of inflation and hyperinflation, consider an example of hyperinflation and discuss the possibility of this occurring in the U.S. One thing is certain, if hyperinflation does materialize, it would be devastating to our economy. Let’s begin with inflation.InflationThe Fed is the primary catalyst for inflation. Moreover, it actually attempts to create a low to moderate level of inflation. Why does the Fed want inflation? Because inflation is a signal of a growing economy. Additionally, if inflation is too high, the economy will suffer. If it’s too low, deflation becomes a threat. Therefore, low to moderate inflation is the goal.Inflation may be defined as “A general rise in prices” and occurs when demand outpaces supply. Actually, there are a couple of ways inflation can manifest and the Federal Reserve’s monetary policy lies at the heart of both. For example, when the Fed lowers interest rates, money is cheaper to borrow. Next, when the Fed expands the money supply, money is more plentiful, which again, makes it easier to borrow. Finally, when the Fed reduces bank reserve requirements (i.e.: The percentage of each deposit which must be held in reserve at the Fed), banks have more money to lend. All three create an environment which makes money more plentiful and cheaper for consumers and businesses to borrow. Of course, this assumes consumers and businesses are willing to take on debt. Another consequence of a significant expansion in the money supply is the devaluation of the currency. In essence, when there is a substantial increase in the supply of an item, including currencies, its value declines. Hence, it takes more dollars to buy the same goods and services. In a literal sense, inflation is the result of a decline in the value of a currency. Therefore, if Fed policy is successful, the expectation is that demand will rise, companies will expand their workforce and/or spend more money on technology to meet the increased demand and the economy will grow. However, if demand increases too rapidly, inflation will result.Although inflation is defined as a general increase in prices, during such periods, prices on some items may rise while others may fall. Therefore, we shouldn’t presume that if home prices rise; food prices, auto prices, etc., will also rise. Actually, prices on specific items rise and fall based on the Fed’s monetary policy plus supply and demand for the particular product or service. For example, let’s assume XYZ Company produces widgets and has a monopoly on them (i.e.: no other company is legally allowed to produce them). Further assume this company makes 8,000 widgets each month, but has the capacity to produce up to 10,000 if necessary. In this case, the company’s “Capacity Utilization” rate (i.e.: the company’s current percentage of maximum capacity) would be 80% (8,000 / 10,000). However, if demand were to suddenly increase to 15,000 widgets per month, XYZ would have to expand its facility, hire more staff and/or purchase technology to meet the increased demand. This would cause the price per unit to rise (at the production level), which would necessitate a price increase to the consumer in order to maintain the same margin of profit. If inflation became too elevated, it would be called hyperinflation. Let’s look at this now.HyperinflationHyperinflation is much less common than inflation. Unfortunately, there is no specific numerical definition for hyperinflation. However, there is some consensus. For example, a few economists suggest that an inflation rate of 50% per month would constitute hyperinflation. Using this rate, a junior cheeseburger deluxe at Wendy’s, which costs about one dollar today, would cost $130 a year from now and nearly $17,000 in 2 years. Needless to say, hyperinflation is a destructive force which is best avoided. Could we actually see hyperinflation in America? Has hyperinflation occurred frequently?The Nineteenth century was the century of deflation, whereas the Twentieth century was the period of inflation. Hyperinflation occurred as many as 55 times over the past century. Notable countries include: China, Russia, Brazil, Germany, Argentina, Poland, Chile and others. Could it happen in America? Many experts say no.Because the U.S. has a very proactive Fed, and there’s such a large amount of historical data from countries that have experienced hyperinflation, we should be able to learn from the past mistakes of others and avoid it. However, since inflation and hyperinflation are triggered by an excess of currency, which is not backed by gold or any other substance of value (i.e.; called “fiat” currency), there is no limit to the amount of dollars the U.S. can print (though we don’t print that much actual paper these days). Therefore, we need to briefly discuss the gold standard.Gold StandardThere are a few different types of gold standards. However, in the interest of brevity, we’ll only skim the surface on this subject. Generally speaking, when a country adopts a gold standard, the amount of currency it may issue is limited by the amount of gold it holds in reserve. During times of war, a country’s need for capital increases, so abandoning the gold standard allows a country to expand its money supply to finance the war. This has been the typical path for countries during wartime. Today, there are no countries on the gold standard. In the absence of this, again there is no limit to amount of currency a country may print. This can be problematic, especially in smaller, developing nations. The absence of a gold standard was a key factor in one of the worst cases of hyperinflation in history. I’m referring to Germany following WWI.Germany’s Hyperinflation After WWI.
