The Debt

Tipping Point: 25 Signs That The Coming Financial Collapse Is Now Closer Than Ever

The financial collapse that so many of us have been anticipating is seemingly closer then ever.  Over the past several weeks, there have been a host of ominous signs for the U.S. economy.  Yields on U.S. Treasuries have moved up rapidly and Moody’s is publicly warning that it may have to cut the rating on U.S. government debt soon.  Mortgage rates are also moving up aggressively.  The euro and the U.S. dollar both look incredibly shaky.  Jobs continue to be shipped out of the United States at a blistering pace as our politicians stand by and do nothing.  Confidence in U.S. government debt around the globe continues to decline.  State and local governments that are drowning in debt across the United States are savagely cutting back on even essential social services and are coming up with increasingly “creative” ways of getting more money out of all of us.  Meanwhile, tremor after tremor continues to strike the world financial system.  So does this mean that we have almost reached a tipping point?  Is the world on the verge of a major financial collapse?

Let’s hope not, but with each passing week the financial news just seems to get eve worse.  Not only is U.S. government debt spinning wildly toward a breaking point, but many U.S. states (such as California) are in such horrific financial condition that they are beginning to resemble banana republics.

But it is not just the United States that is in trouble.  Nightmarish debt problems in Greece, Spain, Portugal, Ireland, Italy, Belgium and several other European nations threaten to crash the euro at any time.  In fact, many economists are now openly debating which will collapse first – the euro or the U.S. dollar.

Sadly, this is the inevitable result of constructing a global financial system on debt.  All debt bubbles eventually collapse.  Currently we are living in the biggest debt bubble in the history of the world, and when this one bursts it is going to be a disaster of truly historic proportions.

So will we reach a tipping point soon?  Well, the following are 25 signs that the financial collapse is rapidly getting closer….

#1 The official U.S. unemployment rate has not been beneath 9 percent since April 2009.

#2 According to the U.S. Census Bureau, there are currently 6.3 million vacant homes in the United States that are either for sale or for rent.

#3 It is being projected that the U.S. trade deficit with China could hit 270 billion dollars for the entire year of 2010.

#4 Back in 2000, 7.2 percent of blue collar workers were either unemployed or underemployed.  Today that figure is up to 19.5 percent.

#5 The Chinese government has accumulated approximately $2.65 trillion in total foreign exchange reserves.  They have drained this wealth from the economies of other nations (such as the United States) and instead of reinvesting all of it they are just sitting on much of it.  This is creating tremendous imbalances in the global economy.

#6 Since the year 2000, we have lost 10% of our middle class jobs.  In the year 2000 there were approximately 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.

#7 The United States now employs about the same number of people in manufacturing as it did back in 1940.  Considering the fact that we had 132 million people living in this country in 1940 and that we have well over 300 million people living in this country today, that is a very sobering statistic.

#8 According to CoreLogic, U.S. housing prices have now declined for three months in a row.

#9 The average rate on a 30 year fixed rate mortgage soared 11 basis points just this past week.  As mortgage rates continue to push higher it is going to make it even more difficult for American families to afford homes.

#10 22.5 percent of all residential mortgages in the United States were in negative equity as of the end of the third quarter of 2010.

#11 The U.S. monetary base has more than doubled since the beginning of the most recent recession.

#12 U.S. Treasury yields have been rising steadily during the 4th quarter of 2010 and recently hit a six-month high.

#13 Incoming governor Jerry Brown is scrambling to find $29 billion more to cut from the California state budget.  The following quote from Brown about the desperate condition of California state finances is not going to do much to inspire confidence in California’s financial situation around the globe….

“We’ve been living in fantasy land. It is much worse than I thought. I’m shocked.”

#14 24.3 percent of the residents of El Centro, California are currently unemployed.

#15 The average home in Merced, California has declined in value by 63 percent over the past four years.

#16 Detroit Mayor Dave Bing has come up with a new way to save money.  He wants to cut 20 percent of Detroit off from essential social services such as road repairs, police patrols, functioning street lights and garbage collection.

#17 The second most dangerous city in the United States – Camden, New Jersey – is about to lay off about half its police in a desperate attempt to save money.

#18 In 2010, 55 percent of Americans between the ages of 60 and 64 were in the labor market.  Ten years ago, that number was just 47 percent.  More older Americans than ever find that they have to keep working just to survive.

#19 Back in 1998, the United States had 25 percent of the world’s high-tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China’s share had soared to 20 percent.

#20 The U.S. government budget deficit increased to a whopping $150.4 billion last month, which represented the biggest November budget deficit on record.

#21 The U.S. government is somehow going to have to roll over existing debt and finance new debt that is equivalent to 27.8 percent of GDP in 2011.

#22 The United States had been the leading consumer of energy on the globe for about 100 years, but this past summer China took over the number one spot.

#23 According to an absolutely stunning new poll, 40 percent of all U.S. doctors plan to bail out of the profession over the next three years.

#24 As 2007 began, there were just over 1 million Americans that had been unemployed for half a year or longer.  Today, there are over 6 million Americans that have been unemployed for half a year or longer.

#25 All over the United States, local governments have begun instituting “police response fees”.  For example, New York Mayor Michael Bloomberg has come up with a plan under which a fee of $365 would be charged if police are called to respond to an automobile accident where no injuries are involved.  If there are injuries as a result of the crash that is going to cost extra.

Need A Job? Too Bad! The Good Jobs Are Being Shipped Out Of America As Part Of The New One World Economy

I hope that you enjoy the cheap foreign-made plastic trinkets that you will be exchanging with your family and friends this holiday season, because they are literally destroying the U.S. economy.  As part of the new “one world economy” that both Democrats and Republicans insist is so good for us, millions of good paying middle class jobs have been shipped out of America.  Do you need a job?  Are you wondering where all the good jobs went?  Well, the next time you are out just walk into a store and start looking at the product labels.  Most of the things that are sold in our stores are now made out of the country.  So if you need a good paying job to support your family that is just too bad – you have been merged into a global labor pool where you must compete for jobs with people on the other side of the globe willing to work for less than a tenth of what you usually make.  Welcome to the “one world economy” where big global corporations make a fortune exploiting slave labor on the other side of the world while “overly expensive American workers” get dumped out on the street.

Are you in favor of a redistribution of wealth?  Most of the time when the phrase “redistribution of wealth” is brought up, conservatives and libertarians visibly cringe – as they should.  But did you know that right now the greatest redistribution of wealth in the history of the world is taking place and our politicians are doing nothing about it?

