Happy New Year and Bye Bye to 2011!

Happy New Year!

Social implications of economic collapse - why this isn't fixable

Simply put, the United States and much of Europe are borrowing an extraordinary amount of money now just to pay interest on the money they've already borrowed. They cannot even self-fund their mandatory entitlement programs without going into the hole, and their options are limited:


Option 1: Continue borrowing, keep the party going.


As long as the government CAN do this, they WILL do this.  Regardless of their intentions, though, more debt only worsens the situation, creating higher borrowing costs in the long run, and even more debt. As this happens, the pool of buyers begins to dry up, especially from overseas.


Option 2: Inflation


The more buyers stop purchasing Treasury securities, the more the Federal Reserve will mop up the excess liquidity. In doing so, the Fed essentially conjures up money and loans it to the government.  This leads to the coming destruction of the dollar.


No matter what the government monkey statistics say, this is inflationary, plain and simple. The more money they print, the greater the level of inflation in the long-term. Meanwhile, as foreigners simultaneously reduce their US dollar holdings, this inflation will become more acutely felt in the US.


Option 3: Austerity


There's going to come a time when the US government is forced to face its economic reality and make some incredibly deep cuts that would be felt across society, from Wall Street and the military industrial complex to project housing on the other side of the tracks.


Option 4: Default


Eventually, the debt burden is simply going to be too much, and the most obvious solution will be to default. Politicians will make China out to be the enemy and they will probably invent a war just to have an excuse to default on Chinese owned debt. Americans will wave the flag and celebrate defaulting on their enemies.


Option 5: Economic Cannibalism


In the best traditions of Atlas Shrugged, the government will continue its persecution of the productive class- professionals, investors, entrepreneurs, and skilled workers. Existing taxes will rise, new taxes will be created, trade barriers will be enacted, and a maze of cost prohibitive regulations will be passed.


The first option (keeping the party going) is what has been happening for years. Politicians make small concessions to show they're "serious" about fiscal discipline, cutting laughably small programs while dumping hundreds of billions of dollars into wars and entitlement programs.


The worse the debt situation becomes, though, the higher the borrowing costs become, and the worse the debt situation becomes. It's not an enviable position. Existing lenders will continue backing away from the US Treasury market, giving option 1 a half-life measured in months at best.


In the longer term, only options 2-5 remain: inflation, austerity, default, and cannibalism. Each of these remaining options will shake the financial system to its core. More importantly, each of these has the power to create widespread social upheaval.


When inflation eats away at a family's already meager standard of living, when austerity eliminates the benefits to which recipients have grown accustomed, when default vanquishes a retiree's savings, when high taxes make workers feel like they're just government serfs- this is when the real turmoil will begin:


* Rising crime: devoid of a job or means to support their families, people will turn to crime out of desperation


* Class warfare: with dividing lines drawn between have's vs. have-not's, it will become unpopular and even dangerous to be successful


* Corruption: low-level public service officials will look to supplement their income through bribery and kickbacks


* Black economy: An underground, cash-only (probably gold or foreign currency) economy will emerge with people getting paid in envelopes


* Censorship: Of course they'll blame it on national security, but the idea will be to prevent public disparaging of government policy


* War: The government will need another major event to distract people from the real problems


* Protests/Riots: This is when things turn bloody


* Police state conditions: The government will close ranks and send the cops out to show all the little people who's really in charge


There are a number of other manifestations, and many are already showing signs of emergence. The US and European police states are alive and well. Crime is on the rise.


In Europe, cops are doing battle in the streets with their citizens. Think it can't happen in the US? Remember tanks in the streets during the LA riots? Remember New Orleans? Remember any number of G8/G20 protests?


Here's the bottom line: all you have to do is glance at the headlines to see what happens when you strip people of their livelihood, of their ability to put food on the table for their families.


The US has been able to kick the can down the road with the most blunt social implications simply because the country benefits so much from a US-oriented financial system. This is coming to an end very, very quickly.


