Celebrating Independence Yet Enslaved To Debt

Every year when July 4th rolls around, Americans from coast to coast celebrate July 4th with cookouts, outdoor concerts and fireworks.  We love celebrating Independence Day and yet we are deeply enslaved to debt.  We like to think of ourselves as “free” and yet we have rolled up the biggest pile of debt the world has ever seen.  The people that we have borrowed all of this money from expect to be paid.  Sadly, instead of addressing the problem, we have been loading more debt on to the backs of future generations with each passing year.  What we are doing to our kids and our grandkids is so immoral that is almost defies description.  At the heart of this debt-based system stands the Federal Reserve.  It is a perpetual debt machine that was designed to trap the U.S. government in a spiral of debt permanently.  Today, the U.S. national debt is 4700 times larger than it was when the Federal Reserve was created back in 1913.  This year alone, we will add more to the national debt than we did from the presidency of George Washington to the beginning of the presidency of Ronald Reagan.  So yes, enjoy the hotdogs and the fireworks, but also remember that we will never be free as long as this constantly expanding debt problem is hanging over our heads.

If you know anyone that does not take our national debt problem seriously, please share with them the video posted below.  It is entitled “Economic Armageddon and You” and it is definitely worth the 5 minutes that it takes to watch it.  Someone out there did a really great job of explaining our debt problem in a way that almost anyone can understand….

So is there any solution to this problem?

Not under the current system.

The debt-based Federal Reserve system is designed to expand U.S. government debt indefinitely.  But of course all debt bubbles burst eventually and we are rapidly reaching that point.

It is being projected that the U.S. national debt will hit 344% of GDP by the year 2050 if we continue on our current course.  The truth is that it would never get even close to that high because the whole system would completely collapse long before then.

So what should we do?

We need to abandon our current debt-based financial system.  The way that our current system normally works, whenever more money is created more debt is also created.  Such a system is inevitably doomed to fail.

We need to transition to an entirely new system that has nothing to do with the Federal Reserve or Federal Reserve notes.  We need an entirely new system where the money is not based on debt.

But even though more Americans than ever are awake to the flaws in our monetary system, the truth is that neither major political party is remotely ready to even consider an end to the current financial system.

Many Republicans believe that if we can just cut government spending enough we can solve the problem.  Many Democrats believe that if we can just “raise enough revenue” we can solve the problem.

Neither of those solutions will work.

Many conservatives are so frustrated with the whole thing that they just want Congress to refuse to raise the debt ceiling.  I have taken a lot of heat over the past couple of days for suggesting that this is a bad idea.

If we refuse to raise the debt ceiling, our borrowing costs will absolutely explode.  Even if the U.S. government adopted a “balanced budget” by some miracle, the reality is that the federal government would still need to “roll over” very large amounts of debt every single year.  If interest rates on U.S. debt rise substantially it will be beyond catastrophic.

In 2010, the U.S. government paid $413 billion in interest on the national debt.

If interest rates were to start rising as a result of a debt default, interest on the national debt would likely double or even triple.

Look, if we want to come anywhere close to balancing the budget under our current system, it will be a whole lot easier to do if we are spending 400 billion dollars on interest on the national debt rather than 1.2 trillion dollars.

Today, the U.S. government only takes in about 2.2 trillion dollars in taxes.  How in the world are we going to have a chance if we have to pay out a trillion dollars just in interest on the national debt?

The yield on 10-year U.S. Treasuries rose from 2.86% to 3.18% just this past week.  Let us hope that this is not the beginning of a bad trend.

A refusal to raise the debt ceiling would also likely set off another recession (or worse).  The following is what a new article on CNBC says would happen if the U.S. does not raise the debt ceiling by August 2nd….

A U.S. default would not only be historic, it would also almost certainly lead to a new financial crisis. Interest rates would likely spike, equity markets would plunge along with the value of the dollar, and the country could fall back into a recession.

We have to raise the debt ceiling.

So does this mean that I am advocating “kicking the can down the road”?

No.

If you are a conservative, you can still get the same result that you want without destroying the credit rating of the United States.

All the Republicans in Congress have to do is to pledge that they will never pass anything but a balanced budget for 2012 or for any year beyond that.  Without the permission of the House of Representatives, Barack Obama and the Democrats cannot continue their deficit spending.  The sad truth is that the Republicans have been enabling and actively participating in this debt binge all along.

A balanced budget would definitely hurt the economy, but at least it would not wreck our credit rating and cause our borrowing costs to multiply.

But is that what the Republicans are shooting for?

No.

It is being reported that the Republicans and the Democrats have tentatively agreed to between $1 trillion and $2 trillion in budget cuts over the next 10 years.

So that comes to $200 billion in spending cuts a year at most.

Considering the fact that we are running budget deficits of about a trillion and a half dollars a year, that is not nearly enough.

