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Washington fiddles while the economy burns

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    Posted: Nov 18 2013 at 1:04pm
Why we are doomed, and why I will never vote for another Democrat again, EVER.
 
http://www.cnbc.com/id/101200435
Washington fiddles while the economy burns
 

The dust has settled for the time being on the government shutdown but there has been NOTHING done to address the United States debt crisis. We need a call to action to save our country. This includes every mom and dad; particularly every mom and dad with children in their teens, twenties and thirties. This generation is the generation that will bear the primary burden of our excessive government debt.

Congress has taken this country from financial stability five short years ago to the ninth worst debt-to-GDP ratio in the world. Most in Congress and many otherwise reasonable people walk around believing that a financial disaster cannot happen here, but it has happened here and will happen here again — but this time will be far worse.

During the Great Depression, the government debt was minimal and interest expense was not a crushing problem to the government. Today is completely different. Everyone knows the $17 trillion in gross debt but few realize the extent of our other financial problems.

We have an unfunded pension liability to federal employees of over $7 trillion and this grows almost $1 trillion per year. Couple this with the $70 trillion or so negative cash flow in the future for social programs and the failure of the United States is assured. As John Smith so concisely framed it, "There are two ways to enslave and conquer a nation: One is by the sword. The other is by debt."

We gain no solace in the financial projections provided by the Congressional Budget Office and and Office of Management and Budget. They project GDP growth around 4 to 5 percent for 10 years, when we will be lucky to sustain 2 percent. They assume no recessions, no wars and no large terrorist acts or natural disasters. They assume interest rates will remain far below historical averages and worst of all, they assume no new spending by Congress. I project that our nation's debt will top 170 percent of GDP in 10 years, worse than Greece and second only to Japan.

The way the financial crisis will happen is the same way it happens everywhere else: Interest expense gets you. When markets fear risk, interest rates rise and lending stops. The creditor country must then balance its budget. By this time, interest expense becomes a very large proportion of the budget, crowding out pensions, medical and Social Security. Not all of these can be paid as promised: Something has to be cut.

 

Interest expense will get the U.S. Today, we have ZIRP: Zero Interest Rate Policy that is masking our underlying problem. This has been brought on by Federal Reserve policy and economic problems in Europe that chased investors over here. These things will change. We will return to higher interest rates (an average of 6 percent over the last 40 years) hopefully from economic activity but likely from investors' risk assessment. In either case, interest rates can easily consume 25 percent of our federal tax receipts. We will be forced to balance our budget by the markets if we don't do it ourselves and we will be caught in the debt trap… in the fine company of Iceland, Ireland, Spain, Portugal, Greece and Italy.

But what does all this mean to you and me, and why so much concern in the financial community? The crisis that too much government debt creates is an economic and currency crisis. It is very similar to what happens when a person or business borrows too much debt: it enters the debt trap. As we have seen around the world recently, governments borrow themselves into the debt trap without a second thought, despite warnings from their own bankers, other countries and other central bankers.

Even more astounding is that the markets continue lending far beyond reason. This leads to recessions or depressions. We see unemployment of over 26 percent in Spain and worse in Greece. Interest expense alone will cost this next generation $720 billion per year, $7.2 trillion per decade and $36 trillion over a typical 50-year career. And this is assuming no additional debt that entire time. This is now the next generation's burden … and for what great cause was all this money borrowed?

 

Economic growth is the only way out, but this is the tough part. The government needs more revenue and needs economic growth to get it. They then call on the central bank to start printing money ("quantitative easing") to stimulate economic growth. If the central bank prints too much money, hyper-inflation will crush the currency, creating a currency crisis and recession or depression.

The answer for most countries is to make "structural changes," or spending cuts. This is the only way out because new taxes hurt GDP growth. Just imagine cutting 25 percent of Medicare, Medicaid, Social Security and Obamacare. Where would this lead?

The United States is in the debt trap but we have yet to feel its teeth because of a confluence of beneficial anomalies have kept our interest rates at near zero. The days of zero interest rates will end and the trap will close around the country and every citizen.

Can Congress or the Fed sprinkle pixie dust on it and make it all go away? Unfortunately, the laws of economics are like the laws of physics: They cannot be manipulated by Congress or the Fed … there is no easy way out.

The only "American" way out is how we got out of the World War II debt: Balance the budget and grow GDP at 2 to 3 percent for 30 years and we can get back to the debt-to-GDP ratio we had in 2008. This country needs courageous active citizens to become leaders in their own world by educating everyone they know — at school, at work and socially — as to the events that are going to unfold here on our own soil



“It's easier to fool people than to convince them that they have been fooled.”
Mark Twain
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Post Options Post Options   Thanks (0) Thanks(0)   Quote cmsquare Quote  Post ReplyReply Direct Link To This Post Posted: Nov 18 2013 at 2:25pm
If we are doomed as you have claimed for the last 5+ years it won't matter how you vote.

Stop acting like your guys have all the answers. It was their decision making that got us here. If they had all the answers they wouldn't have bungled their time in charge.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote blueblood Quote  Post ReplyReply Direct Link To This Post Posted: Nov 18 2013 at 2:46pm
Originally posted by cmsquare cmsquare wrote:

If we are doomed as you have claimed for the last 5+ years it won't matter how you vote.