When WWI began, Germany abandoned its gold standard in order to print more currency to finance the war. When the war ended, Germany admitted they had started the war and agreed to pay reparations to various countries, with France being the major beneficiary. The details were included in the Treaty of Versailles, the document which formally ended the war. The amount Germany was required to pay was enormous. In fact, the total was close to 226 billion gold marks (approx $846 billion in current U.S. Dollars). After it became evident that Germany was unable to meet this demand, in 1921 the burden was reduced to 132 billion marks, the equivalent of $442 billion in today’s dollars. Due to the war, Germany’s economy was in shambles. Moreover, with many of its factories in ruin, its production capacity was severely reduced. Hence, even the reduction to 132 billion marks was well beyond its ability to repay. However, to help assure compliance, France and Belgium deployed troops to Germany from 1923 to 1925. During this period, Germany’s central bank, the Reichsbank, issued a massive amounts of marks to repay its debt. However, because Germany had abandoned the gold standard, its currency was backed only by the full faith and credit of its government. Between this monetary explosion and the loss of confidence in its currency, the German mark experienced a massive decrease in value, which resulted in severe hyperinflation. To better grasp the situation at that time, prices doubled during the five years from 1914 to 1919. They doubled again in only five months in 1922. In 1914, the ratio between the mark and the U.S. Dollar was 4.2 German Marks to one dollar. By 1923, it took 4.2 trillion marks to equal one dollar. The German currency had totally collapsed. This also contributed to a brief, but sharp recession in the U.S. (August 1918 to March 1919).
Who Benefits And Who Suffers From Inflation And Hyperinflation?
The beneficiaries of high inflation include any individual or entity who has borrowed money at a fixed rate. High inflation also benefits investors who own commodities, and businesses that derive a significant portion of revenue from exports. Who loses with inflation? First, the overall economy suffers. Specifically, consumers lose purchasing power and their standard of living erodes. Lenders are also hurt as are those who need to borrow. The latter group suffers because lenders raise their interest rates to hedge against inflation. In short, money becomes much more expensive. Finally, import-oriented businesses struggle when inflation is high.
Hyperinflation, on the other hand, hurts almost everyone. It decimates the middle class. It can cause massive bank failures, especially banks with large amounts of outstanding fixed-rate loans. And, although borrowers who have a fixed rate loan do benefit, because prices on everything else are increasing so rapidly, any benefit from the loans is erased by the extreme cost of goods and services. There really are no winners with hyperinflation.
The Potential for Hyperinflation in the U.S. Today
Could the U.S. experience hyperinflation? If you look at the amount of the Feds monetary expansion since 2008, then you would likely conclude yes. For example, when the financial crisis began, the Fed’s balance sheet was around $800 billion. Today, it is over $4 trillion. That’s a tremendous increase. However, it’s important to note that the majority of this new money is sitting at the Federal Reserve and has not actually entered the economy. If this were not the case, if all this capital were allowed to enter the economy, inflation would be very high. Perhaps not hyperinflation, but I believe it would be much higher than it was during the late 1970s.