For a moment, imagine a giant map of the world.  On that giant map, put a huge pile of money on the United States, and also put a huge pile of money on China and on the OPEC nations.  Now imagine a big hand coming along once a month that takes tens of billions of dollars out of the U.S. pile and puts it into the piles of China and the OPEC nations.

As this continues month after month after month, what is eventually going to happen?

The U.S. pile of money is going to get far smaller and the other piles of money are going to get much, much larger.

And that is exactly what is happening in our world today.

Back in 1985, the U.S. trade deficit with China was 6 million dollars for the entire year – not really anything to worry about  it.

Well, let’s fast forward to 2010.  For the month of August alone, the trade deficit with China was more than 28 billion (that’s billion with a “b”) dollars.

In other words, the U.S. trade deficit with China in August was more than 4,600 times larger than the U.S. trade deficit with China was for the entire year of 1985.

My, how the world has changed in 25 years.

Oh, but doesn’t China “invest” some of that money they are getting from us back into our country?

Well yeah, our top officials regularly go over there to beg them to lend us more money.  Now we owe China close to a trillion dollars.  We also owe the major oil exporting nations of the Middle East massive amounts of money.

Is this a good idea?  Let us keep in mind the ancient principle that the borrower always ends up the servant of the lender.

Is it wise for the United States to become enslaved to China and to the oil exporters of the Middle East?

Is that any way to run an economy?  Is that any way to run a country?

All over the United States factories are closing down.  If you go to shopping centers in many areas of America you would think that the hottest new store was called “Space Available”.

Since the year 2000, we have lost 10% of our middle class jobs.  In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.

What kind of progress is that?

“But oh”, the supporters of the one world economy will declare, “the cheap goods, the cheap goods!”

Yes, I hope you enjoy paying ten percent less for your plastic trinkets.  But you will also support American workers one way or another.  Either you will provide them with good paying jobs, or you will pay for their food stamps and their unemployment checks.

One out of every six Americans is now enrolled in a federal anti-poverty program.  As 2007 began, 26 million Americans were on food stamps, but now 42 million Americans are on food stamps and that number keeps rising every single month.

Can anyone out there please explain how the “one world economy” is supposed to be good for us when 42 million Americans cannot even feed themselves?

Allowing our country to be deindustrialized just so that we can consume more cheap goods from China is like tearing down pieces of your house to keep your fire going.  In the end, you won’t have much of a house left.

Whatever your opinion of Donald Trump is, this next video is worth watching.  Trump certainly should not run for president, but as a savvy businessman he definitely understands what China is doing to us….

It is time for the American people to wake up.

We are being taken advantage of.

The one world economy is going to keep destroying the U.S. middle class.  There is no way that American workers can compete with slave labor on the other side of the globe.  It is impossible.

In fact, just about every kind of job imaginable is being shipped to places where labor is cheaper.  Even engineering and computer programming jobs are being offshored and outsourced.

The United States is even being slaughtered in high-tech industries.  Back in 1998, the United States had 25 percent of the world’s high-tech export market and China had just 10 percent. Ten years later, the United States had less than 15 percent and China’s share had soared to 20 percent.

According to one recent study, China could become the global leader in patent filings by next year.

The United States has become a bloated, slovenly nation that consumes massive amounts of wealth but that produces relatively little.

With each passing year, we make fewer things inside the United States….

*The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

*Since 2001, over 42,000 U.S. factories have closed down for good.

*As of the end of 2009, less than 12 million Americans worked in manufacturing.  The last time that less than 12 million Americans were employed in manufacturing was in 1941.

*Manufacturing employment in the U.S. computer industry is actually lower in 2010 than it was in 1975.

*In 2010, the number one U.S. export to China is “scrap and trash”.

Oh, but won’t “getting more education” solve all of our problems and get the American people back to work?

No.

The truth is that tens of millions of Americans have a “higher education” that is not doing them any good today.

In his article entitled “The Great College-Degree Scam“, Richard Vedder explains that a large percentage of U.S. college graduates are working in jobs that have not historically required college degrees….

Here it is:  approximately 60 percent of the increase in the number of college graduates from 1992 to 2008 worked in jobs that the BLS considers relatively low skilled—occupations where many participants have only high school diplomas and often even less.

Ouch.

Later on in his article, Vedder notes that the number of college graduates that are waiting tables or that are working as cashiers is absolutely exploding….

In 1992 119,000 waiters and waitresses were college degree holders. By 2008, this number had more than doubled to 318,000. While the total number of waiters and waitresses grew by about 1 million during this period, 20% of all new jobs in this occupation were filled by college graduates. Take cashiers as well. While 132,000 cashiers possessed college degrees in 1992, by 2008, 365,000 cashiers were college graduates. As with waiters and waitresses, 20% of new cashiers since 1992 are college graduates.

So do you still think that the “one world economy” is a great idea?

Well, you might want to practice the following two phrases….

#1 “Would you like fries with that?”

#2 “Welcome to Wal-Mart!”

Our economy is turning into a low-wage service economy because we don’t make much of anything in the United States anymore.

So if you need a good job, I am afraid that the joke is on you.

The good jobs are being shipped out of the United States as part of the new one world economy, and millions of unemployed Americans have been left to fight over the low paying service jobs that remain.

So if you are flipping burgers or stocking shelves for a big multinational retail chain, perhaps you should consider yourself to be fortunate.  At least you still have a job.  There are millions of desperate, hungry-eyed Americans that would take your job in a second.

And you know what?  Things are only going to get worse.

10 Signs That Confidence In U.S. Treasuries Is Dying And That Financial Armageddon May Be Approaching

Selling government debt is a gigantic confidence game.  For decades, investors all over the globe have gobbled up massive amounts of U.S. debt at incredibly low interest rates because they believed that it was a certainly that they would be paid back and be able to make a little bit of profit on top of it.  Unfortunately, things have changed.  Confidence is U.S. Treasuries is dying, and if confidence in U.S. government debt completely collapses at some point we could literally be looking at financial Armageddon.  Why is that so?  Well, when the world totally loses faith in U.S. Treasuries, interest rates on U.S. Treasuries will have to keep going up until enough investors are found to buy them.  But much higher interest rates will mean much higher interest on the national debt and thus much higher federal budget deficits.  That will erode confidence in U.S. Treasuries even further.  In the end, a vicious cycle of eroding confidence and higher interest rates could ultimately lead to hyperinflation as the U.S. government and the Federal Reserve flood the system with endless amounts of paper money to try to keep the system solvent.

