Money

The Federal Reserve Shows Barack Obama Who The Real Boss Is

January 13, 2013 by Michael

Barack Obama has greatly expanded the powers of the presidency during his time in the White House, but there is one institution that he simply will not mess with. There is one organization that is considered to be so sacred in Washington D.C. that Obama will not dare utter a single negative word against it. That organization is the Federal Reserve. Even though he has shown that he is unafraid to pick a fight with just about everyone else in Washington, Obama flat out refuses to criticize the Fed and he even reappointed Ben Bernanke for another term as Fed Chairman even though Bernanke has a track record of failure that would make the Chicago Cubs look good. Perhaps Obama is aware of what has happened to other presidents that have chosen to tangle with the Fed. In any event, it has become clear that Obama submits to anything that the Fed says without question, and the controversy over the “trillion dollar coin” is another perfect example of this. For weeks, there has been much speculation in the mainstream media about the possibility that the Obama administration may print up a one trillion dollar coin that it would use to keep paying the bills of the federal government if an agreement to raise the debt ceiling is not reached. But on Saturday the Federal Reserve killed that idea, and we shouldn’t be surprised by that because under no circumstances will the Fed ever accept a threat to their monopoly over money creation in the United States. If the Federal Reserve had allowed Obama to print up a debt-free trillion dollar coin, that would have set a very dangerous precedent for the Fed. The American people would have realized that the federal government can actually create debt-free money whenever it wants and that it does not actually have to borrow money from anyone. That is something that the Fed probably would have moved heaven and earth to keep from happening. But now we won’t ever know how far the Fed would really be willing to go to keep their monopoly over money creation, because Obama has no plans to challenge this latest ruling from “the real boss” of our financial system.

Sadly, most Americans don’t even realize that a private banking cartel has a monopoly over all money creation in this country. In recent years they have abused this power by wildly printing money (“quantitative easing“), and by making more than 16 trillion dollars in secret loans to their friends during the last financial crisis. Under our system, the private Federal Reserve creates money whenever they want, and nobody else gets to create money. It is an insane system, but very, very few of our politicians will ever dare to question it.

At this point, the U.S. Treasury Department is essentially just an arm of the Federal Reserve. That is why it was no surprise that the Fed and the Treasury Department issued a joint statement on Saturday. According to Treasury spokesman Anthony Coley, both the Treasury and the Fed have come to the conclusion that under no circumstances should a trillion dollar coin be printed up by the Obama administration…

“Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit”

But of course it was actually the Federal Reserve which made this decision. The following is from a report posted by Zeke Miller of Buzzfeed.com…

The Federal Reserve was responsible for killing a controversial proposal to circumvent the debt limit, a senior administration official told BuzzFeed Sunday.

On Saturday the Treasury Department released a statement ruling out the only remaining alternative to Congress raising the nation’s borrowing limit, which would utilize a loophole in federal law to mint a $1 trillion coin to be deposited in the Federal Reserve and ensure the federal government could pay all bills and debt obligations.

According to that Buzzfeed article, the Federal Reserve would have actually refused to recognize the trillion dollar coin if the Obama administration had tried to deposit it with the Fed…

But it was the Federal Reserve that killed the proposal, the official told BuzzFeed, denying a purely political rationale for the announcement, saying the independent central bank would not have credited the Treasury’s accounts for the vast sum for depositing the coin.

Wow.

So there you go.

The real boss has told Barack Obama how it is going to be, and Obama plans to meekly comply.

So why is the Federal Reserve so adamant about maintaining their monopoly over money creation?

Well, it is all about compound interest. Albert Einstein once made the following statement about compound interest…

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

When the Federal Reserve system was initially created back in 1913, the bankers that created it intended for it to be a perpetual debt machine that would extract massive amounts of wealth from the U.S. government (and ultimately from all of us) through the mechanism of compound interest. Each year, hundreds of billions of dollars of interest are transferred into the pockets of the wealthy bankers and foreign nations that own our debt. This is one of the reasons why I preach about the evils of government debt until I am blue in the face. The debt-based Federal Reserve system is a way to systematically steal the wealth of the United States, and it is happening right in front of our eyes, but very few people actually understand it well enough to complain about it.

Unfortunately, we are rapidly getting to the point where we have accumulated so much debt that it is threatening to collapse our entire financial system. The following comes from a recent Zero Hedge article…

By now most are aware of the various metrics exposing the unsustainability of US debt (which at 103% of GDP, it is well above the Reinhart-Rogoff “viability” threshold of 80%; and where a return to just 5% in blended interest means total debt/GDP would double in under a decade all else equal simply thanks to the “magic” of compounding), although there is one that captures perhaps best of all the sad predicament the US self-funding state (where debt is used to fund nearly half of total US spending) finds itself in. It comes from Zhang Monan, researcher at the China Macroeconomic Research Platform: “The US government is now trying to repay old debt by borrowing more; in 2010, average annual debt creation (including debt refinance) moved above $4 trillion, or almost one-quarter of GDP, compared to the pre-crisis average of 8.7% of GDP.”

This is a key statistic most forget when they discuss the stock and flow of US debt: because whereas the total US deficit, and thus net debt issuance, is about $1 trillion per year, one has to factor that there is between $3 and $4 trillion in maturities each year, which have to be offset by a matched amount of gross issuance just to keep the stock of debt flat (pre deficit funding). The assumption is that demand for this gross issuance will always exist as old maturities are rolled into new debt, however, this assumption is contingent on one very key variable: interest rates not rising.

Do you understand what is being said there?

Not only is our debt rising by more than a trillion dollars a year, we also need to roll over trillions of dollars of federal debt each year. If interest rates on that debt start rising, we are going to start feeling the pain very rapidly.

As I have mentioned previously, the average rate of interest on U.S. government debt was 6.638 percent back in 2000. If we returned to that level today, we would be paying more than a trillion dollars a year just in interest on the national debt.

The main thing keeping interest rates low right now is the fact that the U.S. dollar is the de facto reserve currency of the world. If that ends, interest rates on U.S. debt will skyrocket. The following is from a recent article by Chris Ferreira…

The US Dollar is the reserve currency of the world. You need it to buy oil, a vital component of any economy. Since other countries like China cannot print US dollars at their leisure, they have to get it from somewhere. They get it from trade with the US. The US buys products in Asia and the rest of the world with US dollars, and in turn these same dollar surpluses are used to buy oil and US bonds, creating a much needed artificial demand for US dollars.

This is also how the enormous US 558$ billion trade deficit in 2011 was financed. The US has been in a trade deficit since the 1980′s and it continues the grow as jobs and manufacturing are being lost to more competitive nations. The trade deficit also accounts for the national debt. The financing of the debt creates artificial demand for US bonds which helps lower the interest rate and coincidentally helps to raise the debt levels even higher.