So don’t accuse me of wanting to kick the can down the road.  I want to actually do something substantial about the national debt.  I just don’t think it is a good idea to trash our credit rating in the process.

It is the Republicans and the Democrats in Congress that are kicking the can down the road.

Trillion dollar deficits are not acceptable.  Our nation is on the road to financial ruin.

But it is not just the federal government that is in massive financial trouble.

The reality is that we have “government debt problems” from coast to coast.

Did you hear that the government of Minnesota shut down the other day?

As the financial health of almost every single state government continues to decline, this type of thing is going to become more common.

In the state of Illinois things are so bad that some income tax refunds have not been paid since 2009.  The following is a brief excerpt from an article on the Economic Policy Journal blog….

I repeat, this is no time to own state or municipal bonds. The desperation level at various states and municipalities is getting more and more intense.

With the start of a new budget year just two days away, thousands of Illinois businesses are still waiting for state income tax refunds dating back to 2009.

In a recent article entitled “Is The Economy Improving?“, I went into greater detail about the horrific financial crisis that Illinois is facing….

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Did you know that things have gotten so bad in Illinois at this point that the Illinois state government is letting bills go unpaid for long periods of time on a regular basis?

It’s true.

Right now they have billions in unpaid bills and they are facing a financial future that is so bleak that it is almost indescribable.

In one recent article, author Stephen Lendman described the horrific financial crisis that Illinois is facing right now….

With spending exceeding revenues, and obligations not postponed, unpaid bills are growing “at a frightening rate. For instance, IGPA’s Fiscal Futures Model indicates (they) could reach $40 billion by July 1, 2013, with an associated delay in paying those bills of more than five years.”

Besides its $13 billion deficit and $6 billion in unpaid bills, its pension fund is about $130 billion in the red – a red flag that state workers may lose out altogether, wiping out their promised retirement savings.

But it isn’t just the state government that is having problems.  According to Cook County Treasurer Maria Pappas, the average household in Chicago would owe a whopping $63,525 if all local government debt was divided up equally among all of the households.

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How can we claim that our country is free when we are enslaved to such horrible debt burdens?

The borrower is always a servant of the lender.  As a nation, we are becoming a little bit less independent every single day.

So enjoy celebrating Independence Day while you still can.

If we continue on the path that we are currently on, nobody is going to be celebrating much of anything in the future.

The State Of The Economy

The U.S. economy is like a rubber band that is being pulled in several different directions at the same time.  Everyone knows that at some point it is going to snap, but nobody is quite sure exactly when it is going to happen.  Right now, the state of the economy is not good, and it is going to get a whole lot worse.  Sadly, most Americans don’t even understand the economic fundamentals well enough to be able to ask the right questions to our politicians.  Today, the United States consumes far more wealth than it produces every single month.  That means we are continually getting poorer.  U.S. debt is also rising at a far greater rate than U.S. GDP is.  On an individual level, if your assets were going down every single month and if you were going into more debt every single single month it would be easy to understand what was happening.  However, most Americans can’t really seem to grasp what is taking place on a national level.  Our politicians and the mainstream media just keep telling them that everything is going to be okay and they just keep believing it.

These days our leaders are resorting to increasingly desperate measures in order to help revive the economy.  On Thursday, Barack Obama decided to release 30 million barrels of oil from the U.S. strategic oil reserve.

Yes, that will drive down oil prices for a few days, but what is going to happen someday if we actually need to use that strategic oil reserve?

But in many ways you can’t blame Obama for trying.  He desperately wants to get reelected and he knows that his campaign will be highly dependent on the state of the economy.  Look for Obama to pull out all the stops as we get closer to the fall of 2012.

Sadly, the truth is that it almost does not matter what the Democrats or the Republicans do at this point.  The long-term trends are so powerful now that it would take a miracle to reverse them. We are facing an “economic tsunami” that is just going to keep on destroying middle class America.

If you went to a store today, and there were two somewhat similar products sitting on the shelf and one cost ten times more than the other one, which one would you buy?

Well, that is the situation facing American workers today.  They have been pushed into one giant globalized labor pool, but big corporations are allowed to pay workers on the other side of the globe slave labor wages.  It costs ten times more (at least) to hire a blue collar American worker than it does to hire a blue collar worker in most areas of Asia.

As a result of the globalization of labor, we have seen a mass exodus of jobs out of the United States, and wages for many of the jobs that remain have been significantly depressed.

There simply are not nearly enough jobs for all Americans at this point.

Recent college grads are finding this out.  A new study that was conducted by Rutgers University discovered that over 30 percent of all those that graduated from college between 2006 and 2010 were not able to get a job within six months of graduation.

But unemployment is only part of the story.  There are millions upon millions of Americans that are “underemployed” today.

There are hordes of highly educated, hard working Americans that are working temporary or part-time jobs at close to minimum wage because that is all they can get.

With good jobs being so scarce, American families are finding it more difficult than ever to make ends meet.