Faith in U.S. Treasury bonds is absolutely critical if the world financial system is going to continue to operate in a stable manner.  In the post-World War 2 era, U.S. Treasuries have been largely viewed as the absolutely safest investment out there.  So if there comes a point when the market for U.S. Treasuries completely collapses, it is going to cause unprecedented financial chaos.  The worldwide derivatives market, which is already highly unstable, would almost certainly implode.  Credit markets all over the globe would seize up.  Global trade would quickly grind to a standstill.

This isn’t going to happen overnight (hopefully).  Rather, the loss of confidence in U.S. Treasuries is something that is likely to take months or even years to play out.  But once that confidence is gone, it is not something that will be able to be rebuilt easily.

Think of it this way – once you drive a car off a cliff, is it easy to reconstruct it?

Of course not.

Well, that is where we are headed with U.S. Treasuries.

The Federal Reserve is flooding the system with new dollars, Barack Obama and the U.S. Congress seem poised to pass a new tax deal which does not include corresponding spending cuts which will cause U.S. government budget deficits to become even more bloated, and there is a tremendous lack of faith both in U.S. political leaders and in the Federal Reserve at this point.

The rest of the world is losing faith that the U.S. government is going to be able to handle all of the debt that it has accumulated.  We may be approaching a “tipping point” soon.

The following are 10 signs that confidence in U.S. Treasuries is dying….

#1 The financial community is extremely concerned that the tax deal that Barack Obama is pushing is going to dramatically increase U.S. government budget deficits over the next two years.  On Monday, Moody’s warned that if Barack Obama’s tax deal with the Republicans becomes law, it will increase the likelihood that Moody’s could soon be forced to slash the rating of U.S. government debt.

#2 Already there are signs that some bond investors are looking for the exits.  Last week, U.S. Treasuries suffered their largest  two day sell-off since the collapse of Lehman Brothers back in September 2008.

#3 The yield on 10-year Treasury bonds set a six-month high on Monday before pulling back a bit.  Most analysts believe that Treasury yields are going to push significantly higher in coming weeks.

#4 This trend of rising yields has been going on for a while.  In fact, yields on 10-year Treasury bonds have been steadily rising since October 7th.

#5 Even before the recent tax deal was announced there were already troubling signs regarding the growth of U.S. government debt.  The U.S. government budget deficit rose to $150.4 billion in November, which was the largest November budget deficit ever recorded.

#6 It is not just the new tax deal that has investors around the globe spooked.  The truth is that the rest of the globe reacted very negatively to the new round of quantitative easing that the Federal Reserve announced back in November.  The Federal Reserve is flooding the system with liquidity and the rest of the world is not amused.

#7 The American people have less faith in the Federal Reserve and in the financial system than at any other point in recent memory.  For example, a new Bloomberg National Poll has found that a majority of Americans now want the Federal Reserve to either be held more accountable or to be abolished entirely.

#8 Investors all over the globe are starting to wake up and realize that America’s debt problem is unsolvable.  David Bloom, the currency chief at HSBC, raised eyebrows when he recently stated that “if yields are rising because people think America’s fiscal situation is unsustainable, then its Armaggedon.”

#9 There is also a growing feeling among investors that the Federal Reserve simply does not care about the danger of inflation, and this is making bondholders very nervous.  Stephen Lewis of Monument Securities recently put it this way….

“There is a feeling that the Fed doesn’t care about inflation – in fact, wants more of it – and that is certainly not in the interest of bondholders.“

#10 Over the next 12 months, the U.S. government is going to be rolling over trillions of dollars in debt along with all of the new borrowing that it is going to be doing. In fact, the U.S. government is somehow going to have to find a way to finance debt that is equivalent to 27.8 percent of GDP in 2011.

For years our politicians have told us that “deficits don’t matter”, but the truth is that they do matter.  The national debt of the United States is now the biggest debt in the history of the world by far, and yet most Americans do not seem to grasp the absolute financial horror that we are facing as a nation.

In the end, debt is always painful.  It can be a lot of fun to run out and buy a beautiful new house, a couple of brand new cars and to run your credit cards up to the max, but eventually it catches up with you.  Well, the same thing is now happening to us on a national level.

We are getting to the point where eventually we are not even going to be able to service the debt that we have already piled up.  Once that happens we can either declare national bankruptcy or we can try to hyperinflate our way out of trouble.

Meanwhile, the once great U.S. economic machine is dying as well.  The only reason we have been able to survive with all of this debt as long as we have is because of how powerful our economy has been.

But over the past couple of decades, the big global corporations that now dominate our economy have shipped thousands of factories and millions of jobs overseas.

The mighty economic machine which is supposed to provide funds to pay off all of this debt is being dismantled right in front of our eyes.

There was no way in the world that U.S. government debt was going to be sustainable even if our economy remained vibrant and healthy.  The sad truth is that U.S. government debt is approximately 13 times larger than it was just 30 years ago.

But now that the “real economy” is dying a savage death there is simply no hope that this thing is ever going to turn around.  The only thing left to do is to take bets on when the implosion is going to happen.

All of this “great tax cut debate” nonsense going on in Washington D.C. right now is just a bunch of incompetent politicians running around rearranging the deck chairs on the Titanic.  Perhaps these tax cuts will provide enough of a short-term economic boost to get many of them re-elected in 2012.  Meanwhile, our long-term economic problems continue to get a lot worse.

It has become quite obvious that Barack Obama is completely clueless about the economy, and what is even sadder is that the “highly educated” Chairman of the Federal Reserve, Ben Bernanke, seems almost equally as clueless.

Unfortunately, Americans have become so dumbed-down that they don’t even realize that their leaders are incompetent.  In fact, as sad as it is to say, most Americans you will meet on the street probably cannot even tell you what U.S. Treasuries are.

Let us hope and pray that investors around the globe continue to have at least some confidence in U.S. Treasuries for at least a little while longer.  When “financial Armageddon” finally does happen, it isn’t going to be pleasant for any of us.

So enjoy these happy economic times while you still have them, because at some point things are going to get a whole lot worse.

Derivatives: The Quadrillion Dollar Financial Casino Completely Dominated By The Big International Banks

If you took an opinion poll and asked Americans what they considered the biggest threat to the world economy to be, how many of them do you think would give “derivatives” as an answer?  But the truth is that derivatives were at the heart of the financial crisis of 2007 and 2008, and whenever the next financial crisis happens derivatives will undoubtedly play a huge role once again.  So exactly what are “derivatives”?  Well, derivatives are basically financial instruments whose value depends upon or is derived from the price of something else.  A derivative has no underlying value of its own.  It is essentially a side bet.  Today, the world financial system has been turned into a giant casino where bets are made on just about anything you can possibly imagine, and the major Wall Street banks make a ton of money from it.  The system is largely unregulated (the new “Wall Street reform” law will only change this slightly) and it is totally dominated by the big international banks.