Unfortunately, the rest of the world is starting to move away from the U.S. dollar. Over the past couple of years, a whole host of international currency agreements have been signed that are intended to start reducing the use of the U.S. dollar in international trade. For much more on this, please see the following article: “The Giant Currency Superstorm That Is Coming To The Shores Of America When The Dollar Dies“.

Most Americans have absolutely no idea how very close we are to financial catastrophe. The only way we can continue to service our enormous 16 trillion dollar debt is for interest rates on that debt to remain super low. But the only way those interest rates can remain low is for the U.S. dollar to remain absolutely dominant in international trade. Once the rest of the world rejects the U.S. dollar, the game is over.

We are headed for total system meltdown, but neither major political party is going to do a thing about it. They are both just going to continue to meekly comply with the dictates of the real boss of our financial system – the Federal Reserve.

It is imperative that we educate the American people about these things. Please share this article with as many people as you can, and the following is another great article for anyone that does not understand how the Federal Reserve is destroying our financial system: “10 Things That Every American Should Know About The Federal Reserve“.

The Federal Government Hands Out Money To 128 Million Americans Every Month

January 10, 2013January 10, 2013 by Michael

The number of Americans receiving money directly from the federal government has grown from 94 million in the year 2000 to over 128 million today. A shocking new research paper by Patrick Tyrrell and William W. Beach contains that statistic and a whole bunch of other very revealing numbers. According to their research, the federal government hands out money to 41.3 percent of the entire population of the United States each month. Overall, more than 70 percent of all federal spending goes to what they call “dependence-creating programs”. It is the most massive wealth redistribution scheme in the history of the world, and it continues to grow at a very rapid pace with each passing month. But can we really afford this? Of course we never want to see a single person go without food to eat or a roof to sleep under, but can the federal government really afford to support 128 million Americans every month? If millions more Americans keep jumping on to the “safety net” each year, how long will it be before it breaks and it is not there for anyone? The federal government is already drowning in debt. This year the U.S. national debt will easily blow past the 17 trillion dollar mark and we are rapidly heading toward financial oblivion. We are stealing more than 100 million dollars from our children and our grandchildren every single hour of every single day with no end in sight. If we don’t get our finances in order as a nation, what will the end result be?

According to Tyrrell and Beach, federal spending on entitlement programs has been rising more than 6 times as fast as population growth has in recent years…

Between 1988 and 2011, spending on dependence-creating federal government programs has increased 180 percent versus “only” a 62 percent increase in the number of people who are enrolled in federal government programs, and a 27 percent increase in the population. Not only are more people enrolled in government programs than ever before, but more US taxpayer dollars are being spent on each recipient every year.

But even though the numbers that Tyrrell and Beach present in their paper are incredibly shocking, the truth is that they have probably underestimated the true scope of government dependence in America today. Just consider the following numbers…

Food Stamps

Back in the year 2000, there were about 17 million Americans on food stamps. That number has exploded to more than 47 million today.

Medicaid

If you can believe it, today more than 70 million Americans are on Medicaid, and it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

Social Security

Right now, there are more than 53 million Americans on Social Security, and that number is projected to absolutely explode as huge waves of Baby Boomers retire in the coming years.

Medicare

As I wrote about in a previous article, the number of Americans on Medicare is expected to grow from 50.7 million in 2012 to 73.2 million in 2025.

And those are only four examples of government programs that have seen their numbers explode in recent years. There are so many more that could be mentioned. Overall, the federal government runs nearly 80 different “means-tested welfare programs“, and almost all of them are experiencing explosive growth.

So is the “128 million” figure that Tyrrell and Beach have come up with actually too low? I believe that it is. But in any event, nobody can deny that the “welfare state” in the U.S. has absolutely mushroomed in size since the turn of the century.

According to one recent poll, 55 percent of all Americans say that they have received money from a safety net program run by the federal government at some point in their lives. We are a nation that has become very comfortable leaning on Uncle Sam for help.

And poor people from all around the globe see how good things are here and they are eager to get a seat at the table. In a previous article, I talked about a federal government website (“WelcomeToUSA.gov“) that actually teaches new immigrants how to apply for welfare once they are able to get into the United States.

Will we all eventually becoming dependent on the government? If that happens will we still be free men and women?

Once someone is dependent on the government, they become forced to do what the government tells them to do in order to survive. If we all eventually become dependent on the federal government, how much power will that give them over us?

That is something to think about.

Another thing to ponder is how the U.S. middle class is rapidly disappearing.

There will always be poor people, and we should always take care of them, but what we should be truly alarmed about is how the middle class in America has been dramatically shrinking in recent years.

One of the biggest reasons why so many Americans are applying for government assistance these days is because there simply aren’t enough jobs for everyone. Politicians from both political parties have fully embraced the one world “free trade” economic agenda of the global elite, and as a result millions of our jobs are being shipped out of the country. Big corporations can either choose to pay U.S. workers a living wage with benefits, or they can choose to set up shop on the other side of the globe where it is legal to pay workers slave labor wages with no benefits. Plus there are much fewer taxes and regulations to deal with typically on the other side of the globe.

As long as this nation pursues this “one world economic agenda”, there will never be enough jobs in the United States ever again. Chronic unemployment will become the new normal. Our formerly great manufacturing cities will continue to degenerate into gang-infested war zones.

Apologists for the current system continue to insist that the answer is “more education”, but the truth is that government dependence is even exploding among those with advanced degrees. The following is a brief excerpt from a recent article on The Chronicle Of Higher Education…

People who don’t finish college are more likely to receive food stamps than are those who go to graduate school. The rolls of people on public assistance are dominated by people with less education. Nevertheless, the percentage of graduate-degree holders who receive food stamps or some other aid more than doubled between 2007 and 2010.

During that three-year period, the number of people with master’s degrees who received food stamps and other aid climbed from 101,682 to 293,029, and the number of people with Ph.D.’s who received assistance rose from 9,776 to 33,655, according to tabulations of microdata done by Austin Nichols, a senior researcher with the Urban Institute. He drew on figures from the 2008 and 2011 Current Population Surveys done by the U.S. Census Bureau and the U.S. Bureau of Labor.

After reading that, does anyone still believe that “more education” is the answer to our problems?

What we need is more jobs, and lots of them. Unfortunately, our politicians continue to pursue policies that absolutely kill American jobs.

So the number of Americans that are forced to turn to the government for assistance will continue to grow, as will our national debt.

Sadly, most Americans still don’t realize what is happening. Most of them are still listening to those in the mainstream media that are insisting that everything is going to be just fine.

