The ending in the U.S. will be similar to that in Greece [and France]. It is assured for the same reasons. The Democrats will lose the 2012 election…and the Republicans will control government for the next two years. Whatever enthusiasm initially exists, however, will dissipate as soon as the polls show how unpopular austerity is. If they try to cut spending, they will suffer the same fate as the European Austerians. [Let me explain.] Words: 1116
So says ”Monty Pelerin” (a pseudonym derived from The Monty Pelerin Society) in edited excerpts from his original article* as posted at www.economicnoise.com .
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Pelerin goes on to say, in part:
After seventy years of increasing Keynesian economic witchcraft, the world is cracking. Politicians have succeeded beyond their wildest dreams. They have gained control (and ownership) of the economy and created great personal wealth for themselves in the process but all of this is coming to an end. Tyler Durden explains:
The standard Keynesian narrative that “Households and countries are not spending because they can’t borrow the funds to do so, and the best way to revive growth, the argument goes, is to find ways to get the money flowing again.” is not working.
In fact, former IMF Director Raghuram Rajan points out that today’s economic troubles are not simply the result of inadequate demand but the result, equally, of a distorted supply side…
Detailing his view of the mistakes of the Keynesian dream, Rajan notes “The growth that these countries engineered, with its dependence on borrowing, proved unsustainable.”
Politicians Have Papered Over Each Downturn With Disasterous Results
It is the distortions on the supply side that have created the current problem. For at least fifty years politicians have papered over each downturn. The result has been to mitigate the severity of each slump, but doing so by propping up companies, prices and investments that should have adjusted. Instead, these distortions were enabled and continued in the system. After decades of such economic interventions, the misallocation of labor and capital has crippled the economy’s ability to function. Small costs avoided have built into a massive cost directly ahead. Durden summarizes the choice ahead:
The industrial countries have a choice:
- they can act as if all is well except that their consumers are in a funk and so what John Maynard Keynes called “animal spirits” must be revived through stimulus measures or
- they can treat the crisis as a wake-up call and move to fix all that has been papered over in the last few decades and thus put themselves in a better position to take advantage of coming opportunities.
For better or worse, the narrative that persuades these countries’ governments and publics will determine their futures — and that of the global economy.
Our Democratic Process is Not About to Change for the Better
The Politicians: Political greed is a given. There is no hope of changing that. The constitution held it in check for a while but when the Progressive Movement, aided by Keynesianism economics, finally weakened these constraints, politicians leapt at the opportunity to control the economy. This loosening of constitutional constraints turned our democratic process into a “spending as bribery for votes” contest. The country has gone so far down this road that the possibilities of politicians ever relinquishing this power is slim to none – especially because it would require them to admit that:
- government has been the root cause of economic problems and that
- government is too large and too interventionist and needs to be dramatically curtailed both in terms of power and spending.
Few who have held political office during the last fifty years accept either of the above points.
Current politicians and politician wannabes have been drawn to the profession (it used to be a public service; now it is a profession…) based on the belief that government should, and must, solve all problems, grow bigger while doing so, and make it possible for elected officials to become wealthy in the process. The mindset of these politicians cannot comprehend the above two conditions.
If you like what this site has to offer go here to receive Your Daily Intelligence Report with links to the latest articles posted on munKNEE.com. It’s FREE! An easy “unsubscribe” feature is provided should you decide to cancel at any time.
The Voters: Sadly, voters are in a somewhat similar position. They have been conditioned to the myth that government creates wealth. The private sector is merely a necessary evil. Government must control this evil to protect the rest of us from their predatory exploitation.
This conditioning of the public was necessary in order to implement political plunder – and this plunder is used to enrich politicians directly and to bribe votes with the plunder.
The above rationale is never stated so bluntly. Rather it is justified in terms of making society “fair” and helping the poor.
Government officials believe that government is indispensable and needs to do more rather than less while a large proportion of the population, primarily the dependents and crony capitalists, have been convinced to believe the same. Under these conditions, it is impossible to enact a political solution to current problems.
- Neither side can compromise on spending cuts for any proposal ends up in perceived harm to one or the other.
