I feel so safe now!!

Having just listened to the mumblings of our President, listening closely as he said out of one side of his mouth that the markets have confidence in the good ole’ USA (as they collapsed even more as he spoke) and then spent about half his speech on a panegyric in tribute to those poor guys killed yesterday in the shot down chopper near Kabul, I can say one thing with assurance.

He wanted to get off the subject of the economy and debt downgrade as quickly as he could possibly do it and, even more importantly, he never – not even a single time – mentioned what the real problem is.

He did not say a single word that would indicate even to the most attentive listener, that he even knows what the unsolvable problem is both here and in Europe.

His suggestimonious speech only mentioned more spending (unemployment for the masses, lower taxes for the masses, perhaps an “adjustment” to medicare), plus “We’ll keep kicking ass all over the world!” which, of course, equals more spending too.

What word did he neglect to say? “DEBT“, that’s what. Trillions and Trillions of MBS, CDS, BULLShitPaper, dollars, pounds, euros, pesos, reals, yuan, rememberme’s (or how ever you spell it in Chinese), rubles and every other currency denominated debt you can add to the list that are hanging out there, needing to be “rolled over”, interest paid promptly and eventually – here’s the kicker – repaid or retired or otherwise cleared off the books.

He didn’t mention that Europe and the USA are so deep in debt, unfunded liabilities and swamps full of sharp toothed derivatives of a dozen sorts.

He skipped the simple fact that it is now a mathematical certainty that we are so deep in debt that more debt does not increase GDP – IT REDUCES IT! Fact: The more debt a country has, the slower it can grow because funds needed for growth must instead be paid as interest and fees to roll over the debt.  At some point (we’ve passed it in 2000), the debt is beyond the ability of the country to cope without resorting to the printing press (which we are/have).

It has taken us over 40 years to fuck this up as bad as it is (since Tricky Dick removed the last link between gold and the dollar for international settlements) but now we are to the point where there is so much debt, we cannot pay the interest on it without borrowing the money to do it. Oh I know, several non-Austrian economists say the Federal tax income is sufficient to pay the interest payments therefore we would never be in default – and that is almost true. Of course, if the Feds ever did that without borrowing, there would not be anything left to spend on more than funding breadlines for the 52% of the people who get checks from the Feds now. And if you think that’s bad, wait a while..

So our humble Chief Executive somehow “forgot” to mention the real trouble lurking just outside the unlatched door.  Debt. Or perhaps he did not forget to mention it.  He did not bring it up on purpose because of the simple reason that neither he, nor the RepuDemoTea party (nor the commies, whigs, greenback party, or any other political organization) can fix it.  If you can’t fix it, if you’re a politician, for goodness sake, don’t mention it!  And they don’t.  And except for a few like Ron Paul, you never will.

The only way it will get fixed is the old filter trick called “through the eye-of-needle” otherwise called default.  Re-structuring the debt won’t do it.  When you go through the eye-of-the-needle solution, you slough off everything except things that have value.  Debt that will never be paid has no value.  Gold and silver and farmland (unmortgaged), tools, guns, ammo, food, even houses (unmortgaged) have value.  So you pile everything up on one side of the eye-of-the-needle, push really hard and when you’re done, all the BS and worthless stuff is in a rotting, smelly pile on one side and on the other side is a much smaller and sweet smelling mound of value.

Doing that is kind of rough on who ever own all the non-valuable trash that is now in that rotting, stinking pile.  In fact, sorting out value from garbage is very rough on everyone even if you are a reader of TBP and only have valuable things in your small neat pile on the far side of the eye-of-that-damned-needle.  You’re going to get dinged by some of the fall out, fart-flares, burning bits of trash, ricocheting rubbish and other cast off pieces of junk that get flung on the wall as it is filtered by that damned-miserable-too-small-eye-of-the-needle.

Part II

This will be a short part..

You may now be assured – as you were aware of anyhow – that whatever actions our Chief Executive Officer of the USA takes to “fix” things (note! I did not say “problems”, I said “things”) his actions will be diametrically opposed to that which would be needed to fix the “problem”.

The markets of the world were just waiting for a trigger to go berserk. It wouldn’t have mattered a tiny bit if that trigger had been a bail out of a Eurobank, the Japanese yen falling out of bed unexpectedly, Grease catching on fire (forgive the pun), or whatever.  All the markets needed was a “ding!” and with last weeks havoc already having wound up the bears like a new rubber band,  that “ding” was all it took to trip the unwinding.  Of course, it helps that the USA has NEVER had a debt downgrade in the history of the Union.  But I suspect Fitch and Moody will follow along like little dummies since they look pretty stupid sitting there with their thumbs stuffed up their butt while the markets fall apart around them.

Won’t matter.

The bond markets haven’t been given a vote yet – after all, with ka-jillions of dollars in Treasury Trash, if they were all to be sold at once, where would they all go?  Right now, this minute, hour, day, ?? , the world perceives the U.S. $$ to be safer than Euros or most other currencies.  They are, of course, stupid and wrong as the dollar is only worth $0.04 of what it could buy before the Federal Reserve was created.  It will, one day, be worth nothing and something else will come along to be put in its place. But, for right now, even though the dollar is dying, it is still thought of by those people living in countries that are (and have been) in far worse condition than we are, as a safe haven in time of fear, war, famine, TEOTWAWKI and so on.

It’s not but it is still perceived so and so it is.  Sooner or later, an alternative to the dollar will pop up (gold? silver? Obviously already has! Dog food? Maybe later) and bond yields will go straight up.  Not quite yet.

To protect this temporary situation, the next step is to insure law and order is maintained throughout our fair land.   In spite of the Posse Comitatus Act, this will be mostly achieved by the military of which the President praises so well and who is honored daily in some part of the country or another.  I served in it myself.  I wonder how long that will last.

When the Free Shit Army starts going hungry or their free shit stops flowing – as it will – the local para-military police forces scattered around the country will not be able to handle it except in fits and spurts.  Things can get out of hand very rapidly when the Free Shit Army gets pissed and goes on the warpath.  Half of them serious about it and the other half along for the fun and looting.

So the military will be used.  Count on it. Whether the elite pull the military into it via the States activating National Guard units or the Feds just taking it over remains to be seen.  But it will happen.  At that point, we will see what the majority of the American people are made of and the exact point at which they may or may not stand up and be counted.

Time will tell and it will be an interesting, if unpleasant trip from here on in.  Good luck to us all because we’re going to need it.

End

Author: MuckAbout

Retired Engineer and Scientist (electronic, optics, mechanical) lives in a pleasant retirement community in Central Florida. He is interested in almost everything and comments on most of it. A pragmatic libertarian at heart he welcomes comments on all that he writes. View all posts by MuckAbout