RIP common sense

By Donald Hank

Fellow American, you need to be aware of and prepare for something that will happen:

The US economy will eventually sputter and fail.

At that point, the blame will fall not on the socialist government that destroyed the economy but on a scapegoat, i.e., capitalism itself and on the capitalists who had until then provided work for us.

First let's examine why I say with full confidence that we are headed for a collapse.

We now have a national debt of $16 trillion/yr and have unfunded liabilities in the range from $80 to $140 trillion, depending on whose figures you are consulting. Now, an article I read in the Atlantic says not to worry because those liabilities can be pared down as desired. What they didn't mention is that trimming these liabilities to an acceptable level would spell an end to welfare and a goodly number of entitlement programs including Obamacare, Medicare and social security. If we can judge by Greece, then the resulting austerity would make things even worse. But who would bail us out?

Now, government receipts are at about $2.5 trillion. Let's see, take 140 trillion and divide it by 2.5 trillion. We get 56. So we are liable for an amount that is 56 times the amount of revenues collected by the government in one year. That means that only if the government confiscated every penny earned for the next 56 years, could it pay off these unfunded liabilities on the books, but by then they would have increased exponentially and the economic indices would be even worse than today. There is no wiggle room here.

Zero Hedge reckons that these liabilities alone (not even counting the debt) amount to $1.2 million per tax payer.

So once America experiences the crash with its own eyes, either as an outright default or as a quantitative easing package resulting in a hyperinflation level that makes Weimar look like small change, will Americans be smart enough to understand who and what caused it?

My prediction is that, unless everyone who understand the math explains it to someone who does not, they will not understand what hit them. And that means the solution will be slow and painful in coming. If my prediction is true, then we all have a lot of work to do, convincing our fellow Americans that Keynesian overspending and overborrowing are the culprits, not the capitalist system (which has been dead or moribund for decades, replaced by corporatism or crony capitalism).

I had a little insight into this anthropological phenomenon a few weeks ago and that told me where we are probably headed in terms of making Americans see the reality.

Now, I wouldn't blame you if you absolutely refused to believe the following anecdote. Unless, that is, you have heard other 'educated' people talking like my old college chum, who was dead serious.

I was discussing the economy online with this chum, who is a brilliant fellow when it comes to the humanities. He has an in depth knowledge of literature like no one else I know. And he worked his way through college back in the 60s, often coming to class tired, but always eager to learn. He went on to acquire a doctorate from Harvard no less and is a highly respected professor at a state university.

I try to be patient when discussing the economy because people have been brainwashed into accepting premises that are, unfortunately, false myths. Yet these myths are lodged in their brains and are an inextricable part of their intellectual baggage. Like addicts, they just can't let go. They would no doubt experience tremors, vomiting and maybe even heart failure if they were ever forced to own up to the truth.

It is that bad.

This old chum thinks I am too pessimistic about the economy and that 'President' Obama (he gets miffed when I omit the P word) will get the economy humming again in the latter part of his term.

The truth is, given the above discussed unfunded liabilities and a debt equal to 101% of GDP and with a trend toward increasing the dizzyingly high debt ceiling rather than ratcheting it down, there is no way we could ever pay off this debt in the next 50 years. And with 63% of employable Americans unemployed (that's 37% unemployment, the highest in the industrialized world. The phony government unemployment figure ignores the majority of unemployed, who have dropped out of the job hunt), it is a sure bet that our economy is headed for a crash some time after the FRB realizes it has to stop the quantitative easing for fear of hyperinflation.

In the course of our conversation, I mentioned that many employers were going to stop employing people because they can't afford the mandatory health insurance payments

Please note well his response:

"The employers were just waiting for such an excuse not to employ people."

Really? So employers needed an excuse not to employ people?

So prior to Obamacare, employers were giving people jobs because someone had a gun to their heads demanding they employ people?

They were not employing people because workers helped them expand their businesses and earn more money? They needed an excuse to stop expanding their businesses and making more money?

I did not bother to respond to that. This man has been steeped in Keynesian lore and will continue to blame the capitalists long after capitalism is banned and the government has taken control of all businesses in the US and driven us into abject poverty.

If enough Americans, whether educated or not, insist on blaming the employers for not hiring and fail to see how government is killing employment, with reams of regulations, by catering to unions, by preferential trade treatment toward countries with lax regulations, then we will become another Zimbabwe and will never pull out of our self-induced pain.

They say a nation gets what it deserves.

© Donald Hank