- Furthermore, any politician who admits the truth about what has gone on and what needs to be done is committing political suicide. He is unilaterally disarming himself against his opponent and leaves himself open to charges of “meanness” and “unreasonableness” by an opponent who will run against him on the premise that things can continue as they were.
Recent elections in Europe demonstrated the above point. Those proposing austerity (the Austerians) lost big to those promising to continue or even increase spending….and their replacements will only accelerate the Greek-type tragedy that lies ahead for these countries.
What the Future Holds for the U.S. and Why
The Democrats will lose the 2012 election…and the Republicans will control government for the next two years. Whatever enthusiasm initially exists will dissipate as soon as the polls show how unpopular austerity is. If they try to cut spending, they will suffer the same fate as the European Austerians [did in Greece and France – resounding defeat!].
Voters given the choice between someone who promises to take their ice cream away and someone who promises to increase their ice cream will vote for the latter. That is what fifty years of conditioning has done. Eventually there will be no juice (taxes, borrowing or printing) left with which to produce and distribute the ice cream. Bond markets or hyperinflation will end what politicians refuse to do.
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
The U.S. government has put us between the proverbial ‘rock and a hard place’. Cutting spending to improve our country’s financial situation would surely trigger rioting in the streets by those Americans most adversely affected yet not cutting spending will trigger much higher inflation – even hyperinflation – which will also result in rioting….Government cannot control how this ends. They may be able to tinker with the timing a bit and they still have the choice of poisons with which to destroy the country, [but] that the country is gone, that is no longer alterable. Words: 930
For the past four years I have been covering the progression of the global economic crisis with an emphasis on the debilitating effects it has had on the American financial system. Only once before have I ever issued an economic alert, and this was at the onset of the very first credit downgrade in U.S. history by S&P. I do not take the word “alert” lightly. [Read on to to understand why I have issued an economic alert once again.] Words: 1904
Europe may soon be choking on that plat du jour of government a la Hollandaise with the side of chopped Greek salad. The whole world, in fact, has got something like a giant hairball stuck in its craw. The hairball is composed of filaments of lies wound over a core of supernatural indebtedness. The lies are promises that the debt will be paid back. Words: 710
The implications for the elections in Europe likely portend what will happen in the U.S.. A similar revolt against incumbents [will] …sweep Obama…out of office but… the newcomers will be placed in the position of Sarkozy and other European incumbents. They will have to address the insolvency and eventual liquidity issues in similar fashion which will be viewed here as “austerity” or worse, “cruel and unusual” punishment. [So, how likely is that? Not very, because] politicians, by nature, are not courageous animals. Instead we will see more of the same: half-assed attempts to fool the people into believing that something is being done to solve the problems. [So what does the future hold for America?] Words: 631
The Federal government is gearing up for unprecedented social unrest (worse than Greece or Spain) when Washington is forced to impose “austerity” plans next year… [which will be deemed absolutely necessary to avoid] runaway inflation [that would otherwise occur] to pay for the country’s costly welfare programs like Social Security, Medicare, Medicaid, Food Stamps and massive unfunded liabilities. [Below are the preparations presently underway.] Words: 500
The deficits aren’t going to stop anytime soon. The debt mountain will keep growing…Obviously, the debt can’t keep growing faster than the economy forever, but the people in charge do seem determined to find out just how far they can push things….The only way for the politicians to buy time will be through price inflation, to reduce the real burden of the debt, and whether they admit it or not, inflation is what they will be praying for….[and] the Federal Reserve will hear their prayer. When will the economy reach the wall toward which it is headed? Not soon, I believe, but in the meantime there will be plenty of excitement. [Let me explain what I expect to unfold.] Words: 1833
The plight of municipalities in the U.S., and their struggles under the weight of enormous pension budget deficits, are reaching the critical phase [with] many municipalities [now]contemplating bankruptcy. [That, in turn, is causing]… municipalities [to eliminate jobs (150,000 – 175,000 in 2012) providing significant headwinds to jobs growth nationally [which, in turn, will adversely affect] economic growth…[causing even] more municipalities to declare bankruptcy and [their] states, in turn, run to the Federal government for help. Words: 567
