RUTHFULLY YOURS

Australian Broadcasting Corporation commentators Clark and Dawes did a great comedic explanation of the current debt crisis in Europe, incorporating factual debt numbers for some critical nations in the European Union. Their numbers pertaining to the actual debts were rather shocking, particularly when viewed through the prism of the United States Government.

The amounts owed by the nations of Greece ($367 Billion EUD), Italy ($1 Trillion EUD), Spain ($1 Trillion EUD) and Ireland ($865 Billion) were in fact mostly amounts owed to other EU member nations and their banks. They didn’t get to Portugal’s debt in this discussion. They certainly didn’t include the unfunded liabilities of their socialist worker programs, the real monsters in the debt soup, just like in the U.S.

They cited the nations with the biggest liability exposures to these borrower nations as being Germany, Great Britain, and France, none of which are solvent in their own stead. Indeed, each of these lending countries carries national debt that is a multiple of their GDP, with the greatest of these being Great Britain, with a debt load of 400 percent of its GDP, before its unfunded liabilities. The song sung repeatedly in this little ditty was: how were these insolvent lenders going to survive while insolvent borrowers ask for more money to bail them out when they can’t service the debt they already have? It is a formula for a perfect storm.

They proffer the reason for the current flight to the U.S. dollar as being a flight to safety – not because the U.S. Debt picture is any better but rather because, for now, our economy is so much stronger than those of Europe, individually or in total. And what is our debt picture?

Many are familiar with the U.S. Debt Clock maintained by the U.S. Treasury. It reflects a debt of the US. at $13 Trillion today, steadily exploding, moving $5 Trillion in the last 18 months, more than the added amount accrued in the previous eight years of the Bush administration. It also reflects an estimate of the current debt from unfunded liabilities of our social welfare programs (including Social Security, Medicaid, Medicare, Head Start, School support, etc.) at roughly $108 Trillion Net Present Value (NPV), giving the US a total debt load of about $121 Trillion, before the factoring in of the future costs of the Obama administration’s health care reform act. A $14 Trillion GDP economy, which is the U.S. now, simply can’t pay off such obligations

What is most shocking about these numbers is the absolute refusal of leftist “social justice” advocates/revolutionaries to acknowledge that obligations of this size simply overwhelm the U.S. from just the dual costs of servicing the cost of the debts’ borrowing and any retirement of principal. Leftist flights of fantasy include absorption of all pension and retirement accounts nationally into the U.S. Treasury, which would bring down the U.S. Government overnight.

Reflecting their abysmal ignorance of basic economics, they put this forward without addressing the fact that this pittance ($14 Trillion est.) won’t last a decade. More significantly, they could not be trusted to keep their hands off these funds, anymore than they could be trusted to keep their hands of the original trust funds of the Social Security system, or of the Medicare system. These political pickpockets have the ethics of single cell viruses, and their ideas are just as deadly.

So what some potential answers to this crisis? The first would be to immediately freeze all new USG spending across the board. Next, you would need to form a commission that would be mandated to cut all USG spending by 50 percent, with the Government spending frozen at these levels for 10 years. Then, you would have to cut USG payrolls by 50 percent of personnel, followed by a cut of their salaries and benefits by another 50 percent, with one exception, that being the military. Then, you would have to derail Obamacare, which could be accomplished by forcing all Congressmen and Senators to live with the coverage they came up with, which should be sufficient to get them to keep their eyes on the ball, and their butts in their seats.

Finally, I would cut all taxes, including estate taxes to a flat 10 percent, fixed, with no deductions. What could come from this? There would be such an explosion in investment in this country, it would look like the launch of an interplanetary missile, as funds sidelined by fear and uncertainty (currently over $9 Trillion by best estimates) would be reinvested along with an avalanche of offshore monies seeking higher returns than the current 2 percent yield for 10 year paper.

If this option is rejected or not implemented in some form, what then could we expect? I would forecast an economic meltdown, as the Federal Reserve attempted to monetize the U.S. Debt (NOT including unfunded liabilities), which should cause our currency to literally melt to almost no value. We would have a re-run of the Weimar republic, ended by a literal clearing of the financial board here, with nothing worth any form of currency. The exercise would become one familiar to chess students, where by the entire board of a game is cleared of playing pieces in one sweeping move, and everything is rebased to zero. (Does anyone remember the old “Zero Base Budgeting?”) These actions would turn the U.S. into a third world economy for at least 50 years and our assets’ ownership would be shifted as if by magic. This nearly happened in 1933, following the banking collapse, and the removal of the Gold standard to back our currency. Fiat currency that replaced Gold backed currency was and is too easily manipulated, and ownership of an interest in the economy is never certain. Those talking of banksters would get to find out first-hand what the term means, as everything they owned would be seized on collection, as if loan sharks were owed this fantasy money.

What are needed now are prospective solutions, ones that stand up to reality. Too many have had too much given to them for too little. This is going to end, one way or another.

We have reaped the wind, to harvest the whirlwind. If you don’t see the outcome we are headed for if nothing is done, you have no one to blame but yourself.