Tuesday, December 18, 2012
Kabuki Theater on the Potomac.
I find it amusing if not tragically hilarious to watch the dancing fools in Washington argue over their competing non-solution solutions the the pending fiscal cliff. That latest load of scat is that we should raise taxes now and cut spending later and all "new" revenue will be directed to paying down the debt and or reducing the deficit. Gee where have we heard this before? Oh that's right, only every single time we have one of these budgetary kabuki dances.
Unfortunately there are a majority of Americans who either don't care, have absolutely no idea of the vastness of the numbers involved or are so ideologically hidebound (left or right), that all they care about is political power positioning and not economic reality, that they can't see never mind conceive that there is no solution. At least not within the constructs that created the mess in the first place, namely Keynesian economics and fiat currency central banking.
So the dance will continue right up to the so-called deadline and then we will get an announcement of some "grand bargain" wherein both sides will claim victory over the other in the more taxes/less spending argument and that real progress has been made in resolving the country's economic woes. Everything will be declared as "fixed," markets will soar, the FED will print even more monopoly money and the sound of the can rattling down the road to inevitable disaster will be drowned out in all the applause from the know nothing pundits and back slapping self-congratulation of the politicians.
Except of course nothing will have been fixed in the least no matter which "side" prevails in these all for show negotiations. Creating more new debt to pay off old debt and then adding new-new debt on top of the pile has never worked on any economic scale, be it micro or macro or anywhere in between. This is nothing more than the same foolishness we see playing out in Europe where each new month we see yet another "summit meeting" followed by another solution and another declaration that the problem is fixed. It's all the "Little Boy Who Cried Wolf" writ large. I'm reminded of the Governor's board meeting meeting from "Blazing Saddles." "Hey I dind't get a loud enough harumph out of that guy!"
Tragically it's not like there aren't more than a few politicians in Washington that understand the truth of what I've said here it just that they are either more concerned with re-election than reality or they are scared to death of the financial elites who pull their strings and fund their campaigns. So the likes of Ron Paul and others are left to preach in the wilderness.
So before we go any further lets look at the simple math of the situation. Our present debt is some $16.3 Trillion (it grows by tens of billions every month). Now let's imagine so so-called "best case" scenario of a "grand bargain" wherein the Democrats get to raise taxes by some $100 billion over ten years, (They use ten years to try and make people think there are actually looking ahead but any fool knows that with each new year the last years deal is the first thing thing goes out the window) and the Republicans get to cut spending by another $200 billion over ten years. (It won't be a real cut but a decrease in the rate of growth but that's just another inside the beltway absurdity.) But for the sake of this argument lets call it an actual cut.
So then we take these ten year numbers and reduce them to an annualized figure. We now have $10 Billion in "new" revenue and $20 Billion in cuts. Now we simply divide the total debt of $16.3 Trillion by the combined new revenues and cuts of $30 Billion. (After dropping off all the over lapping zeros this comes to 16,300 divided by 30 = 5,433.33, the number of years it would take to pay off JUST THE EXISTING DEBT. If that number begins to open your eyes just a little to the absurdity of it all now consider that none of these numbers include the interest due on this debt or the fact that Congress will keep adding another $1.1 Trillion, at least, to the existing debt each year.
The US of course is not operating in some vacuum here. The European situation is on par in terms of over all numbers as ours, they're just closer to the end of the road than we are. Japan is a basket case with the highest debt to GDP ratio in the world. Their only saving grace right now is that the largest part of their debts are held internally and not just to their central bank.
What is unsustainable is unsustainable but our politicians and their banking masters are determined to sustain this mess right to the bitter end, determined that whatever final reckoning comes will be as disastrous as possible so we can then be told that this is a failure of capitalism not the central planning methods that brought it about. More power and more control to the center and less freedom and less liberty for the individual. Digested down to a single word TYRANNY.
These politicians aren't in the least bit afraid of any popular rebellion or any secession movement. They are scared to death of the bankers. Unless and until that changes (part and parcel to the false left vs. right pardigm) the future looks grim and 2013 will not be a "good" year.