One of the problems with the debate over the “national debt” is that there’s no generally agreed upon definition of that term. Is it what the federal government owes, or what it owes foreigners, or what the whole country, private and public sector together, owes? Does it include off-balance-sheet items and contingent liabilities? There’s a hundred-trillion dollar gap between lowest and highest on this spectrum, which allows each commentator to confuse the rest of us by picking the measure that best suits their point of view. [Let’s try to decipher the true state of the nation.] Words: 1468
A monumental change is coming, and for most Americans, it will be painful—especially for the unprepared. [Let me explain just what is happening, why it can not go on as is and what we can likely expect in the future.] Words: 1144
The U.S. government is spending more than a trillion dollars more than it takes in every year…[which] all gets into the pockets of ordinary Americans [who,] in turn,…use that money to pay the mortgage, buy food, shop at the mall, etc. – creating a “false prosperity” bubble that is not real. It may feel real to you right now, but it is unsustainable…We are living in the greatest debt bubble the world has ever seen and, as such, a devastating economic collapse is on the horizon no matter what we do [so] don’t let this false prosperity and this “calm before the storm” fool you…There is going to be a massive amount of pain so you might want to get yourself and your family prepared for that. [Let me explain.] Words: 1211
The Age of Austerity has arrived with a vengeance in U.S. cities. City budgets shrank 1.9% in 2011 after 4.4% declines in 2010 and city revenues declined 2.3% this year for the fifth straight year of declines, according to the annual report from the National League of Cities. While tax revenue and state and federal aid decline, costs are increasing including pensions and health care. Cities have responded with layoffs, hiring freezes, pay cuts and service cuts. [A picture is worth a 1000 words so here are 11 charts that show just how bad the situation really is.] Words: 333
Rising education and medical costs, on-going credit card interest payments, well used personal lines of credit and large mortgage debt and home equity loans – most a penchant for living beyond their means – is keeping 75% of American households in some degree of debt. Take a look and then pass it on to your friends, neighbors and co-workers.
At present, the underlying fundamentals could not be much worse for the U.S. dollar. Beyond trade, the key factors, relative to other major currencies, could not be much worse. Despite any political and financial hype in the markets, the U.S. economy is relatively weaker, interest rates are lower, inflation is higher and fiscal policy and political stability all are relatively much worse than are seen relative to the other major currencies.
How this economic disaster ends is something about which many of us speculate. Two extreme endings are likely — a sudden deflationary collapse or a period of very high inflation/hyperinflation which ultimately cripples commerce and resolves itself in a deflationary collapse. In either case, the deflationary collapse is another Great Depression. It is important to know which route will occur because of what will happen to asset values along the way. Words: 1057
The demise of America is on borrowed time – and the end game could be dire – unless YOU do something about it. Congress is a tool of special interests – not OURS! As such, WE, as citizens, must become proactive if we are to protect OUR financial future by solving the Washington debt and tyranny problems and preventing foreign nations and/or creditors from forcing OUR country into bankruptcy and collapse! [What can YOU do to help? Read on!] Words: 2971
The definition of insanity is to continue doing something that goes wrong, without contemplating that there could be a different course of action…[and we] are heading deeper and deeper into insanity…we are just getting deeper and deeper into problems leaving our children and grandchildren with loans that could well take decades to finish (paying) off. I fear we are now stoking up the conditions, at some point in the future, for serious inflation.
With the U.S. election just nine months off, political pressures will mount to favor fiscal stimulus measures instead of restraint. Such action can only accelerate higher domestic inflation and intensified dollar debasement culminating in a Great Collapse – a hyperinflationary great depression – by 2014. [Let me explain why that is the inevitable outcome.] Words: 2766
Currency wars arise when a country steals growth from trading partners by cheapening its currency to promote exports. The new currency war began in 2010 when President Obama declared in his State of the Union address that it was the policy of the United States to double exports in five years. Since the U.S. would not become twice as productive in five years, the implication was the U.S. would severely cheapen its currency to achieve this goal. [Let me expand upon this.] Words: 666
The economy is now so manipulated by politicians, big bankers, and special-interest groups that making sense of the markets has become an almost impossible feat. Which is to say, it must push even harder on the levers of its printing presses, further setting the stage for the massive period of inflation we continue to see as inevitable… and for a stunning rise in interest rates. Words: 968