FedUpUSA

Proof: Hobson's Choice Before Us

 

There’s no way out of the box that doesn’t result in a monstrous economic contraction folks:

Households received $2.3 trillion in some kind of government support in 2010. That includes expanded unemployment benefits, as well as payments for Social Security, Medicare, Medicaid, and stimulus spending, among other things.

But thats more than the $2.2 trillion households paid in taxes, an amount that has slumped largely due to the recession, according to an analysis by the Fiscal Times.

The last time the people got more handouts than taxes paid?  The Depression.

And the handouts from the government have been growing. Government cash handouts account for a whopping 79% of household growth since 2007, even as household tax payments–for things like the income and payroll tax, among other taxes–have fallen by $312 billion.

Seventy-nine percent of household income growth?

In short, Americans have the government, not private enterprise, to thank for their wealth growth.

No they don’t, because government didn’t tax that money.  They printed it.

Note that the delta starting in 2008 – that is, the change in deficits – was one trillion dollars.

That’s the distinction between private organizations and the federal government.  Private organizations can borrow, but the borrowing has to be paid back.

There are many who claim that the government doesn’t have to pay back the loans.  That it “can’t” go bankrupt, because it can always QE (or just “print”) out of the debt.  This is factually true but horribly misleading, and those who run this meme, including the clowncar brigades from various so-called “new” theories of monetary operation, conveniently omit the central fact in all such debates:

The very people who are “helped” by all these government handouts are the same individuals and families who get screwed by the ramp in prices for various basic needs when you play “Quantitative Easing.”

In other words the handouts don’t do a damn bit of good.  They’re a chimera.  A popular chimera, but a chimera nonetheless.

Private industry can play a game with borrowing for quite some time, as is shown here:

But this game doesn’t work at all for the Federal Government, because as soon as the “borrow and spend” game begins the natural reaction is for the bond market to hike rates.  This in turn makes the borrowing more expensive and chokes it off, as Clinton discovered.

When The Federal Reserve comes in and interferes with this process, as it is doing now, the excess liquidity supplied in order to tamper with rates has to go somewhere.  Where does it go?  Right into the things that those very same poor people you’re trying to “help” need to buy in order to survive – food and energy. 

Why?  Because these are global commodities and yet they’re priced in our currency.

There is no escaping the trap folks, except to admit to the truth and force the insoluble debt into the open, defaulting it and destroying those institutions that foolishly granted credit without any evidence that the people it was given to could pay.

This is the same mistake – identical in point of fact – that was made in the 1930s.  By attempting to prevent people from being “hurt” by unemployment and economic contraction the government stretched what should have been a nasty 18 month depression into a decade-long economic disaster!

Yes, the dollar rallied and Treasuries bounced higher after the news that S&P had issued a negative outlook on the U.S. debt picture. Some argued that happened because eventual austerity would slow growth, which is deflationary and in turn good for bonds. 

The dollar did what?

Uh, that would be “collapse”, not “rally.”

And in point of fact the dollar is now sitting within spitting distance of its all-time low.  There is no floor beneath that level on a technical basis.  While an “underthrow” excursion might well be tolerated, should there be any meaningful and sustained break below about 71.5 on the /DX you’re not going to have to worry about what comes next – you’re going to be treated to it immediately with $150/bbl+ oil, gas north of $5 and literal privation and hunger in the streets of America, as it becomes impossible for the government to hand out money faster than currency devaluation steals it.  Shortly thereafter S&P will downgrade and then we’re find out if we’re Greece, Egypt, or (far worse) Libya.

Most people in the lower economic brackets are a few percentage points in the increase of their cost of living from literal starvation or inability to pay for other basic necessities such as the heat and water bill.  There is no margin for these folks, and yet we’ve already effectively doubled the price of gasoline in the last year alone, not to mention the price of corn, cotton and more.  While some of those agricultural commodities have come in on price over the last couple of weeks they remain at ridiculously-elevated levels – double or more where they were a year ago.

NEARLY ONE HALF OF AMERICA IS IN THIS POSITION TO SOME DEGREE, AND MORE THAN A QUARTER OF ALL AMERICANS ARE UTTERLY UNABLE TO ABSORB THE COMMODITY RAMPS THAT HAVE ALREADY TAKEN PLACE, SAY MUCH LESS THOSE THAT ARE TO COME IF THE GOVERNMENT AND FEDERAL RESERVE POLICIES CONTINUE.

So the question is: What government policies will bring the U.S. labor back to robust health, enough to drive economic growth, consumer spending — and higher tax revenues?

None.  We are unwilling to stop the rape of our labor force by Mexico, China and India.  Until we do, there is no solution to this problem.  You cannot have “free trade” with a nation that has a per-capita income that is a tiny fraction of your own.  Such is nothing other than exporting your labor and wealth to that nation, and it never comes back so long as those policies remain.

The same holds true so long as you allow illegal immigrants to come into the country and undercut the wage base of Americans here.  These policies must end.

When will the U.S. government pull back from its intervention into the U.S. economy, so the economy can try to stand on its own?

That’s easy: I am becoming increasingly convinced that there will be no change in this regard until the nation collapses into a smoldering heap after the half of America that is being intentionally and systematically impoverished and destroyed by the banksters and Congress riots, burning it all to the ground.

Our government has demonstrated through multiple decades that it lacks both the intelligence and honesty required to address these problems.  Our so-called leaders will stand before a podium and lie outright to their constituents in this regard, irrespective of the party they allegedly adhere to and caucus with.

There is no way out of this mess other than through acceptance of both what we’ve done and the consequences that must flow from those acts.

This isn’t complex mathematics or so-called “economist wonk talk.” 

It’s arithmetic, and the longer we try to pretend it doesn’t apply the worse the outcome.

The pain stops accumulating when we choose to accept it – and not before.

The Market-Ticker

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