Nobody knows for certain how large the worldwide derivatives market is, but most estimates usually put the notional value of the worldwide derivatives market somewhere over a quadrillion dollars.  If that is accurate, that means that the worldwide derivatives market is 20 times larger than the GDP of the entire world.  It is hard to even conceive of 1,000,000,000,000,000 dollars.

Counting at one dollar per second, it would take you 32 million years to count to one quadrillion.

So who controls this unbelievably gigantic financial casino?

Would it surprise you to learn that it is the big international banks that control it?

The New York Times has just published an article entitled “A Secretive Banking Elite Rules Trading in Derivatives“.  Shockingly, the most important newspaper in the United States has exposed the steel-fisted control that the big Wall Street banks exert over the trading of derivatives.  Just consider the following excerpt from the article….

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

Does that sound shady or what?

In fact, it wouldn’t be stretching things to say that these meetings sound very much like a “conspiracy”.

The New York Times even named several of the Wall Street banks involved: JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup.

Why does it seem like all financial roads eventually lead back to these monolithic financial institutions?

The highly touted “Wall Street reform” law that was recently passed will implement some very small changes in how derivatives are traded, but these giant Wall Street banks are pushing back hard against even those very small changes as the article in The New York Times noted….

“The revenue these dealers make on derivatives is very large and so the incentive they have to protect those revenues is extremely large,” said Darrell Duffie, a professor at the Graduate School of Business at Stanford University, who studied the derivatives market earlier this year with Federal Reserve researchers. “It will be hard for the dealers to keep their market share if everybody who can prove their creditworthiness is allowed into the clearinghouses. So they are making arguments that others shouldn’t be allowed in.”

So why should we be so concerned about all of this?

Well, because the truth is that derivatives could end up crashing the entire global financial system.

In fact, the danger that we face from derivatives is so great that Warren Buffet once referred to them as “financial weapons of mass destruction”.

In a previous article, I described how derivatives played a central role in almost collapsing insurance giant AIG during the recent financial crisis….

Most Americans don’t realize it, but derivatives played a major role in the financial crisis of 2007 and 2008.

Do you remember how AIG was constantly in the news for a while there?

Well, they weren’t in financial trouble because they had written a bunch of bad insurance policies.

What had happened is that a subsidiary of AIG had lost more than $18 billion on Credit Default Swaps (derivatives) it had written, and additional losses from derivatives were on the way which could have caused the complete collapse of the insurance giant.

So the U.S. government stepped in and bailed them out – all at U.S. taxpayer expense of course.

As the recent debate over Wall Street reform demonstrated, the sad reality is that the U.S. Congress is never going to step in and seriously regulate derivatives.

That means that a quadrillion dollar derivatives bubble is going to perpetually hang over the U.S. economy until the day that it inevitably bursts.

Once it does, there will not be enough money in the entire world to fix it.

Meanwhile, the big international banks will continue to run the largest casino that the world has ever seen.  Trillions of dollars will continue to spin around at an increasingly dizzying pace until the day when a disruption to the global economy comes along that is serious enough to crash the entire thing.

The worldwide derivatives market is based primarily on credit and it is approximately ten times larger than it was back in the late 90s.  There has never been anything quite like it in the history of the world.

So what in the world is going to happen when this thing implodes?  Are U.S. taxpayers going to be expected to pick up the pieces once again?  Is the Federal Reserve just going to zap tens of trillions or hundreds of trillions of dollars into existence to bail everyone out?

If you want one sign to watch for that will indicate when an economic collapse is really starting to happen, then watch the derivatives market.  When derivatives implode it will be time to duck and cover.  A really bad derivatives crash would essentially be similar to dropping a nuke on the entire global financial system.  Let us hope that it does not happen any time soon, but let us also be ready for when it does.

Start A Business? In The United States? Are You Kidding Me?

Many of you have decided that you are going to attempt to start a business in the United States today.  Many of you are still convinced that this is “the land of opportunity” and that starting a business is fairly easy.  Are you sure about that?  Are you certain that you have considered all of the headaches involved?  Are you sure that you are ready to handle the thousands of regulations that apply to your business and the mountains of paperwork mandated by various levels of government?  Are you prepared to deal with entrenched unions, predatory lawyers and rabid environmentalists?  The truth is that the business environment has never been this toxic in all of U.S. history.  So even if you are able to start a viable business that can compete with the monolithic global corporations that dominate our economy, you still might not be able to make it.  In the end, thousands upon thousands of businesses across America have been doomed to failure by ridiculous regulations, mountains of paperwork, health insurance costs, predatory lawsuits or corrupt government officials.  So do you really think that you can beat the odds?

Historically, small businesses have been the driving force behind America’s economic growth.  But today, we have made the business environment so complicated that small business owners are being completely smothered by red tape.

The following are 10 areas that anyone wishing to start a small business had better think about before moving forward.  When you really stop and think about it, the fact that anyone out there is still attempting to start small businesses in America today is absolutely amazing.

#1 Regulations

If you plan to start a business in America today, you better get a hold of a good lawyer.  In fact, if you want to be safe, you better get a small army of lawyers.  You are going to need an expert on the federal regulations that apply to your business, you are going to need an expert on the state regulations that apply to your business and you are going to need an expert on the local regulations that apply to your business.

There are going to literally be thousands of regulations that apply to any business started inside the United States today.  There is no way that you will ever be able to learn them all.  Not only that, but the truth is that your lawyers will only be aware of a small fraction of them.

Do you know what the Federal Register is?  The Federal Register is the primary source of regulations for U.S. government agencies.  In 1936, the number of pages in the Federal Register was about 2,600.  Today, the Federal Register is over 80,000 pages long.  That is just one example of how bad things have gotten.

So what do you do?  Well, just do your best to try to learn about the major regulations that apply to your business and pray that you don’t end up violating some important regulation that you are not even aware of.

#2 Paperwork

Do you know what paperwork the federal government expects you to fill out?  Do you know what paperwork the state government expects you to fill out?  Do you know what paperwork the city or the county expect you to fill out?  Do you know what paperwork you will be required to fill out when hiring a new employee?

The truth is that the paperwork burden on small businesses has multiplied in recent years.  Many small business owners are so swamped with paperwork that they barely have time to conduct their actual businesses.

For example, the U.S. Food and Drug Administration is projecting that the food service industry will have to spend an additional 14 million hours every single year just to comply with a new federal regulation that mandates that all vending machine operators and chain restaurants must label all products that they sell with a calorie count in a location visible to the consumer.