One recent survey found that 9 out of 10 U.S. workers do not expect their wages to keep up with the rising cost of basics such as food and gasoline over the next year.

I talked about the rising cost of food in my recent article entitled “Why Are Food Prices Rising So Fast?”  Today, one out of every seven Americans is already on food stamps, and if the cost of living keeps rising this quickly we are going to see millions more of our fellow citizens clamoring for government assistance.

The decline of the American consumer is having other effects as well.

For example, pre-orders for Christmas toys from China are way down.

It looks like this holiday season is not going to be as “merry” as usual.

It would be nice if we could say that the economy is improving, but that simply is not the case.

American households are in a far different place than they were prior to the recent recession.

For example, did you know that home values in the United States have plummeted $6.6 trillion since the peak back in 2007?

U.S. homeowners have taken the brunt of that decline.  According to the Federal Reserve, average home equity has fallen from 61 percent in 2001 to 38 percent in the first quarter of 2011.

That is a colossal shift.

If U.S. homeowners only own 38 percent of their homes, then who owns the rest?

The banks do.

Doesn’t that just make you feel all warm and fuzzy inside?

Health care is another area where American families are getting squeezed.

Today, the United States spends more on health care per person than any other country in the world.

Sadly, we are also one of the sickest populations on the planet.

What is up with that?

Once upon a time the United States had a middle class that was the envy of the entire globe.

Now it is being ripped to shreds at every turn.

Today, approximately half of all Americans say that they could not come up with $2,000 within 30 days without selling away some possessions.

The vast majority of us are basically flat broke and surviving from month to month.

Meanwhile, our vaunted financial system just may be on the verge of another meltdown.

There has been all sorts of volatility in the marketplace recently and there are all kinds of signs that Wall Street is about to go into panic mode.

For example, Moody’s recently warned that it may downgrade the debt ratings of Bank of America, Citigroup and Wells Fargo.

Barclays Capital, Goldman Sachs, Bank of America, JPMorgan Chase and Morgan Stanley are all either already laying workers off or are rumored to be considering it.

Frank Davis, director of sales and trading with LEK Securities, says that there is a lot of pessimism on Wall Street right now….

“There’s a lot of emotion in this market at the moment, and the conversations among traders are nearly all leaning toward the bear side”

As the financial system spins out of control, the Federal Reserve is increasing the number of workers that it is “embedding” at the big Wall Street banks.

I guess the Fed wants to keep a closer eye on things as they come crashing down.

Sadly, so much of this would be much easier to fix if our nation was not drowning in debt.

Since Barack Obama was elected, the national debt has increased by nearly 4 trillion dollars. If you and I went out today and started repaying that 4 trillion dollars at a rate of one dollar per second, it would take over 120,000 years to do it.

Most Americans have a hard time comprehending these kinds of numbers. Janet Tavakoli tried to put our debt situation into perspective in her latest column….

David Walker, the former U.S. comptroller general, says it’s even worse than that. When he takes into account future obligations for Medicare, Social Security, Federal debt, Military retirement, Civil servant retirement, and more, we owe $546,663 per household. That doesn’t even include your local debt — it may not be as bad as if you lived in Illinois, but it’s substantial nonetheless — and personal debt including mortgages and consumer debt that average more than $120,000 per household.

But you don’t have to toss wild numbers around to get an idea of how much trouble we are in.

As I have written about recently, there is increasing evidence all around us that the collapse of society is accelerating.  We are seeing disturbing reports of civil unrest pop up all over the U.S. at an alarming rate.

According to a CBS affiliate in Chicago, earlier this week approximately 50 young people conducted a shocking mob robbery of a drug store located on the Magnificent Mile in Chicago….

Some 50 young people barged into a Walgreens at Michigan and Chicago on the Magnificent Mile on Tuesday afternoon. They took bottled drinks and sandwiches off the shelves, then ran off, CBS 2′s Suzanne Le Mignot reports.

When large groups of young people get together and agree to commit crimes that should be a huge red flag for all of us.

We are a nation that is deeply, deeply divided.  Hatred is growing and the love of most Americans is growing cold.

As I have written about previously on “The American Dream“, the American people are actually encouraged to hate one another these days….

The truth is that the “establishment” is constantly trying to divide us and get us fighting with one another.  They pit the Republicans against the Democrats (even as though control both sides).  They pit one race against another.  They pit one gender against another.  We are told that the rich are against the poor, the north is against the south, urban is against rural and that there are even “generational battles” going on.  Frustration and hate are rapidly growing in the United States today, and a lot of that frustration and hate is unfortunately aimed at the targets that the mainstream media has programmed all of us to hate.  Meanwhile, those at the top of the pyramid who are controlling the whole game love it when we are divided because we can never become united and challenge their control.

We need to come together as a nation.  If we don’t, we are going to face an unprecedented nightmare when the economy collapses.

So what do you think about the state of the economy?  Please feel free to leave a comment with your opinion below….

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