For example, the most famous economic journalist in the country, Paul Krugman of the New York Times, recently wrote that the deficit crisis has been “solved”…

True, there are projected problems further down the road, mainly because of the continuing effects of an aging population. But it still comes as something of a shock to realize that at this point reasonable projections do not, repeat do not, show anything resembling the runaway deficit crisis that is a staple of almost everything you hear, including supposedly objective news reporting.

So you heard it here first: while you weren’t looking, and the deficit scolds were doing their scolding, the deficit problem (such as it was) was being mostly solved.

Oh really?

I don’t know how in the world Paul Krugman can get paid to write such nonsense, but the truth is that our government debt problems are only just beginning.

In a previous article, I explained that the unfunded liabilities of the federal government are growing so rapidly that we could not cover them even if we raised the highest tax rate to 100%…

According to Chris Cox and Bill Archer, two men who served on Bill Clinton’s Bipartisan Commission on Entitlement and Tax Reform, there is no way in the world that we could raise taxes high enough to pay for all of the obligations that we are currently taking on. They say that even if we taxed all corporations and all individuals at a 100% tax rate on all income over $66,193, “it wouldn’t be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities.“

Yes, Paul Krugman, we do have a spending problem. Even if Bill Gates gave every single penny of his fortune to the federal government, it would only cover the U.S. budget deficit for about 15 days. We simply cannot go on spending money like this.

If anyone out there believes Paul Krugman and is convinced that the federal government is no longer facing a massive debt problem, please read this article: “55 Facts About The Debt And U.S. Government Finances That Every American Voter Should Know“.

But if we can’t afford to do all of this spending, then why are we doing it?

Well, it is because there are a whole lot of people out there that are really hurting. Poverty in the U.S. is absolutely exploding, and the gap between the wealthy and the poor has grown to unprecedented heights.

According to a recent article posted on Economy In Crisis, the bottom 60 percent of all Americans only own 2.3 percent of all the financial wealth in the nation combined.

That is astounding.

If you live in a wealthy area of the country, you may look around and things may look really good to you. But in many other areas of the country things are worse than they have ever been in the post-World War II era. For the first time ever, more than a million public school students in the United States are homeless. That number has risen by 57 percent since the 2006-2007 school year.

Can you imagine that? We have over a million kids that are attending our public schools that do not have a home to go back to at night.

Our economy desperately needs more jobs, but we just continue to lose more of them. On Thursday, it was announced that American Express is eliminating 5,400 more jobs. More announcements like this come out just about every day now. 65 percent of all Americans expect 2013 to be a year of “economic difficulty”, and there aren’t a whole lot of reasons to be optimistic about things at this point.

When you lose your job, it can feel like your entire life is falling apart. The competition for jobs is absolutely fierce, and a lot of workers have fallen through the cracks. In this rough economic environment, there are millions of Americans that have never been able to put the pieces of their lives back together. A recent CNN article profiled a 42-year-old woman up in Oregon named Lynette who has had her life totally turned upside down by unemployment…

I’m a single mom with a son in high school.

Three years ago, I was laid off from a job working at a propane company. I had just gotten back on my feet after battling breast cancer, then cervical cancer, but the economy tanked, and I was the first to go.

I am now 42, and the cancer is gone. But it appears my employability is also gone.

She used to work in a position that helped others find government assistance, but now she is the one who has been forced to seek it…

Before I was diagnosed with cancer, I worked for the state of Oregon and was the number one service manager for the Department of Human Services. My job was to help low income families find work and get food stamps and insurance. Now, I cannot even get a job at McDonalds, and I’m the one living on social assistance.

Does anyone out there have a similar story to share? If so, please feel free to share it below…

If Obama Can Just Create A Trillion Dollar Coin, Then Why Do We Have To Pay Taxes?

January 7, 2013 by Michael

If Barack Obama can “solve” the debt ceiling crisis by printing up some trillion dollar coins, then why does the federal government need our money? As another debt ceiling showdown approaches, many in the liberal media are suggesting that if Congress does not raise the debt ceiling that Obama should just have the U.S. Treasury create a trillion dollar platinum coin and use it to pay our bills. It sounds crazy, but many notable voices (including Paul Krugman of the New York Times) are supporting this idea. But if the federal government has had the power to create trillion dollar coins out of thin air all this time, then why do we have to pay taxes? Not only that, why do we have a national debt? If the federal government can just create money whenever it wants, then why does the federal government ever have to borrow it from others? The U.S. Constitution actually grants Congress the power to “coin money”, so why is the Federal Reserve doing it? Those are some very important questions. Most Americans don’t even realize that the U.S. government never actually needed to borrow a single penny from anyone else. The U.S. Congress has the authority to create debt-free money whenever it wants to. Conceivably, the entire federal government could be funded without ever borrowing a single dollar and without ever receiving a single dollar from any of us in taxes. Just imagine that – a nation without a single penny of national debt, no income tax and no IRS. What a wonderful world that would be. Of course there would be other potential dangers under such a system (such as runaway inflation), and those dangers would have to be addressed. But the truth is that we don’t have to have an income tax or 16 trillion dollars of government debt. We only have those things because we have chosen to have those things.

Sometimes, a crisis can illuminate options that most people had not considered previously. As another debt ceiling crisis draws closer, many are looking for ways for the U.S. government to be able to continue to pay its bills if Congress does not authorize an increase in the debt ceiling.

If a debt ceiling agreement is not worked out, the U.S. government will soon only be able to pay about half the bills that are coming due after interest payments on the national debt (which will almost certainly be prioritized) are made.

That is why a lot of people on the left are pushing the “trillion dollar coin” alternative. So how would this work exactly? The mechanics were recently explained by Jim Pethokoukis on his American Enterprise Institute blog…

There are limits on how much paper money the U.S. can circulate and rules that govern coinage on gold, silver, and copper. BUT, the Treasury has broad discretion on coins made from platinum. The theory goes that the U.S. Mint would create a handful of trillion dollar (or more) platinum coins. The President would then order the coins deposited at the Fed, who would then put the coin(s) in the Treasury who now can pay all their bills and a default is removed from the equation. The effects on the currency market and inflation are unclear, to say the least.

In my opinion, if anyone in the federal government is going to be creating money out of thin air, it should be the U.S. Congress. After all, according to Article I, Section 8 of the U.S. Constitution, it is the U.S. Congress that has been granted the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.

But those that are pushing Obama to create a “trillion dollar coin” point to a law that Congress passed that allows the U.S. Treasury to mint platinum coins. The following is from a recent CNN article…

Normally, the Federal Reserve is charged with issuing currency. But U.S. law, specifically 31 USC § 5112, also grants Treasury permission to “mint and issue platinum bullion coins and proof platinum coins.”