14 million hours just to comply with one ridiculous regulation?  Yes, that is how bizarre things have gotten in America in 2010.

#3 Fees And Fines

Many small business creators in America are absolutely horrified to learn of the fees and fines that they must pay before they can ever even open their doors.  Much of the time it is revenue-starved local governments that are the biggest culprits.

For example, a reader of this column named Gene recently shared his regulatory horror story with us….

Started a new business this year in AZ. Paid over $10,000 in fees for permitting, $10,000 in fee for elec hookup, $10,000 in fees for gas hook up and an extra $200 fee per month just for the “privilige” of having gas. Adding up all the fees to start our business, I don’t think we would do it again. We are now just getting to the point that we are making our bills each month, and so we are not taking a paycheck, and don’t anticipate one for at least another year. Our family has been in business for ourselves for decades,and we know what we are doing, but the rising fees caught us off guard. Cities, municipalities, counties and states are raising all fees at astronomical rates to help offset the slump in their real estate income (since banks apparently don’t have to pay real estate taxes)…I’m telling you every business person I know is on their last leg.

#4 Taxes

The United States has one of the most (if not the most) repressive business taxation scheme in the world.  As a small business owner, do you know what taxes you will be expected to pay?  It is not just federal income taxes and state income taxes that you will be paying.  In a previous article, I detailed the various forms of taxes that Americans pay each year and most of them apply to small businesses as well….

Accounts Receivable Taxes

Building Permit Taxes

Capital Gains Taxes

CDL license Taxes

Cigarette Taxes

Corporate Income Taxes

Court Fines (indirect taxes)

Dog License Taxes

Federal Income Taxes

Federal Unemployment Taxes (FUTA)

Fishing License Taxes

Food License Taxes

Fuel permit taxes

Gasoline Taxes

Gift Taxes

Hunting License Taxes

Inheritance Taxes

Inventory tax IRS Interest Charges (tax on top of tax)

IRS Penalties (tax on top of tax)

Liquor Taxes

Local Income Taxes

Luxury Taxes

Marriage License Taxes

Medicare Taxes

Payroll Taxes

Property Taxes

Real Estate Taxes

Recreational Vehicle Taxes

Road Toll Booth Taxes

Road Usage Taxes (Truckers)

Sales Taxes

Self-Employment Taxes

School Taxes

Septic Permit Taxes

Service Charge Taxes

Social Security Taxes

State Income Taxes

State Unemployment Taxes (SUTA)

Telephone federal excise taxes

Telephone federal universal service fee taxes

Telephone federal, state and local surcharge taxes

Telephone minimum usage surcharge taxes

Telephone recurring and non-recurring charges taxes

Telephone state and local taxes

Telephone usage charge taxes

Toll Bridge Taxes

Toll Tunnel Taxes

Traffic Fines (indirect taxation)

Trailer registration taxes

Utility Taxes

Vehicle License Registration Taxes

Vehicle Sales Taxes

Watercraft registration Taxes

Well Permit Taxes

Workers Compensation Taxes

#5 Health Insurance

Do you know if you will be required to provide health insurance for your new employees?  Have you familiarized yourself with the new 2,409 page health care law enough to be able to set up a health insurance program?

As a result of the new health care law, health insurance premiums for employees are shooting through the roof.  Are you going to be able to afford them?  Would it be better to have fewer employees and work each of them harder so that you won’t have to provide health coverage for as many people?

Will you be able to compete with the companies in your industry that have received waivers from having to comply with the new health care law?

In the United States, our system places the burden of providing health care on to the backs of employers.  So are you ready to handle that burden?

#6 Pensions

Will the employees of your new business need pensions?  Do you know how to set up a 401K program?  Do you know what defined benefit plans are?

You can literally sit through an entire law school course on pension law and still understand virtually nothing about the subject.  The truth is that if you plan to provide your employees with some kind of pension program you had better hire someone who can at least pretend that they know what they are talking about to set it up for you.

#7 Foreign Competition

Especially if you are creating a small business that does manufacturing, you are going to have to deal with foreign competition.

So are you going to be able to compete with the companies in your industry that pay their workers on the other side of the world less than a tenth of what you are paying to your American workers?

On the other side of the world, companies often don’t have to worry about unions, worker’s comp, health benefits, retirement benefits, nightmarish environmental regulations, crushing taxes or miles of paperwork and red tape.

Are you certain that you can compete against that?

#8 Lawsuits

The more successful you become, the more inviting of a target you are going to be for predatory lawsuits.  The truth is that the courtrooms of America are packed with thousands of them, and the lawyers that bring them are hardly ever held accountable.

All of your hard work can go down the drain in a single moment.  There are hordes of lawyers out there that make their living by filing lawsuits against small to mid-size businesses.

The truth is that if you are running a small business, you are probably doing something wrong.

Just hope and pray that a predatory lawyer does not find out.

#9 Environmentalists

Protecting the environment is a good thing.  Unfortunately, there are many radical “environmentalist” groups that consider it to be a bad thing that humans even breathe because it produces carbon dioxide.

When Audi ran their now famous “Green Police” commercial during the Super Bowl last year, most Americans laughed it off and thought that nothing like that could ever happen in America.  Well, it turns out that it is happening in America.

Not only are government environmental regulations totally nightmarish at this point, but there are a growing number of radical environmentalist groups that are running around the country filing lawsuits against whoever they feel like.

#10 The Federal Government

Are you prepared for a federal government that can literally change all the rules at any time?

Many businesses across America are frozen in their tracks at this point because they don’t know what Obama and the U.S. Congress are going to do next.

The truth is that things are getting really bizarre in this country.  For example, federal agents recently raided an Amish farm at 5 A.M. in the morning because they were selling “unauthorized” raw milk.

If federal agents will raid an Amish farmer at 5 AM in the morning over some raw milk, do you think that they are going to have any mercy on your small business when the time comes?

The America that once embraced “free enterprise” and the entrepreneurial spirit is dead and gone.

Now we are a country filled with bureaucrats and red tape from sea to shining sea.

Is it any wonder why we can’t compete with the rest of the world?

Is it any wonder why so many millions of Americans are unemployed and can’t find jobs?

In an attempt to “solve” our problems we just keep passing more “reform” which means even more rules and regulations for our businesses to follow.

Just as they are doing on an individual level, the government is attempting to watch, track and control everything that our businesses are doing.

Everywhere you look in American society today, the government is gradually tightening the steel-fisted grip that is has around everyone and everything.  Pretty soon you won’t even be able to sneeze without the government telling you how to do it correctly.

