Dec 07 2012
The country is need of a wake up call. A brutal, ice-bucket-in-the-face, wake up call.
The country needs to hit the fiscal cliff – which is just a way of facing the fact we need to deal with our out-of-control spending and the cost to all of us on getting right.
I have not been posting much because we have to see how this fiscal-cliff stuff all plays out before there is much to post about. If we continue on with business-as-usual, then we will slowly over the next 4 years slip into a “Greece-like” economic state.
If, on the other hand, we embrace the cliff we will begin to adopt what DC has avoided for decades – fiscal sanity.
Yes, it will be painful. Yes, it will be abrupt (as opposed to phasing in the cuts through attrition and controlled shrinking of government). But since the powers-that-be in DC have resisted a controlled correction for so long, we are left with an abrupt pull out of our dive. Take your pick: pull out with some injury or pile into a really brutal conclusion.
One thing not so obvious to everyone is that we need to understand we actually hit the cliff in 2007. It’s not like it is still in front of us an avoidable. 2007 is when the nonsense of liberal economic social engineering imploded because of the left’s dumb experiment with “affordable” housing. By removing all financial requirements from select home buyers (those who could not qualify financially) they created the fiscal disaster that hit us all in 2007. This experiment wiped out home and real estate values, which then rippled into all the other investment mechanisms that were riding on that faux bubble of wealth.
This is what we call an “economic correction“. This is what happens when Centralized Command-Economies finally hit the wall and reality strikes. And we have many more of these in front of us as we pay the piper for decades of fiscal irresponsibility in DC from ALL parties.
Don’t believe it? Look at the US workforce and how it has shrunk dramatically in the last decade [click to enlarge]:
The US Workforce has shrunk back to 1980 levels!
This is nothing to ignore. Our population has been growing over that very same time period, but the portion of that population gainfully employed has shrunk. By this brutal measure, today’s economy is the same size as the US economy in 1980, which means the economy is smaller as a measure of the population today. The pie has shrunk, so each person gets less than in 1980. Thus the economic pain.
However, the seasonally-adjusted labor force dropped by 350,000, and the civilian labor force participation rate also dropped two-tenths of a point to 63.6%, almost at the 31-year low hit in August. The employment-population ratio dropped by one-tenth of a percent to 58.7%.
In other words, America isn’t going back to work. Americans are still dropping out of the work force.
Unless of course your career exists on Wall Street or amongst the DC Political Industrial Complex (which includes the news media folks). If you live in the bubbles of Wall Street and DC, you are financially immune to this chronic and painful situation.
So we must embrace the cliff, since the people in the bubbles are ignorant of what they have done. We must begin to pull out of our compliance with DC irresponsibility. Time to pull out of the dive. We had plenty of chances to fix all thus smoothly. But powers that be living off the federal revenue trough refused behave responsibly, and now we get to do it the hard way. So be it.
Update: Good Lord, this really is scary:
Enter the platinum coins. Under current law, the Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.
Under this scenario, the U.S. Mint would make a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.
There’s nothing obviously problematic about it, except for the fact that we’re going to devalue world’s baseline currency by about two trillion dollars. How exactly can that avoid stoking inflation? It creates money that hasn’t been in circulation before, and it spends it almost immediately based on the completely artificial valuation of a couple of coins in a vault.
Amateurs can create massive pain and suffering. I’ll take the cliff over this stupendously stupid idea. – end update