This section of law was meant to allow for the printing of commemorative coins and the like. But the Treasury Secretary has the authority to mint these coins in any denomination he or she sees fit.

But it wouldn’t quite be that easy. According to a recent ABC News article, some elements of the coin design would have to be determined by legislation…

The more difficult part comes sometime after the decision is made to coin the platinum and before the Mint gets to work in sculpting the pieces.

At that point, the American people must decide whose face will adorn the trillion dollar trinket. The process to determine the “specs” of the coin, U.S. Mint Public Affairs Specialist Genevieve Billia warns, must be “determined by legislation,” creating the potential for another congressional impasse.

So we would likely end up back at square one.

But if printing up a “trillion dollar coin” does not work out, Paul Krugman of the New York Times has come up with another option…

Don’t like the platinum coin option? Here’s a functionally equivalent alternative: have the Treasury sell pieces of paper labeled “moral obligation coupons”, which declare the intention of the government to redeem these coupons at face value in one year.

It should be clearly stated on the coupons that the government has no, repeat no, legal obligation to pay anything at all; you see, they’re not debt, and therefore don’t count against the debt limit. But that shouldn’t keep them from having substantial market value.

Of course there is a very, very low probability that any of these wild ideas will ever be tried, but this debate has raised some very interesting points.

The truth is that we do not have to have a system where more money is only created when more debt is created. We could have a system where the federal government directly creates debt-free money that is spent directly into circulation by the federal government.

In fact, this has happened before.

As I have written about previously, during the presidency of JFK a limited number of debt-free United States Notes were issued by the U.S. Treasury and spent by the U.S. government directly into circulation without any new debt being created. In fact, each bill said “United States Note” right at the top.

Unfortunately, after JFK’s presidency no more debt-free United States Notes were ever issued.

But even before JFK, there were times when debt-free United States Notes were being used. According to Wikipedia, United States Notes were first used during the Civil War….

They were originally issued directly into circulation by the U.S. Treasury to pay expenses incurred by the Union during the American Civil War. Over the next century, the legislation governing these notes was modified many times and numerous versions have been issued by the Treasury.

So why are we using debt-based Federal Reserve Notes today instead of debt-free United States Notes?

If the Federal Reserve did not exist and the U.S. government directly created money instead of borrowing it, it is conceivable that we could have a national debt of $0.00 today instead of $16,432,707,263,449.56.

Which option do you think our children and our grandchildren will wish that we had opted for?

In a system where the government directly created money, it is also conceivable that we could completely do away with the income tax and the IRS completely. The U.S. once prospered greatly without an income tax, and it could do so again.

And the truth is that our system of taxation is broken beyond repair. If you doubt this, just read this article.

So what would the downside be to such a system? Well, of course rampant inflation would be a huge danger. Allowing Congress to print up money whenever they wanted to would be playing with fire. That is why it would be imperative for there to be a hard cap on what the federal government could spend. For example, you could set the cap on spending by the federal government at 20 percent of GDP. That way we would hopefully never end up looking like the Weimar Republic.

And the current federal debt could be paid down a little at a time using newly created debt-free currency. This would have to be done slowly to keep inflation under control, but it could be done.

Of course if you wanted to continue to fund the federal government through taxation, there are other options that would still allow you to do away with the income tax. For example, one of the ways that our founders intended for the federal government to be funded was through tariffs, and we could definitely raise a lot of money that way. Plus, that would have the added benefit of making American companies much more competitive again and it would reduce the flow of American jobs out of the country.

So am I in favor of having Barack Obama create a trillion dollar coin to get around the debt ceiling crisis?

Most definitely not. If it does not violate the letter of the Constitution (which I believe it does), it sure does violate the spirit of it.

But if the U.S. Congress decided to shut down the Federal Reserve and the IRS and they decided to abolish the income tax, and instead they started directly issuing debt-free currency directly into circulation, that is something I would very much be in favor of.

Yes, that system would not be perfect either, but it would be far more preferable to what we have today.

So what do you think? Should we keep our current system of debt-based money, or would a system of debt-free money be better?

Please feel free to post a comment with your opinion below…

Government Dependents Outnumber Those With Private Sector Jobs In 11 U.S. States

December 26, 2012December 26, 2012 by Michael

America is rapidly becoming a nation of takers. An increasing number of Americans expect the government to take care of them from the cradle to the grave, and they expect the government to dig into the pockets of others in order to pay for it all. This philosophy can be very seductive, but what happens when the number of takers eventually outnumbers the number of producers? In 11 different U.S. states, the number of government dependents exceeds the number of private sector workers. This list of states includes some of the biggest states in the country: California, New York, Illinois, Ohio, Maine, Kentucky, South Carolina, Mississippi, Alabama, New Mexico and Hawaii. It is interesting to note that seven of those states were won by Barack Obama on election night. In California, there are 139 “takers” for every 100 private sector workers. That is crazy! The American people have become absolutely addicted to government money, and it gets worse with each passing year. If you can believe it, entitlements accounted for 62 percent of all federal spending in fiscal year 2012. It would be one thing if we could afford all of this spending, but unfortunately we simply cannot. We are drowning in debt, and we are stealing more than a hundred million more dollars from future generations with each passing hour. No bank robber in history can match that kind of theft.

Yes, we will always need a safety net. There are many people out there that simply cannot take care of themselves. We certainly don’t want to see anyone sleeping in the streets or starving to death.

But if the number of people jumping on to the safety net continues to grow at the current pace, the net will break and it will not be available for any of us.

For example, the number of Americans on food stamps grew from about 17 million in 2000 to more than 47 million today. It nearly tripled in just 12 years.

What will happen if it nearly triples again over the next 12 years?

The federal government even has a website (benefits.gov) that guides people through the process of figuring out what welfare programs they can take advantage of.

Overall, the federal government runs nearly 80 different “means-tested welfare programs” and more than 100 million Americans are already enrolled in at least one of those programs.

Yes, I realize that figure is very hard to believe. I had a hard time believing it when I first came across it.

And it is even more shocking when you realize that the figure of 100 million Americans does not even include those who only receive Social Security or Medicare.

Today, there are 56.76 million Americans on Social Security.

To support all of those Americans on Social Security, there are only about 94.75 million full-time private sector workers.

So there are just 1.67 full-time private sector workers to support each American that is on Social Security.

Medicare is also growing like crazy. As I wrote about the other day, the number of Americans on Medicare is expected to grow from 50.7 million in 2012 to 73.2 million in 2025.

How much farther can we push things before the entire system collapses?

In order to support this exploding entitlement system, we need a lot more Americans to be working good paying jobs.

Unfortunately, millions of good paying jobs continue to be shipped overseas and they aren’t coming back.