Is that really the kind of society that we all want to live in?

What a nightmare.

Do you have a horror story from starting a business in America that you would like to share?  If so, please feel free to post it in the comments section below….

Will Ron Paul Be Able To End The Fed?

Is Ron Paul finally in position to really do something about the Federal Reserve?  U.S. Representative Spencer Bachus, the chairman-elect of the House Financial Services Committee, has announced that Ron Paul will chair the domestic monetary policy subcommittee starting next month.  This puts Ron Paul in tremendous position to be able to put significant pressure on the Federal Reserve.  In previous years Ron Paul has introduced legislation to end the Federal Reserve but it never got any traction.  During this most recent session of Congress an effort by Ron Paul to have a full audit of the Federal Reserve conducted gathered quite a bit of momentum for a while, but in the end it did not get passed.  However, a very limited examination of Fed activities during the recent financial crisis was passed, and that examination has revealed some really shocking things.  With so many Tea Party members entering Congress this upcoming session there may be more momentum than ever to hold the Federal Reserve more accountable.  Ron Paul is already talking about how he is planning for a full slate of hearings on U.S. monetary policy and he has indicated that he plans to restart a push to have the Fed audited.

And why shouldn’t the Federal Reserve be fully audited?  The Federal Reserve has more power over the U.S. economy than any other institution and yet it has not been subjected to a comprehensive audit since it was created back in 1913.

So what would an audit accomplish?

Well, it would hopefully expose what is going on inside the Federal Reserve.

A very, very limited examination of Fed transactions that occurred during the recent financial crisis forced the Federal Reserve to reveal the details of 21,000 transactions stretching from December 2007 to July 2010 that totaled more than 3 trillion dollars.  It turns out that the Federal Reserve was just handing out gigantic piles of nearly interest-free cash to their friends at the largest banks, financial institutions and corporations all over the globe.

These revelations have many members of Congress wondering what else has been going on inside the Federal Reserve.

For example, U.S. Senator Bernie Sanders was absolutely outraged by these “backdoor bailouts” by the Federal Reserve….

“The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution.”

More members of Congress than at any other time in recent memory are openly wondering if it is now time “to pull back the curtain” at the Federal Reserve.  For those who would like to see the power of the Federal Reserve greatly diminished, there should be one primary goal right now.

Expose the Federal Reserve.

The truth is that the more the American people learn about the Federal Reserve and about what it has been doing the more they disapprove.

During his farewell speech on the floor of the U.S. Senate this week, Senator Jim Bunning noted that as the American people become increasingly aware of what the Federal Reserve is doing the less they like it….

“Public awareness of what the Fed is doing is increasing while public opinion of the Fed is falling.”

Unfortunately, the views of Ron Paul and other anti-Federal Reserve members of the Tea Party movement are strongly opposed by many other members of the Republican Party.

In a recent Bloomberg Television interview, Barney Frank noted this division within the ranks of the Republicans….

“I do not believe that Ron Paul’s views on the Fed represent the views of most Republicans.”

However, there is evidence that the tide is turning with the American public.

According to a recent Bloomberg National Poll, the number of Americans that would like to see the Federal Reserve held more accountable or even completely abolished is increasing….

Asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Only 37 percent favor the status quo.

Those are very exciting numbers.  A majority of Americans now want the power of the Federal Reserve to be reduced or they want it shut down entirely.

If Ron Paul is able to get a comprehensive audit of the Federal Reserve passed, the revelations that would come out of that would certainly turn public opinion against the Fed even more.

So what is so bad about the Federal Reserve?

Well, think of it as a perpetual debt machine.

Did you know that the U.S. national debt is 5,000 times larger than it was a hundred years ago?

That’s right – back in 1910, prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion.

Since that time, our debt has been endlessly skyrocketing.

Under the Federal Reserve system, the U.S. government cannot just go out and print money.  It is actually the Federal Reserve that issues our currency.

The way our system works, whenever the U.S. government arranges for the Federal Reserve to issue more currency, more government debt is created at the same time.  In fact, as I have written about previously, all of our money is now based on debt.

No debt, no money.

What we desperately need is for the current monetary system to be scrapped.  The federal government should take back the power to issue currency and should implement a new system based on money that is debt-free.

The truth is that it is insane that any sovereign government should have to go into debt just to produce more of its own currency.

Instead, what we have under the Federal Reserve system is a money supply that will forever be expanding, a currency that will forever be deteriorating in value and a national debt that will continue to skyrocket until the entire system collapses.

Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power.  This continual debasement of our currency is called “inflation” and it is a hidden tax on every man, woman and child in the United States.

It is absolutely guaranteed that every single dollar that you own will go down in value over the long-term.

But the American people have come to accept that a constantly expanding national debt and a currency that is constantly losing value is the most “rational” economic system that humanity has ever come up with.

So who benefits from all this?

Well, for fiscal year 2010 the U.S. government paid out over 413 billion dollars in interest on the national debt.  In future years that number is projected to rapidly skyrocket even more.

Wouldn’t you like to be getting a nice chunk of that 413 billion dollars?

It turns out that loaning money to the U.S. government is very, very profitable.

That 413 billion dollars is money that was transferred from the American people to the U.S. government, and then transferred from the U.S. government to big financial institutions, foreign countries, and very wealthy bankers.

So what did we get in return for our 413 billion dollars?

Nothing.

Sadly, this is not just going on in the United States.  This is going on literally in almost every nation on earth.

All over the world sovereign governments are drowning in debt and so they have to drain their citizens dry so that they can meet their obligations.

In the book of Proverbs, it tells us that “the rich ruleth over the poor, and the borrower is servant to the lender.”  Americans like to think that they live in “the land of the free”, but the truth is that we have become enslaved to debt.

But even worse, we have consigned our children and our grandchildren to a lifetime of debt.  They will have to work all of their lives to pay trillions of dollars in interest on all of the debt that we have accumulated in this generation.

How would you like to be born into a world where the previous generation had racked up a $13 trillion debt that now you were expected to pay off?

There is a reason why people like Ron Paul are so obsessed with the Federal Reserve.  It is not because they don’t have anything better to do.  It is because the future of our country literally hangs in the balance.

Throughout American history, presidents, top members of Congress and leading business people have warned us about the dangers of having a central bank.  In fact, even though our young people are no longer taught this, the debate over central banking was one of the most important themes in early American history.

But we didn’t listen to the warnings.

We were convinced that we knew better.

Well, now we have an economic system that is dying and a $13 trillion debt that we are passing along to our children and to our grandchildren.

Perhaps we were not as smart as we thought we were.