As a rule of thumb, the greater the economic distortion, the harder the collapse. The US economy has been in a fantasy world for so long, and when its dominant primacy is yanked away, the collapse will be at freefall speed.


Listen... I'm not talking about the end of the world here, I'm talking about difficult times ahead, and the things that go beyond economics. It's time to face facts and look at how society will change (and has already changed).


Will you be prepared or caught unaware?

Why Politicians Don't Matter - and Other Christmas Fairy Tales I Wish Were True

Call me cynical, but tell me if you haven't had any of these thoughts.

There are people who are constantly reminding us that the current way of things is unacceptable...and that they need (or are the only ones with the real solution) to fix it. Without their improving, their constant drive to liberate us from the horror of having to think for ourselves and to accept responsibility for our own actions, we’d be left in a worse situation than that in which we now find ourselves. Clearly, we first need to distance ourselves from the “world improver” class. So let’s make sure to discard them from the debate.  Oh wait...is there anyone left standing?

Not that politicians don’t have some utility. It’s easy and amusing to poke fun at them, to chide them and harangue their idiotic decisions. And one can indulge this guilty pleasure in so very many ways, there's just so much material to work with it's hard to know where to begin.  You just can't make this stuff up!

It’s amusing, for example, to invent various forms of alternative employment for randomly chosen demagogues and sociopaths currently in the government's employ... tasks more befitting of their respective skill sets. One could, without too much difficulty, imagine Secretary of State Hillary Clinton selling fridge magnets from a tin tray at a busy intersection on a hot, midsummer’s afternoon. Picture for a moment the scuffed Ferragamos underfoot, the grey, late ’90s-cut pants suit, mottled with perspiration in all the most unflattering areas, the usually well-coiffed mop frantically frizzing in the humidity, mascara running like Rocky the Raccoon and a thin layer of smog and car soot blowing over those deeply entrenched frown lines, augmenting the lifeless facial landscape like shifting sands across some barren desert.

Fun, huh?

But so what? Beyond a moment’s entertainment, the time and effort spent conjuring such a frightful image is hardly worth the reward. And besides, when you do inevitably stir from your fitful daydream, you’re left with the cold, gut-punch reality that this woman is not offering anything of even moderate use, nor is she putting her considerable (stolen) wealth and (coerced) power behind anything of marketable value. Instead, she is busy waging an “information war” on your behalf, furnishing would-be enemies around the globe with exactly the kind of motivation their own warped doctrines require to justify the pursuit of violence against citizens who happen to hold a US passport.

We really have no voice in the US presidential elections, and I've shared before my belief that the right and the left are equally corrupt.  It is rare for a decent man (collective man, not to exclude the smarter half - and I really do like Michele Bachman) to seek public office. He is ashamed of pandering. He is embarrassed by the stupidity of his own slogans. He is appalled by the low-lifes and quasi criminals with whom he must associate and from whom he must beg support. The Repubican elite had already made up their mind about Mitt Romney being the heir apparent, but the surge of the Newt has put a monkey wrench in what otherwise seemed to be a lock.  Now, how do you think all that happened?

The new choice is now Republican Newt Gingrich. Of course, some people find him completely repulsive, you may as well.  But he does appear to be the man of the hour. You could argue that history needs him, to carry on the work of Bush and Obama, hustling the great nation on its way to oblivion.

They are all swarming around Newt Gingrich now. The handlers, pollsters, word polishers, idea chiselers, fund raisers, donors, hangers on, groupies, roadies — carpet-bagging rascals every one of them. Now they’ve got the scent in their nostrils. Their chests heave. The hearts pump. If they can just keep their man Newt from blowing himself up they’ll be in high cotton for at least 4 years. One will head a commission or a cushy seat at the UN. Another will get a contract to provide the pentagon with new ID badges. Another will ride into a remote Congressional seat on Newt’s coattails. Power. Money. If Newt wins, they win. Newt’s women will think themselves smarter and prettier. The men among them will feel their brains growing bigger.

American presidential candidates generally fall into three categories. Those who are obviously incompetent. Those who are scalawags. And those who are jackasses. The job of the voters is to choose the defect most suited to the time.