We are even losing good jobs to our own prisoners. The United States has the largest prison population in the world by far, and the exploitation of that low wage labor pool has become a boom industry in America. Even Microsoft and Boeing are using prison labor now. Just check out this video.

Meanwhile, there are millions upon millions of law-abiding Americans that cannot find jobs and that cannot take care of their families.

So poverty and dependence on the government are absolutely exploding. We have a system that is so messed up that it is hard to even put it into words. The middle class is being viciously shredded, and most Americans just continue to applaud the politicians from both parties that are doing this to us.

Our economy is being gutted at the same time that the welfare state is experiencing unprecedented growth. Instead of giving us real answers, our “leaders” just continue to borrow, spend and print more money. We are about to hit the debt limit again, and the Obama administration is saying that we should just do away with the debt limit permanently.

Most of our politicians don’t seem to understand that they are systematically destroying our economy and the bright futures that our children and our grandchildren were supposed to have.

But there are some politicians out there that get it. Unfortunately, many of them live in other countries. For example, Canadian MP Pierre Poilievre seems to have a firm grasp on what debt is doing to the United States. The following are some excerpts from one of his speeches…

“By 2020, the US Government will be spending more annually on debt interest than the total combined military budgets of China, Britain, France, Russia, Japan, Germany, Saudi Arabia, India, Italy, South Korea, Brazil, Canada, Australia, Spain, Turkey, and Israel.”

“Through government spending the indulgence of one is the burden of another; through government borrowing, the excess of one generation becomes the yoke of the next; through international bailouts, one nation’s extravagance becomes another nation’s debt”

“Everyone takes, nobody makes, work doesn’t pay, indulgence doesn’t cost, money is free, and money is worthless.”

You can see his entire speech right here.

And if we continue down this path it is most definitely true that our money will eventually become worthless at some point. Just today I was down at the grocery store, and a can of chili that I was able to get on sale for 75 cents a couple of years ago now has a “sale price” of $1.69. If the Federal Reserve keeps recklessly printing dollars, eventually we will be fortunate to get a can of chili for 10 bucks. Things cost too much already, and the Fed seems absolutely determined to cut the legs out from under the U.S. dollar.

Unfortunately, printing money is the only way that we are going to be able to service the gigantic amounts of debt that we are accumulating.

According to Chris Cox and Bill Archer, two men who served on Bill Clinton’s Bipartisan Commission on Entitlement and Tax Reform, there is no way in the world that we could raise taxes high enough to pay for all of the obligations that we are currently taking on. They say that even if we taxed all corporations and all individuals at a 100% tax rate on all income over $66,193, “it wouldn’t be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities.”

Are you starting to get an idea of how much trouble we are in?

We don’t have enough money to pay for all of this.

We are broke.

Our current economy is a debt-induced illusion, and we will soon be waking up to a tremendous amount of pain.

Are you ready?

What In The World Are Barack Obama And John Boehner Thinking?

December 18, 2012 by Michael

Barack Obama and John Boehner both seem absolutely determined to drive U.S. government finances off a cliff. The mainstream media would have you believe that there are vast ideological differences between the two of them and that they are bitter enemies, but that is simply not the case. Both of them say that tax increases are “necessary”, but they disagree over the details. Both are seeking about a trillion dollars of spending cuts and about a trillion dollars of new “revenue”, but they don’t see eye to eye on how to get there. But overall, they are both definitely playing in the same ballpark. And those numbers certainly do sound impressive until you realize that they are talking about a time span of ten years. Personally, I would love to see federal spending cut by a trillion dollars this year. But that will never happen. A trillion dollars over the course of a decade breaks down to about 100 billion dollars per year. That still sounds like a lot of money until you put it up next to the trillion dollar deficits that we have been running for four years in a row. Even if somehow those spending cuts turned out to be real (which they aren’t), they would still only put a very small dent in our yearly budget deficits. Obama and Boehner both want to continue to have a gigantic federal government that showers people with government money, and both of them want to continue to pass much of the burden for paying for this gigantic government on to future generations. And both of them want to continue to steal more than 100 million dollars an hour from our children and our grandchildren in order to maintain the false bubble of debt-fueled prosperity that we are enjoying right now. This is incredibly foolish and they are leading us down a path that will lead to national ruin.

Sadly, even the pathetically small “budget cut” and “new revenue” figures that they are floating around turn out to be quite hollow when you inspect them more closely.

For example, the “new revenue” figures that both Obama and Boehner are talking about rely on extremely unrealistic assumptions about U.S. economic growth. In order to meet their revenue projections, the U.S. economy would need to grow significantly faster than it is right now and we would need to get through the entire decade without having a single recession.

What do you think the chance of that happening is?

But that is the way that things work in Washington D.C. – our politicians function in a world where it is assumed that everything will work out just perfectly in the future.

For example, if the figures put out at the beginning of the Bush administration were to be believed, we should be absolutely swimming in government surpluses by now.

That didn’t work out too well, did it?

The “spending cuts” are even more illusory.

Obama is projecting that we will save 130 billion dollars by manipulating the way that inflation is calculated for annual increases in Social Security benefits.

But our politicians are already pretending that there is hardly any inflation when any rational person can see that prices are soaring.

So can they really manipulate the numbers to make them look even smaller?

By doing so, they would be cheating elderly Americans out of 130 billion dollars. But I guess this is more convenient for our politicians than going after real government waste.

Obama also plans to save $290 billion by having lower interest payments on U.S. government debt.

Try not to laugh.

The average rate of interest on U.S. government debt was 2.534 percent at the end of November. That is ridiculously low. The only place it is going to go in future years is up.

Back in the year 2000, the average rate of interest on U.S. government debt was 6.638 percent. If the average rate of interest on U.S. government debt rose back to that level, we would be paying out more than a trillion dollars a year just in interest on the national debt.

So Obama’s projection that we are going to save 290 billion dollars over the next ten years by forcing interest rates on U.S. government debt even lower is insanely optimistic. Only a delusional person would make such an assumption.

And most of the savings from the “projected spending cuts” that Obama and Boehner are proposing would not happen until later in the decade.

After all, they don’t want to “hurt the economy” right now.

In fact, Obama is actually proposing that we should increase spending by $80 billion this year so that we can encourage economic activity.

So don’t let anyone fool you with any nonsense about how Obama and Boehner are working on a plan that would get U.S. government finances in order.

No matter how their “negotiations” turn out, we will continue to run trillion dollars deficits year after year with no end in sight.

If Americans want a monstrous federal government that passes out government checks like candy, then they should pay for it. Personally, I think that taxes are already way, way too high and that the government already brings in more than enough money.

If Americans don’t want to pay much higher taxes, then they should tell the government to quit spending money that we don’t have.