America’s Message To The Rest Of The World: You Send Us Oil And Cheap Plastic Gadgets And We’ll Send You Our Wealth And Prosperity

Have you ever seen pictures of extravagant wealth from places such as Dubai or Abu Dhabi and wondered where in the world they got all that money from?  Have you ever read news stories that talk about China lending us hundreds of billions of dollars and wondered how they could possibly have so much wealth?  Well, it is actually quite simple.  They got much of it from us.  Every month, the United States buys much more from the rest of the world then they buy from us.  It is called a “trade deficit” and the United States has been running one for decades.  In essence, what is happening each month is that we are transferring somewhere between 40 to 50 billion dollars of our national wealth to the rest of the globe and they are sending us oil and cheap plastic gadgets that Americans greedily consume.  By the end of the year we have usually transferred somewhere around a half trillion dollars of our national wealth out of the country for good.

In order to maintain our standard of living, the U.S. government has been going to the countries we have been sending our wealth to and has been begging them to loan us massive amounts of their dollars.  At this point the U.S. government literally owes trillions of dollars to the rest of the world.

Scoffers say that it is just a bunch of “paper money” that we are sending them, but the truth is that it is hundreds of billions of dollars of “paper money” that is not in the hands of average Americans.  We have sent massive amounts of our wealth and prosperity overseas and it isn’t coming back unless we borrow it.

Today there are dozens and dozens of U.S. cities such as Detroit, Michigan and Camden, New Jersey that are turning into post-industrial hellholes while thousands of gleaming new modern factories are going up all over China.  42.9 million Americans are now on food stamps (a 16 percent increase in just one year) while the oil sheiks of the Middle East build opulent palaces that are extravagant beyond belief.

Most Americans do not realize how serious the U.S. addiction to foreign oil really is.  We are constantly being drained of our wealth by the oil powers of the Middle East.

So what are they doing with all of this money?  Well, let’s take a look at just a couple of examples.

Have you ever heard of the Emirates Palace? It is located in the United Arab Emirates and it cost approximately 3.8 billion dollars to build. The following is how one writer for a major UK newspaper described it after a visit….

The Emirates Palace has so many biggest and best boasts, it could have its own chapter in the Guinness Book of Records, but the atrium is the whistles and bells, the jaw-dropping big daddy of them all — 60 metres high, 42 metres wide and topped with the largest dome in the world. Staff need golf carts to negotiate their way around it. It is decorated with 13 colours of marble, ranging from sunrise yellow to sunset red (to reflect the many hues of the desert), and lots and lots and lots of gold: 6,040 square metres of gold leaf cover the largest gilded expanse ever created in one building. It’s even in the food. I ate gold leaf on my chocolate cake. Apparently, it aids digestion.

In Dubai, there is so much wealth that they pretty much build whatever they can dream up.  For example, in Dubai you will find the largest “indoor ski resort” in the world.  One travel site describes it this way….

When one thinks of Arabia, let alone Dubai, one likely pictures an arid desert of heat and sun. One does not think of snow skiing. Yet, that is what one can do at Ski Dubai, arguably the largest indoor ski resort in the world. The resort features 22,500 square meters of ski area. The heavily insulated building is kept at 30.2 degrees Fahrenheit during the day and 21.2 degrees Fahrenheit throughout the night, which is when the snow is generated. The resort features five ski runs and is open year round.

But it is not just the Middle East that is getting incredibly wealthy off of the United States.  In a recent article entitled “China #1, United States #2? 25 Facts That Prove The Transition Is Really Happening” I detailed how China is in the process of surpassing the United States economically.

Over the past 25 years, the U.S. trade deficit with China has soared into the stratosphere.  In 1985, the U.S. trade deficit with China was 6 million dollars for the entire year.  In the month of August alone, the U.S. trade deficit with China was over 28 billion dollars.

For many Americans this can be difficult to comprehend.  For a moment, imagine a giant map of the world and that there is a gigantic pile of money in China and a gigantic pile of money in the United States.  Then start taking 20 billion dollars from the pile of the United States and give it to China every single month.

After a while, what is going to happen?

Well, the United States is going to be a lot poorer and China is going to be a lot wealthier.

As we have become poorer, it has been harder and harder to maintain our very high standard of living.

The U.S. government has been borrowing larger and larger sums of money from the rest of the world in order to “stimulate” our economy, but in the process we are piling up horrific amounts of debt.

The national debt of the United States is now 13 times larger than it was just 30 years ago.

If we did that again over the next 30 years, we would have a national debt of approximately $170 trillion by the year 2040.

Of course that will never happen.

Why?

Well, because the entire financial system would collapse and we would be forced into national bankruptcy long before we ever got into that much debt.

The truth is that we are already on the verge of total economic collapse.  In fact, CNS News is reporting that retiring U.S. Senator George Voinovich believes that the collapse could happen at any time now….

“I think we are on the edge of it right now. I really do,” said Voinovitch. “If we don’t do something about dealing with the debt and the budgets that aren’t being balanced for as far as your eye can see, we are over the cliff. We are on thin ice right now. And I don’t think that we can wait. We need to move forward. We need to move forward for our own benefit, but we also need to move forward because the world is watching us right now.”

Indeed, the world is watching us, and they are getting tired of financing our runaway debt.

Just this week there have been some very troubling signs.  For example, U.S. Treasuries just experienced their biggest two-day sell-off since the collapse of Lehman Brothers.

The rest of the world was deeply troubled when the Federal Reserve announced another round of quantitative easing.  Federal Reserve Chairman Ben Bernanke had promised that the Fed would not monetize U.S. government debt, but now that is exactly what is happening.  The rest of the world is less than thrilled by this.

In addition, many economists are warning that the tax cut deal that Barack Obama and the Republicans have agreed to will increase U.S. government debt even more.  In reaction to the deal, economist Nouriel Roubini recently posted the following message on his Twitter account….

“Obama-GOP tax deal costs $900 billion over two years. US kicking the can further down the road. Are bond vigilantes starting to wake up?”

A recent article on CNBC described what these “bond vigilantes” are….

Bond vigilantes – the term was coined by economist Ed Yardeni in the 1980s to describe major investors who demand higher yields to compensate for the perceived risks resulting from large deficits – could derail the country’s precarious recovery, some economists say.

The truth is that the U.S. government is not going to be able to borrow endless amounts of very cheap money forever.

At some point the U.S. is either going to face much higher interest rates on government debt or the Federal Reserve is going to have to step in and monetize the vast majority of all new government debt.

Either alternative will be absolutely disastrous.

