Beyond the Cusp

October 9, 2014

Why the United States Cannot Return to Greatness

You will hear how the United States will make a comeback and return to sane governance just as it did after President Jimmy Carter brought the nation to the brink of economic meltdown and had much of the public pessimistic to the point that the ‘Misery Index’ which had been used as a guide for politicians became a household word and was updated on many daily newscasts. Part of the reason that the United States recovered after President Carter was because they elected Ronald Reagan rather than trust President Carter a second term. President Obama was given a second term but there were some mitigating circumstances such as weak opposition by the Republican Party, the media almost taking a supportive position in backing the campaign of President Obama and foreign policy lapses had yet to prove disastrous and devolving to the threatening level it had with President Carter who faced a hostage crisis where Iran had held Fifty-two Embassy diplomats and citizens for 444 days, until President Reagan’s Inauguration Day. Had the foreign policy missteps by President Obama and his administration been made more evident before the election for his reelection, then he might have had a far more difficult time. Some may remember that the one area which Candidate Romney performed well was on foreign policy where President Obama made his best retort claiming when Romney answered that Russia was the United States number one adversary that, “The 1980s are now calling to ask for their foreign policy back because the Cold War’s been over for twenty years.” The clincher came not from President Obama but from the moderator Candy Crowley countered when Romney claimed that President Obama had not called the assault on the Consulate in Benghazi a terror attack and when Romney repeated his claim after President Obama challenged him to read the transcript and Crowley exclaimed with great authority and emphasis, “He did in fact call it an ‘act of terror.” That ended any challenge Romney might further make over Benghazi as he had been deflated and his argument flattened giving President Obama the impetus he needed to win that debate and escape any further claims on Benghazi, the subject had been poisoned.

Still, if anyone thinks that President Obama would not have received a far better bid for reelection than had Jimmy Carter no matter how the debates went or who he was running against obviously has no idea how almost completely President Reagan won that election, it was a virtually unanimous electoral vote except for the District of Columbia and Georgia, Minnesota, Maryland, Rhode Island, Hawaii and West Virginia. The electorate of the United States has witnessed a sea of change in the past ten years as certain critical demographics have changed with much of that change coming during President Obama’s time in office. Do not get this wrong, President George W. Bush made some huge influences which gave the changes an initial impetus which would have forced much of the change even without any additional shoves which they have received since. We need to remember that the prescription drug assistance granted to those who received government aided medical insurance such as Medicare and Medicaid very soon became the largest single government giveaway program. Sometime during the years when President Bush was in office the percentage of American citizens who were dependent on government at some level surpassed the fifty-percent fulcrum point where it had been theorized that their votes for increased government contributions to their pockets. This was predicted longer ago than many people are probably aware as it was said by Alexis de Tocqueville explaining the breaking point which would inevitable come and destroy the nation he saw as the most exemplary governance in existence when he stated, “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”

There was one Founding Father who foresaw and gave the resolution that would treat this eventuality when Thomas Jefferson wrote a letter upon receiving his copy of the Constitution in which Thomas Jefferson wrote, “The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure.” And earlier in the letter he commented on the frequency such watering the tree of liberty would require, he mentioned his view of the purity of purpose of the American Revolution and the necessity of the purifying fire of refreshment where he wrote, “And can history produce an instance of a rebellion so honourably conducted? I say nothing of its motives. They were founded in ignorance, not wickedness. God forbid we should ever be twenty years without such a rebellion.” Yes, that is what Thomas Jefferson predicted, that the government of men would so far run adrift from the founding principles that every twenty years the nation would require the reset of another revolution and the reinstatement of the Constitution anew. Well, perhaps Thomas Jefferson was wrong though a serious inspection of the governance of the United States over the years there have been the historians who have made a convincing argument that the twenty year measure may not have been as ridiculous as we might think. Even if the measure of twenty years may appear too drastic, would one offer the same argument should one suggest that perhaps a two century timeframe were the measure in place of twenty years?

Whatever the measure one might place, it matters not. The fulcrum point has been surpassed and the preponderance of weight of votes are now likely to be cast in favor of retaining the programs and expanding the payments and the loosening the requirements as the first grants greater funds into their pockets and the latter brings more people into the program thus guaranteeing its continuation and potentials for increased funding. Once we see evidence that the balance has gone to the side of those who receive more from the government than they pay in taxes of all varieties plus those who are dependent on government, state, federal, county, or other elected body for their salaries compared to those whose tax payments are greater than payments received from government programs, then as long as the former vote at an equal or greater percentage than the latter the government will continue to grant greater payments while increasing taxes as those paying the taxes will have been silenced at the ballot box. The predictions that this point was surpassed during the Presidency of George W. Bush may have been correct but when the line was crossed is not as important as whether it was crossed. The numbers of Americans who were collecting the majority of their funds from government; be they welfare, disability, salary or other forms of receipt of government payments; passed the tipping point by a sufficient margin that there may be no turning back. The demographics of the next Presidential election in the United States may prove just as important as who actually wins the election. Once the demographics are studied and become known we may be seeing numerous articles signaling the death of the America which so impressed Alexis de Tocqueville causing him to state as well as to give an ominous warning in the same quote with, “Not until I went into the churches of America and heard her pulpits flame with righteousness did I understand the secret of her genius and power. America is great because she is good, and if America ever ceases to be good, she will cease to be great.” What would Mr. Tocqueville conclude visiting America’s churches and listening to the preaching within today? Would he surmise that the greatness persists or would he fear the empty pews and the generally milquetoast sermons and preaching just as empty as the pews signify the demise of American greatness?