But all of this trying to have it both ways has got to stop. We are destroying the future for our children and our grandchildren. We have already run up 16 trillion dollars in debt and we can’t even seem to slow down our reckless debt binge. If they get the chance, someday future generations will curse us for what we did to them.

The funny thing is that John Boehner was supposed to be a “conservative” that was going to do something about all of this debt. But since John Boehner has been Speaker of the House, the U.S. House of Representatives has approved legislation that has increased the size of our national debt by approximately $18,944 per household.

Thanks John.

Meanwhile, our economy continues to unravel, good jobs are becoming even more scarce, and poverty continues to explode.

For example, did you know that there are now more than one million homeless students in America? Sadly, it’s true…

The number of homeless students in America topped one million for the first time last year as a result of the economic recession, a number that has risen 57 percent since 2007.

The US Department of Education found that of these 1,065,794 children, many lived in abandoned homes, cheap hotels, stations, church basements and hospitals. Some spent their time sleeping over at the houses of various friends whenever they could. Others fell victim to drugs and sexual abuse, in some cases trading sexual acts for food, clothing and shelter or selling illegal drugs.

Even in the midst of our debt-fueled prosperity, the number of Americans that are dependent on the government just continues to rise.

According to one recent survey, 55 percent of all Americans have received money from a safety net program run by the federal government at some point in their lives.

So how bad will things get when we eventually quit borrowing so much money and we start living within our means?

Nobody is looking forward to that day. Certainly not our politicians. They don’t want to be blamed for all of the painful adjustments that will happen once the party ends.

So they just keep borrowing and spending. But at some point the music will stop and the house of cards will come crashing down.

It won’t happen this week or this month, but it will happen soon enough.

I hope that you are ready.

Lock Your Doors And Prepare To Defend Your Family

December 2, 2012 by Michael

Do you think that is an alarmist headline? Well, I am not the one saying this. Law enforcement authorities all over the country are telling citizens that they can no longer deal with all the crime and that people need to lock their doors and prepare to defend their families. Just recently, the city attorney of San Bernardino, California told citizens to “lock their doors and load their guns” because there is not enough money to pay for adequate police protection any longer. The murder rate in San Bernardino is up 50 percent this year, but the city is dealing with bankruptcy and has been forced to lay off 80 police officers. But San Bernardino is not the only city dealing with this kind of a thing. In Oakland, burglaries are up 43 percent so far this year, and to say that there is a “crime wave” going on in Oakland would be a massive understatement. If you can believe it, in Oakland “more than 11,000 homes, cars or businesses have been broken into so far this year – translating to about 33 burglaries a day.” Sadly, there simply are not enough police to keep up with it all. Due to budget cuts, it is being projected that by February the size of the police force in Oakland will be about 25 percent smaller than it was back in 2008. But what is happening in Detroit is perhaps even more frightening. Today there are about 1,000 fewer police officers in Detroit than there was a decade ago. But crime just continues to rise. So now even the police are telling people to “enter Detroit at your own risk“. With very little police protection, an increasing number of citizens are taking matters into their own hands. As I noted in a previous article, justifiable homicide in the city of Detroit increased by 79 percent in 2011, and the rate of self-defense killings in Detroit is approximately 2200 percent above the national average. But don’t laugh at what is happening in cities like San Bernardino, Oakland and Detroit. What is happening in those cities will be coming to your community soon enough.

From coast to coast, criminals are becoming increasingly bold and increasingly desperate. My sister lives near a large city in the middle part of the country, and a house across the street from the one her family just moved into was recently vandalized. The criminals took all of the exposed copper pipe and copper wire that could be accessed easily.

Other criminals have become very focused on gold because it has soared in value and it is easy to resell. For example, there have been more than 250 gold chain robberies in Stockton, California just since the month of April. According to the CBS News affiliate in Sacramento, criminals are just ripping these chains right off of the necks of unsuspecting citizens, and many of the victims that have tried to resist have ended up getting hurt. Normally the criminals sell off the jewelry within 24 hours, so solving these crimes is a real challenge…

Most victims of the robberies are female (65 percent), and 44 percent of victims are age 50 or older, the data showed. The most common time of day for the crimes were between 12 and 5 p.m., though this only accounts for about a third of the crime.

Parino said robbers took even police by surprise initially.

“When [criminals] do these crimes, they normally get rid of the items within 24 hours,” he said.

That’s why police are now checking up on secondhand stores and pawn shops on a weekly basis.

Many dismiss reports such as these as “anomalies”, but how many “anomalies” do we need before we finally admit that we have a widespread problem in our society?

Personally, there are many major U.S. cities that I would not want to be living right in the middle of right now.

Just take a look at Chicago. It has become one of the deadliest major cities on the entire globe. In recent years we have seen massive cuts to the police budget coupled with a dramatic increase in gang activity in Chicago.

The murder rate in Chicago is way up this year and the police force is massively outnumbered.

As I have written about previously, there are only about 200 police officers assigned to Chicago’s Gang Enforcement Unit. It is their job to handle the estimated 100,000 gang members living in the city.

How would you like to be outnumbered 100,000 to 200?

When things really hit the fan, Chicago is going to be a complete and utter nightmare.

And sometimes we get a peek into how people will behave when things break down. Just look at what happened during the aftermath of Hurricane Sandy.

If you can believe it, some criminals actually took advantage of the Thanksgiving holiday to loot homes in the Breezy Point neighborhood of Queens. That was the neighborhood where approximately 100 homes burned down. The suffering of the residents of that neighborhood made headlines all over the nation. But that has not stopped criminals from moving in and taking advantage of their vulnerability…

Cops told the victims burglaries are on the rise in Breezy Point.

There were 14 home break-ins from Nov. 12 to Nov. 18, compared with none a year before.

And in the 28 days before that, there were 48 burglaries. Only four break-ins were reported in that time period the year before.

In the days after Sandy, some of the hardest-hit areas were plagued with store looting, home burglaries, street muggings and other crimes.

There are some very sick people out there. These days you simply do not know who you can trust. The person you meet on the street may be perfectly fine or they may be a total sicko. It is so hard to tell. But without a doubt there are a lot of sickos out there. Just check out what authorities in Pennsylvania found recently…

Animal welfare workers say 11 puppies were found dead and skinned near an eastern Pennsylvania park.

Sadly, authorities in that area had come across another similar incident recently…

The discovery is second disturbing incident in the county in less than a week. About 20 miles away in Lynn Township police say a dog was discovered skinned and cooked.

Who would do such things?

What in the world is happening to this country?

Things are changing, and this is just the tip of the iceberg. As conditions shift, we are all going to have to carefully evaluate what is necessary to protect our families. Don’t ignore all of the warning signs. Sticking our heads in the sand and pretending that everything is going to be okay is not going to help anything.