Stop acting like your guys have all the answers. It was their decision making that got us here. If they had all the answers they wouldn't have bungled their time in charge.
 
You are truly a hopeless case. Thinking like yours is why we don't have a chance.
 
The Democrats are responsible for every dime of this, spent with their programs and mismanagement. And what was the KING SNAKES last statement. I refuse to negotiate. Mother of all idiots, not his fault, ours for electing him, TWICE. Deny all you want. Read the last paragraph. Something we have no hope in achieving, if by some miracle we might, it will take 30 years to get back to the Bush era of 2008!
 
Most have no concept what is in store for us because of own stupidity.


“It's easier to fool people than to convince them that they have been fooled.”
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Matt_Steele Quote  Post ReplyReply Direct Link To This Post Posted: Nov 18 2013 at 3:31pm
I guess the world is over, close up shop, we're done! 

Sorry for my mocking sarcasm but I have a hard time believing the whole sky is falling belief. People have been saying that for over 200 years about decisions made by an opposing party. 
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Post Options Post Options   Thanks (2) Thanks(2)   Quote MFD50 Quote  Post ReplyReply Direct Link To This Post Posted: Nov 18 2013 at 5:35pm
I don't blame either party for the trouble we are in. I blame the voters that keeps re-electing the same ones over and over again and then they complain about the problems they cause. We are the ones with the controls all we have to do is use them!
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Post Options Post Options   Thanks (0) Thanks(0)   Quote jrock1203 Quote  Post ReplyReply Direct Link To This Post Posted: Nov 19 2013 at 8:55am
Originally posted by blueblood blueblood wrote:

Originally posted by cmsquare cmsquare wrote:

If we are doomed as you have claimed for the last 5+ years it won't matter how you vote.

Stop acting like your guys have all the answers. It was their decision making that got us here. If they had all the answers they wouldn't have bungled their time in charge.
 
You are truly a hopeless case. Thinking like yours is why we don't have a chance.
 
The Democrats are responsible for every dime of this, spent with their programs and mismanagement. And what was the KING SNAKES last statement. I refuse to negotiate. Mother of all idiots, not his fault, ours for electing him, TWICE. Deny all you want. Read the last paragraph. Something we have no hope in achieving, if by some miracle we might, it will take 30 years to get back to the Bush era of 2008!
 
Most have no concept what is in store for us because of own stupidity.
 
blueblood, CM has a point - it was under 8 years of GOP rule that lead to two outrageous wars (both in reasoning and price) as well as a massive financial crisis.
 
Isn't saying that the Dems (who figuratively) inherited said mess can't be held 100% liable? I would suggest that yes, some of the policies in the current administration and congress haven't helped, but they are in no way 100% responsible. Come on now Big smile
Insults are the arguments employed by those who are in the wrong. - Jean-Jacques Rousseau

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Post Options Post Options   Thanks (0) Thanks(0)   Quote jrock1203 Quote  Post ReplyReply Direct Link To This Post Posted: Nov 19 2013 at 8:57am
Originally posted by MFD50 MFD50 wrote:

I don't blame either party for the trouble we are in. I blame the voters that keeps re-electing the same ones over and over again and then they complain about the problems they cause. We are the ones with the controls all we have to do is use them!
Insults are the arguments employed by those who are in the wrong. - Jean-Jacques Rousseau

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Post Options Post Options   Thanks (0) Thanks(0)   Quote cmsquare Quote  Post ReplyReply Direct Link To This Post Posted: Nov 19 2013 at 10:20am
It's really tough to take you seriously when you refer to the president as "King Snake"

You are officially the boy who cried wolf.


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Post Options Post Options   Thanks (0) Thanks(0)   Quote cmsquare Quote  Post ReplyReply Direct Link To This Post Posted: Nov 19 2013 at 10:22am
Originally posted by blueblood blueblood wrote:

[QUOTE=cmsquare]
 
Most have no concept what is in store for us because of own stupidity.


Well the good news for you is you seem to have it ALL figured out while nearly everyone around you lives in a world of lies.

You can take solace in that I guess. 

We all have no concept of the rath before us......please do educated us.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote cmsquare Quote  Post ReplyReply Direct Link To This Post Posted: Nov 19 2013 at 10:24am
Originally posted by MFD50 MFD50 wrote:

I don't blame either party for the trouble we are in. I blame the voters that keeps re-electing the same ones over and over again and then they complain about the problems they cause. We are the ones with the controls all we have to do is use them!


Start with the senator from your district.

He continually does very little other than much up the works and play poltics as usual.

He has no term limit.  he will be there forever if you keep electing him.

Start with Boehner.....go from there. 
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Post Options Post Options   Thanks (1) Thanks(1)   Quote MFD50 Quote  Post ReplyReply Direct Link To This Post Posted: Nov 19 2013 at 10:31am
Exactly what I am talking about. I am one out of thousands and if we all get the same idea then there will be change. But until that time comes .......
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