Most Americans just assume that the wealth and prosperity that we have enjoyed for so many decades will always be with us.  But that is not the case.  We have been exporting our national wealth and our national prosperity so that we could fill up our shopping carts with cheap foreign-made plastic crap and so that we could fill up our cars with foreign oil.  It has been a fun ride while it lasted, but with each passing day a national financial implosion draws ever closer.

An economic nightmare is coming.

You better get ready.

Why Democrats And Republicans Are Both Wrong About The Bush Tax Cuts

All over the Internet, Republican pundits are declaring that extending the Bush tax cuts will save the economy and Democrat pundits are declaring that ending the Bush tax cuts will save the economy. Well, you know what? Nothing will save the U.S. economy. The U.S. government is going to continue to drown in a sea of debt no matter what happens with these tax cuts. State and local governments are also going to continue to drown in a sea of debt. Thousands of factories and millions of jobs are going to continue to be shipped overseas every single year. America is going to continue to transfer tens of billions of dollars of its national wealth to foreign nations every single month. Nothing that the Republicans and Democrats are debating right now is going to do a thing to alter the fundamental problems that the U.S. economy is facing.

Not that I personally do not like tax cuts. I would like my own personal income taxes to be cut down to zero percent please. I will take as many tax cuts as I can personally get.

And it is absolutely undeniable that the federal government is already handed way, way, way more money than it ever should need. Starving the federal monster of cash is a good thing. We need a much, much, much smaller federal government. But the odds of us ever returning to the kind of limited central government envisioned by our Founding Fathers is somewhere between slim and none and slim just left the building.

So aren’t less taxes always good? Well, not necessarily. You see, the federal government is planning to spend much more money in the years ahead. When you combine significant tax cuts with huge increases in spending you get lots more debt.

Extending the Bush tax cuts (and throwing in a few extra ones) will help the U.S. economy in the short-term, but without accompanying brutal spending cuts it will make our long-term debt problems even worse.

But most of our politicians don’t think about the long-term. Most of them just want the economy to turn around in the short-term so that they can get re-elected.

For example, Barack Obama is not completely stupid. He realizes that these tax cuts are probably his best shot at a short-term economic boost. If the economy starts to get back to “normal”, it may be just enough to get him another term in office.

And self-preservation is what most U.S. politicians are most interested in.

Meanwhile, we are heading for a national debt nightmare that threatens to destroy our financial system and plunge us into national bankruptcy.

But if our politicians did attempt to make the brutal spending cuts that would be necessary to balance the budget, most Americans would start screaming bloody murder. The truth is that the American people have become dependent on the government and they like getting their checks, their handouts and their government contracts.

Okay, so what will this deal that Obama has made with the Republicans actually do?

Well, it will extend most of the Bush tax cuts for two years (right up through the 2012 presidential election). The following are some of the details….

*All income levels will continue to be taxed at the lower rates instituted by the original Bush tax cuts. That means that the highest rate will remain at 35 percent.

*Barack Obama claims that extending these tax cuts will save the average American family approximately $3,000 next year.

*The 15 percent rate on capital gains and dividends will be continued.

*As part of the package, Republicans have agreed to a 13 month extension of long-term unemployment benefits.

*One new tax cut included in the deal is a reduction of the Social Security payroll tax by two percentage points for one year. So for a year U.S. workers will be paying just 4.2 percent instead of 6.2 percent.  Barack Obama believes that Americans will save $120 billion next year from this tax cut alone. For the average American family, it will mean that they will have approximately an extra $1000 in their wallets.

*The existing $1,000 child tax credit will be extended for the next two years.

*Another tax cut that is new would allow U.S. businesses to immediately expense all business investments in 2011. The Obama administration is claiming that this tax cut would be the biggest “temporary investment incentive” in American history.

*A compromise was reached on the estate tax. There will be an estate tax exemption of 5 million dollars per person and the maximum rate will be 35 percent.

So how much will all of this cost?

Well, all over the Internet the Democrats and the Republicans are arguing over figures.

One figure that is being thrown around quite a bit is $900 billion over two years.

But what is another $900 billion when we are already caught in a death spiral of government debt?

The IMF was already projecting that federal government debt was going to exceed 100 percent of GDP by 2015.

So how soon will we get there now?

Today, our national debt is more than 13 times larger than it was just 30 years ago….

So can’t we just “grow” our way out of this debt?

Not a chance.

Reducing taxes and increasing government spending will both stimulate the economy in the short-term, but both of them will always cause government debt to go up.

The sad truth, as I have written about previously, is that it is now mathematically impossible to pay off the U.S. government debt.

If you took every dollar out of every single wallet, out of every single mattress and out of every single U.S. bank and sent it to the government you wouldn’t even make that big of a dent in the national debt.

So can’t the U.S. government just go out and create more money and solve the problem?

No.

You see, under our system the creation of more money is also the creation of more debt.

As long as the Federal Reserve system exists, the U.S. federal government will be trapped inside a perpetual debt machine.

The best we can hope for is to slow the expansion of government debt down to a reasonable level.

But as I explained in a previous article, it is extremely unlikely that the U.S. government will ever have a balanced budget ever again.

The U.S. government currently has to borrow approximately 41 cents of every dollar that it spends.  The spending cuts that would be required to slash that much out of the federal budget would be beyond draconian.

Sadly, the truth is that even the really bad official budget deficit figures severely understate the extent of the crisis that we are facing.

If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the annual U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion.

So anyone who thinks that we are just a “tweak” or two from fixing U.S. government finances is living in a world of delusion.

Unfortunately, the years ahead look downright apocalyptic.  After analyzing Congressional Budget Office data, Boston University economics professor Laurence J. Kotlikoff concluded that the U.S. government is facing a “fiscal gap” of $202 trillion dollars.

But the American people don’t want to hear this.  The American people don’t want to hear that there are serious consequences for running up the biggest debt in the history of the world.  The American people just want to be told that there are smart people working on the problem and that they are on the verge of “fixing” it.

But it is all a lie.  We can keep trying to “kick the can down the road” for a while longer, but eventually a day of reckoning is going to come and it is going to be painful beyond imagination.

Somehow we have the arrogance to believe that our children and our grandchildren should pay back all of the debt that we have accumulated.  What we have done to future generations is beyond criminal.

America has enjoyed the greatest party in the history of the world, but eventually it is going to be time to turn out the lights.

For now, however, the Republicans and the Democrats are busy trying to figure out ways that they can keep the party going for a little while longer.

Perhaps they can just slash taxes all the way to zero and the federal government can just borrow all of the money that it needs.  At least that way we wouldn’t be endlessly pouring our own money into the financial black hole called the U.S. government.

+ More