Why would the Fed flood the market with so much money if it wasn’t intended to enter the economy? Because during the 2008 crisis, not counting the banks that did go out of business, a large number of other banks nearly collapsed. The actions of the Fed were nothing short of brilliant. They created a glut of new money through T.A.R.P., QEII, Operation Twist and QEIII. Then they offered to pay interest to banks on their reserves, which from a financial standpoint made it profitable to banks to leave large amounts on reserve. Hence, with the majority of this new money in reserve, bank balance sheets have been greatly strengthened. It’s important to note that the financial sector must be strong if the economy is to thrive. The Feds challenge will come when it’s time to unwind it all.
With over $4.2 trillion on the Fed’s balance sheet ($3.8 trillion more than at the beginning of the crisis), when demand finally increases and lenders need more capital to lend, or when the Fed decides not to pay interest on bank reserves, the Fed will have to reverse course and, instead of buying bonds (which removes cash from its balance sheet and increases the money supply), it will be selling bonds (removing cash from the economy, reducing the money supply). This is where things could get dicey. This is also why the Fed would like to end QEIII as soon as possible. Because the longer it continues, the more money there will be to remove and this could cause a severe dislocation in the financial markets. In other words, when the Fed ceases QEIII, the stock market could decline along with bond prices.
Conclusion
Is Marc Faber correct in his prediction? Will the U.S. experience hyperinflation within the next 10 years? It all depends on consumer demand and the leadership of the new Fed Chair, Janet Yellen. It will also depend on economic growth in the rest of the world. The road out of the 2008 crisis has been masterfully maneuvered thus far. Will the next leg of the monetary journey be as smooth? I believe the Fed has done an outstanding job, all things considered. However, with a new chairperson, will the Fed continue to guide the economy with the same precision? My guess is that it will. After all, there are a lot of very bright individuals making decisions, and that gives me confidence. We’ll see if Mr. Faber is right. For the sake of all of us, I hope he’s wrong.
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Conclusion
Let us pray, ladies and gentlemen, that deflation and sub-zero interest rates do not lead to a final global economic collapse. It is this reason why I favor decentralizing all monetary, price and credit controls within the Federal Reserve and the responsibility to determine interest rates passed on to individual banking firms and corporations to encourage competition. To do this slashes drastically a systemic financial collapse of epic proportions and in the process, permitting banks to adjust according to their clientele in the war for business in a region. I propose selling off Fannie Mae, Freddie Mac and Ginnie Mae as shares to the public so that the American people have a stake in what will be three privatized financial firms and lead to a massive level of government revenue that would be determined by what the market for these shares demands. Lastly, the Sixteenth Amendment must be repealed, which would not only destroy the IRS, but dissolve the federal income tax. Doing so will mitigate the plight of down periods of recessions as taxes through an indirect method such as the Fair Tax will be market driven and based upon what each person can afford as a voluntary measure, not by confiscating what one cannot spare. Labor unions either need to be crippled as Gov. Scott Walker (R-WI) has successfully accomplished, or the entire Wagner Act of 1938 repealed in full in order to pave way for economic growth in the industrial sector and in the end, encouraging the resurrection of small business entrepreneurship in the poorest urban area neighborhoods and resurrect through more antitrust suits to break up corporate retailer monopolies to return the American Dream into the power of those who can best provide the greatest bulk of technological and service based innovation. Finally, there must be a federal balanced budget amendment passed to place a firm cap on what can be spent while the free market, through a capital model for indirect taxation, will launch tax revenue to engage in budget surpluses, in which a sizable percentage will be employed in paying down our national deficit while the remainder is returned to the general public as a natural measure for economic stimuli with particular attention paid to engaging in small business investment.
This is in no manner a perfect solution or conclusive plan to end the taxation and spending cycle leading to our pending economic collapse. Rather, it is a series of ideas to consider, to ask of your thoughts and to encourage fiscal restraint by driving government spending through a market-dictated stratagem. The purpose of this article is to warn one and all of the dangers facing the global economy today, for as China continues to devalue the reminibi to undercut the dollar, the rise of Alibaba as the newest stock on Wall Street could serve as the final step to a post capitalist world due to growing volatility.
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