Winston Churchill was a disaster as First Lord of the Admiralty during WWI; the Gallipoli campaign was his doing. Then, on how to deal with the Iraqi insurgents, circa 1920, he offered this advice: Use chemical weapons “against recalcitrant Arabs as an experiment,” he suggested, adding, “I am strongly in favour of using poisoned gas against uncivilised tribes to spread a lively terror.” Later, as Chancellor of the Exchequer, he put Britain back on the gold standard, but at a level that was bound to cause trouble. It came, in 1929.

He may have been incompetent. He may have been a big-mouth imperialist. But Churchill was the man Britain needed in 1940.

When times are good, the public generally prefers a scalawag. Clinton was the perfect president for the ’90s boom years. Warren Harding would have been a great fit with the boom of the ’20s. He drank. He played cards. He snuck out of the White House to go to girlie shows. Otherwise, he left people alone. But he was a little early. Most of the “Roaring Twenties” boom happened during the Coolidge administration. On the surface, Coolidge was a mismatch. Straitlaced. A bit of a scold. But he minded his own business and — like Clinton during the dotcom bubble or Bush during the property bubble — he let speculators ruin themselves without raising an objection.

The trouble with Herbert Hoover was that he was too much of a nuts and bolts engineer. The public turned him out. They preferred Roosevelt’s confident malarkey. They wanted a man with a plan. No matter that the plan was crap. They’d never figure that out.

That’s the problem with Obama. He has no plan. He doesn’t know what is going on, or what to do about it. Which at least marks him as more intelligent than most of his challengers, who have the wrong idea on both counts. But neither brains nor competence is what the public wants now. In an emergency it wants Churchill, not Chamberlain. A Roosevelt, not a Hoover. It wants a bold liar. A hearty delusional.

Gingrich is their man. A letter in The Financial Times compared him to Churchill. He compares himself to de Gaulle. Both are correct, in my view. He is as humble as de Gaulle and at least as competent as Churchill. He is a cad who reportedly told his second wife that she was too old and too ugly to be a president’s wife. He is a scoundrel who took $1.8 million from zombie mortgage lender, Freddie Mac. He makes angels weep; the gods get their backs up. So cometh Newt Gingrich to the Republican race. If you’re dumb enough, you think he’s smart. If you’re corrupt enough, you think he is honest. If you compare him to the field of candidates, he doesn’t seem any more asinine than the rest.

He is incompetent, scalawag and jackass all in one package. A man for all seasons. Most importantly, he is committed to keeping America on course to its own destruction. The US already runs the biggest deficits in the developed world. Gingrich would add to them — by about $850 billion, according to one estimate. He hopes Reagan- era growth will eventually balance the books. He also thinks an Electro-Magnetic Pulse is one of the biggest dangers America faces. And he believes in American exceptionalism — as if the nation can dodge fate with some special math that applies to it alone. But if you begin asking questions about Newt’s thoughts, ideas or plans you are missing the point. America’s empire is decadent and degenerate...rotten at its core. It needs a man like Newt to help it on its way... to where all exceptional empires end up — on the scrap heap of history.

If I were to declare a preference and were he to toss his hat in the ring, I would put my support behind former Senator Jon Corzine. The ex-Goldman chief has the experience that America needs. He has been a front-runner in politics...and in the world of finance, what he doesn’t know about front running is probably not worth knowing. Presuming, however, that Corzine will be too busy fending off lawsuits or jail sentences, I am left to ask the question...is there anyone who is really going to make a difference as our next President?

Given all the above, does it really sound so far fetched to think that Ron Paul could be the next President?  The sheer absurdity of contemplating him in the White House is actually a welcome possibility compared to maintaining our lemmings to the sea wall cliff march that we're on.   All of a sudden, that guy doesn't seem so whacked out and if you actually read the plans he has proposed...he would definitely take us to a different place than we're heading on our current course.  I'd much rather give true hope and change a chance, how about you?

Damn the torpedos...I'm voting for Ron Paul!