It’s All Coming Apart

April 19, 2011 06:02


The political class attained power via Santa Claus economics, providing gifts to constituents in return for votes. Both parties are guilty. Politicians have conditioned themselves and their constituents to “free-lunch” governance.

By Monty Pelerin at American Thinker

EXCERPTS:

Despite Government propaganda and manipulated statistics to the contrary, our economy continues to deteriorate.

Economic damage over the last several decades is structural, yet decision-makers continue to treat the problem as a normal, albeit severe, economic cycle. The US economy and many other world economies are in a debt death spiral.

In the meantime we spiral downward as life slowly ebbs from the economy. There is no way out except to recognize the level of debt is not supportable. Excess debt must be liquidated in order for the economy to recover. That requires pay-downs and defaults, not bailouts. There will be lots and lots of defaults. There is no other way.

There are at least five considerations that should be of concern to all of us:

1. An Incompetent President – The President is inexperienced and incompetent.

2. An Incompetent Political Class – The political class attained power via Santa Claus economics, providing gifts to constituents in return for votes. Both parties are guilty. Politicians have conditioned themselves and their constituents to “free-lunch” governance.

3. An Incorrect Paradigm – The Keynesian model of spend and spend has been good for politicians but disastrous for the economy. Over time, it has encouraged loose credit, overspending, and living beyond our means.

4. An Unhappy Ending – Current economic problems cannot be mitigated or solved without incurring another Great Depression. Whether it is preceded by a deflationary collapse or a hyperinflationary blow-off is moot.

5. A Dangerous Prelude to the Ending – Government is insolvent. It would be bankrupt without Federal Reserve Quantitative Easing. As a cornered, wounded animal will do anything to survive, so will Government. Does that mean confiscatory tax rates, capital controls, IRA investments forced into Treasury Bonds, “excess profits” taxes, a national sales tax, etc., etc.? It could mean any or all of these and more.

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