So what do all of you think about all of this? Please feel free to post a comment with your opinion below…

All Of This Whining About The Fiscal Cliff Is Pathetic

November 28, 2012 by Michael

The fiscal cliff is coming! Run for the hills! There have been endless stories in the mainstream media about the “fiscal cliff” that our country is facing if the Democrats and the Republicans can’t come to some sort of an agreement. If there is no agreement, taxes will go up and government spending will be reduced by a very small amount. And yes, that would likely push the U.S. economy into another recession, although there are many that would argue that we are already in a recession right now. In any event, there is a tremendous amount of distress out there about the fact that something might interrupt the debt-fueled prosperity that we have all been enjoying. You can almost hear them now: “No! Please don’t cut government spending! Please don’t raise taxes! Please keep stealing more than 100 million dollars from our children and our grandchildren every single hour of every single day so that we can continue this economic illusion that feels so very good.” The American people want the government to give everything to everybody, but they definitely do not want to pay for it. They want a big government that showers them with government checks and government benefits, but they don’t want to cough up the ridiculous amount of money that it would take to fund such a government. So we just keep ripping off our kids and our grandkids. What we are doing to future generations is not just immoral, it is criminal. If they get the chance, someday they will look back and curse us for destroying their futures and destroying their country. So why do we continue to do this to them? Because we are greedy and selfish and we are absolutely desperate to maintain the massively overinflated standard of living that we have been enjoying. We have lived way above our means for so long that we don’t even know what “normal” is supposed to be anymore.

But nobody can spend far more money than they bring in forever. At some point an adjustment comes, and our adjustment is going to be exceedingly painful.

Right now, the overwhelming consensus in the United States seems to be that we should put off any economic pain for as long as possible. The American people don’t want significant cuts to government spending and they don’t want taxes to be raised to pay for the spending that we are already doing.

But if the Republicans and the Democrats don’t agree to a deal soon, we are going to see taxes raised substantially and government spending cut by a little bit. A recent CBS News article did a good job of describing exactly what this “fiscal cliff” that we are facing actually is…

There are two parts to the so-called fiscal cliff. The first is the scheduled expiration of the tax cuts enacted in 2001 and 2003 under President George W. Bush, the payroll tax holiday enacted under President Obama, and a host of other tax breaks. The second is $1.2 trillion in automatic spending cuts to defense and domestic programs that are looming due to a 2011 deal that resulted from House Republicans’ reluctance to raise the debt limit.

Now, it’s true that if lawmakers fail to work out any sort of deal, there will be severe long-term consequences for the economy: According to the Tax Policy Center, going off the “cliff” would affect 88 percent of U.S. taxpayers, with their taxes rising by an average of $3,500 a year. Many economists, as well as the nonpartisan Congressional Budget Office, say the combination of spending cuts and tax hikes that are set to take effect would tip the economy into a new recession.

Please keep in mind that the “$1.2 trillion in automatic spending cuts” is not for a single year. When you break it down, the cuts to spending would be somewhere around 100 billion dollars a year. And a lot of those “cuts” are actually spending increases that would be cancelled. So those spending cuts would not really put much of a dent in our yearly budget deficits at all.

The tax increases would be more significant. Middle class families would be paying thousands of dollars more per year in taxes. These tax increases would raise some more revenue for the federal government, but they would also do significant damage to the economy in the short-term.

Do you know what they call a combination of government spending cuts and tax increases over in Europe?

They call it “austerity”.

Nations like Greece and Spain have tried this. They cut spending and raised taxes in an attempt to reduce government budget deficits. What happens is that the spending cuts and the tax increases cause a significant economic slowdown and this causes tax revenues to come in much lower than projected. So then more spending cuts and tax hikes are necessary in order to try to get closer to balancing the budget. But then tax revenues fall even more.

In the end, both Greece and Spain still have large budget deficits and yet the economies of both nations are suffering through depression-like conditions. The unemployment rate in both nations is now over 25 percent. Just check out this chart right here to see how nightmarish austerity has been for the economies of both Greece and Spain.

So that is why everybody is freaking out about the fiscal cliff. They don’t want to go down the same road of austerity. They want to keep living in an economic fantasy land where we can borrow our way to “prosperity”.

But it is all a lie. The lines at the Apple stores, the crazed consumers on Black Friday, the restaurants teeming full with people and the government that thinks that it can take care of everyone from the cradle to the grave and yet keep taxes low. It is all a giant lie.

And no, please do not think that I am in favor of raising taxes. I most definitely am not. I believe that the government brings in more than enough money already.

Personally, I believe that we could have a system that completely eliminates income taxes and that funds the government through tariffs and various other forms of taxation. It was good enough for the Founding Fathers and it should be good enough for us. But that is a subject for another article.

Our current system has allowed us to live way beyond our means for an extended period of time, but it is only a matter of time until it all comes crashing down.

In fact, the game is already over. We have already destroyed the future. At this point it is only a matter of how long we can keep kicking the can down the road and putting off the pain.

Sadly, what we have done on a national level is simply a reflection of our “buy now, pay later” society. We have become a nation that is constantly willing to sacrifice the future in order to make the present more pleasant.

Just check out this video. We have become addicted to a prosperity that we cannot possibly pay for. But as long as someone will keep lending us the money we will continue to enjoy it.

As I have mentioned previously, the government has spent about 11 dollars for every 7 dollars of revenue that it has actually brought in while Barack Obama has been president.

We print, borrow and spend without giving any thought to what we are doing to the future of this country. We are shredding confidence in our currency and we are wrecking the greatest economic machine that the world has ever seen.

And all of our politicians and all of our “leaders” prance about as if they are the smartest generation of Americans ever, and they think that they are an “example” for the rest of the world, but if our Founding Fathers were around today they would be absolutely horrified about what they have done to the country that they built.

If you think that the economy is bad now, you just wait.

We are still in the “economic fantasy land” phase where we are enjoying a massively inflated standard of living constructed on a mountain of borrowed fiat currency. Our economy is being held up by trillions of borrowed dollars, and all of that money makes the U.S. economy appear to be far more prosperous than it actually should be.

When we have to start living closer to what our real standard of living should be things are going to get really bad.

Most Americans simply don’t understand that if the federal government went to a balanced budget tomorrow it would instantly plunge the U.S. economy into a depression.

Just look at Greece and Spain. The same thing is going to happen to us one way or another.

So enjoy this false prosperity while you still can. This is about as good as things are going to get, and from here on out it is downhill for America.