Beyond the Cusp

November 14, 2010

The Federal Reserve’s Great Plan in Everyday Terms

The Federal Reserve is touted as this nebulous body of super bankers who determine interest rates, monetary supplies, and virtually every other action one expects from some nameless, faceless, enigmatic cabal acting as our monetary overlords. Ask most economists to define the powers, manipulations, purview, and machinations of the Federal Reserve and their answer usually takes on terms that make you question what language they are speaking. The latest term of confusion is, “Quantitative Easing”. Many have defined this as a method for monetizing the country’s debt. But what does all this mean and how can we relate it to something more understandable by those of us, like me, who are not econo-verbage literate.

From what I have read, many economists describe Quantitative Easing as paying your credit card bills with a new credit card. Confused yet? I was, as this still left me not really understanding how really bad, evil even, Quantitative Easing was going to be for our economy. As long as you were able to pay the payments of that last credit card, then you would still find your way out of the depths of your debt. I did some more research into Quantitative Easing and think I might be able to give a more descriptive and possibly accurate analogy showing the destructive side of the Federal Reserve plan to “save” the economy.

Here goes. Initially, you buy a house that is near the limit your of ability to meet the mortgage payments. Eventually, other bills make the mortgage payment impossible to meet every month. To cover your shortfall, you take out one credit card after another and use them to pay your mortgage every few months. Initially, things seem stable and you believe this plan is working. Eventually, the credit card bills reach a point where even using them to pay all your mortgage payments, you still are unable to meet the credit card bills. It’s time to take a wild gamble to get out of this predicament, so you refinance your house lumping the balances of all your credit cards into the new mortgage. Now you have an even larger mortgage payment, so once again you use the recently paid off credit cards to pay your mortgage payment, now two out of every three months. Soon, the credit cards are maxed out and you are unable to meet the payments of the mortgage and the credit cards. Once again, you arrange new financing on your house, except this time the loan is for much more than the house is actually worth. This is a desperate bet that you can manage to pay off this new mortgage providing the surrounding economy grew sufficiently, driving up your income. Again, to cover you until the economy heats up, you use these same credit cards to make even more of your mortgage payments. This is where our country now sits as we have just completed what has been called QE2, Quantitative Easing for a second time.

Some economists have predicted another round, QE3, will be necessitated before the economy recovers. Eventually, this making money out of thin air, electronically, will catch up with us and put pressure on prices and/or interest rates to rise unbelievably rapidly, completely out of control. The one obvious outcome will be the use once again of the Misery Index that was invented during the Carter Administration malaise. A few have predicted possible hyperinflation in our near future. The best-known example of hyperinflation occurred during the disastrous and complete meltdown of the economy of Zimbabwe. At its worst, it was a picture of people needing the proverbial wheelbarrow of money to buy a loaf of bread. One truth that depicted exactly how monstrous hyperinflation is, many employers in Zimbabwe began paying their employees daily at noon so they could run out and buy their food for dinner a few hours earlier as prices changed by the hour, sometimes even minutes, Imagine watching the price of the carton of milk and loaf of bread in your hands get more expensive as you wait in line to reach the checkout. This is the reality that the most extreme opinions warn is coming.

In all honesty, I cannot pretend to know what the future holds. I do know that there are a multitude of frightening events of late and the economy does seem to have a volatile uncertainty. Will we see a collapse of our currency as happened in Iceland? For one possibility, research the events before and after October 8, 2008 in Iceland. The Iceland example proves that virtually unimaginable fluctuations can occur and collapse a country’s currency literally overnight. I hope that the American economy never does resemble either the hyperinflation of Zimbabwe or the collapse of the currency as in Iceland. Honestly, I do not trust the Government or the Federal Reserve and actually believe that should they simply not interfere, not hold up failing companies, meddle with the money supply, or any other risky gamble. Just do what is known to work, cut taxes, severely slash government spending, and leave business to private enterprise and Adam Smith’s invisible hand. I often get the feeling that the government and the Federal Reserve playing with the valves of our economy is a big game of blind man’s bluff with them blindfolded swatting at a piñata hoping to get lucky and spill goodies for all around.

Beyond the Cusp

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