The Giant Currency Superstorm That Is Coming To The Shores Of America When The Dollar Dies

November 27, 2012November 27, 2012 by Michael

By recklessly printing, borrowing and spending money, our authorities are absolutely shredding confidence in the U.S. dollar. The rest of the world is watching this nonsense, and at some point they are going to give up on the U.S. dollar and throw their hands up in the air. When that happens, it is going to be absolutely catastrophic for the U.S. economy. Right now, we export a lot of our inflation. Each year, we buy far more from the rest of the world than they buy from us, and so the rest of the world ends up with giant piles of U.S. dollars. This works out pretty well for them, because the U.S. dollar is the primary reserve currency of the world and is used in international trade far more than any other currency is. Back in 1999, the percentage of foreign exchange reserves in U.S. dollars peaked at 71 percent, and since then it has slid back to 62.2 percent. But that is still an overwhelming amount. We can print, borrow and spend like crazy because the rest of the world is there to soak up our excess dollars because they need them to trade with one another. But what will happen someday if the rest of the world decides to reject the U.S. dollar? At that point we would see a tsunami of U.S. dollars come flooding back to this country. Just take a moment and think of the worst superstorm that you can possibly imagine, and then replace every drop of rain with a dollar bill. The giant currency superstorm that will eventually hit this nation will be far worse than that.

Most Americans don’t realize that there are far more dollars in use in the rest of the world than in the United States itself. The following is from a scholarly article by Linda Goldberg…

The dollar is a major form of cash currency around the world. The majority of dollar banknotes are estimated to be held outside the US. More than 70% of hundred-dollar notes and nearly 60% of twenty- and fifty-dollar notes are held abroad, while two-thirds of all US banknotes have been in circulation outside the country since 1990

For decades we have been exporting gigantic quantities of our currency.

So what would happen if that process suddenly reversed and massive piles of dollars started coming back into the country?

It is frightening to think about.

Well, I guess the key is to get the rest of the world to continue to have confidence in the U.S. dollar so that will never happen, right?

Unfortunately, there are lots of signs that the rest of the world is accelerating their move away from the U.S. dollar.

For example, it was recently announced that the BRICS countries are developing their own version of the World Bank…

The BRICS (Brazil, Russia, India, China and South Africa) bloc has begun planning its own development bank and a new bailout fund which would be created by pooling together an estimated $240 billion in foreign exchange reserves, according to diplomatic sources. To get a sense of how significant the proposed fund would be, the fund would be larger than the combined Gross Domestic Product (GDP) of about 150 countries, according to Russia and India Report.

And as I noted in a previous article, over the past few years there have been a whole host of new international currency agreements that encourage the use of national currencies over the U.S. dollar. The following are just a few examples…

1. China and Germany (See Here)

2. China and Russia (See Here)

3. China and Brazil (See Here)

4. China and Australia (See Here)

5. China and Japan (See Here)

6. India and Japan (See Here)

7. Iran and Russia (See Here)

8. China and Chile (See Here)

9. China and the United Arab Emirates (See Here)

10. China, Brazil, Russia, India and South Africa (See Here)

Will this movement soon become a stampede away from the U.S. dollar?

That is a very important question.

But you don’t hear anything about this in the U.S. media and our politicians are not talking about this at all.

Meanwhile, our “leaders” seem to be doing everything that they can to destroy confidence in the U.S. dollar. The Federal Reserve is printing money like there is no tomorrow, and the federal government continues to run up trillion dollar deficits year after year.

They do not seem to understand that they are systematically destroying the U.S. financial system.

Other world leaders get it. For example, Russian President Vladimir Putin once said the following…

“Unreasonable expansion of the budget deficit, accumulation of the national debt – are as destructive as an adventurous stock market game.

During the time of the Soviet Union the role of the state in economy was made absolute, which eventually lead to the total non-competitiveness of the economy. That lesson cost us very dearly. I am sure no one would want history to repeat itself.”

Wow.

Why can’t most of our politicians see how destructive debt is?

What the federal government continues to do is absolutely insane. The national debt increased by more than 24 billion dollars on the day after Thanksgiving this year. But utter disaster has not struck yet, and most Americans are not really that concerned about the debt. So things just keep rolling along.

And of course our national debt of $16,309,738,056,362.44 is nothing when compared to the future liabilities that our federal government is facing. Just check out what a recent article in the Wall Street Journal had to say about all this…

The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.

Other economists paint an even gloomier picture. According to economist Niall Ferguson, the U.S. government is facing future unfunded liabilities of 238 trillion dollars.

So where are we going to get all that money?

Well, why don’t we just print more money than ever before so that the U.S. government can borrow and spend more money than ever before?

Don’t laugh. That is actually what some of the top economists in the country are actually recommending.

The most famous economic journalist in the entire country, Paul Krugman of the New York Times, is boldly proclaiming that the solution to all of our problems is to print, borrow and spend a lot more money. He insists that there is no reason to fear that the giant mountain of debt that we are accumulating will someday collapse the system…

For we have our own currency — and almost all of our debt, both private and public, is denominated in dollars. So our government, unlike the Greek government, literally can’t run out of money. After all, it can print the stuff. So there’s almost no risk that America will default on its debt — I’d say no risk at all if it weren’t for the possibility that Republicans would once again try to hold the nation hostage over the debt ceiling.

But if the U.S. government prints money to pay its bills, won’t that lead to inflation? No, not if the economy is still depressed.

Now, it’s true that investors might start to expect higher inflation some years down the road. They might also push down the value of the dollar. Both of these things, however, would actually help rather than hurt the U.S. economy right now: expected inflation would discourage corporations and families from sitting on cash, while a weaker dollar would make our exports more competitive.

Of course what he is prescribing is complete and utter madness.

At some point this con game is going to collapse and the rest of the world is going to say a big, fat, resounding “NO” to the U.S. dollar.

Why should they continue to use a currency that is becoming extremely unstable and that is constantly being manipulated?

And when the rest of the world rejects the U.S. dollar, the value of the dollar will drop like a rock because there will be far less global demand for it.

In addition, if the rest of the world is not using the U.S. dollar for trade any longer, other nations will cease to soak up our excess currency and huge mountains of our currency that are floating around out there will start flooding back to our shores.

At that point we will be looking at inflation unlike anything we have ever seen before. The era of cheap imports will be over and we will pay far more for everything from oil to the foreign-made plastic trinkets that we buy at Wal-Mart.

Most Americans don’t even know what a “reserve currency” is, but when the U.S. dollar loses reserve currency status it is going to unleash a nightmare that most economists cannot even imagine.

So enjoy this holiday season while you can. There are still lots and lots of cheap imports filling the shelves of our stores.

Once the coming giant currency superstorm strikes, we will dearly wish for the good old days of 2012.

Yes, the U.S. dollar is alive and ticking for now. But at the pace that our authorities are abusing it, I would not say that things are looking good for a long and healthy lifespan.

+ More