The Debt Ceiling Debate – Fiscal Cliff, Breakdown of the Rule of Law or Just Plain Stupidity?

I think the possibility of a debt standoff isn’t only stupid but disturbing as well. A similar impasse in 2011 cost us our triple-A credit rating. These morons in Washington DC don’t seem to have learned a thing.

It’s Not a Fiscal Cliff we are talking about…… It’s the Breakdown of the Rule of Law or maybe just plain stupidity?

The “liberals” want to keep pumping more money in the economy. After all, this is a life-or-death emergency … and if they can just buy more time, they might be able to figure out a way to save the economy.

The “conservatives” want to stop with the capital infusions. After all, giving too much money could kill the economy … and maybe things can and will adjust one day on their own.

Who is right?

Well, both parties are so busy arguing their point of view that they haven’t noticed that the economy is already bleeding out through huge open wounds and unless they suture up the wounds real fast, the economy will bleed out no matter how much money they inject.

If the problem that is grinding the economy to a halt is too much debt, and if no one in the government – in either party – is looking at solving the debt problem, then we’re going to go into a depression as far as the eye can see.

Yes the U.S. hasn’t reined in its profligate spending for a few decades now. We are still spending on both guns and butter…..Let’s get real. The U.S. is bankrupt.

Last month, the International Monetary Fund released its annual review of U.S. economic policy…. The IMF has effectively pronounced the U.S. bankrupt.

We are talking in here – based on the CBO’s data – about a fiscal gap of $202 trillion, which is more than 15 times the official debt.

This is what happens when you run a massive Ponzi scheme for six decades straight….

Bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.

On the other hand, the government isn’t even stimulating in an effective way:

“Deficit doves” – i.e. Keynesians like Paul Krugman – say that unless we spend much more on stimulus, we’ll slide into a depression. And yet the government isn’t spending money on the types of stimulus that will have the most bang for the buck: like giving money to the states, extending unemployment benefits or buying more food stamps – let alone rebuilding America’s manufacturing base. Yes, Congress has just thrown twenty billion dollars at jobs and the states, but it is a tiny drop in the bucket compared to the tens of trillions of dollars in handouts to the giant banks.

In fact, even if Keynesian stimulus could help in our climate of all-pervading debt, Washington has already shot America’s wad in propping up the big banks and other oligarchs.

More important still, Keynes implemented his New Deal stimulus at the same time that Glass-Steagall and many other measures were implemented to plug the holes in a corrupt financial system. The gaming of the financial system was decreased somewhat, the amount of funny business which the powers-that-be could engage in was reined in to some extent. As such, the economy had a chance to recover (even with the massive stimulus of World War II, unless some basic level of trust had been restored in the economy, the economy would not have recovered).

Today, however, politicians haven’t fixed any of the major structural defects in the economy. So even if Keynesianism were the answer, it cannot work without the implementation of structural reforms to the financial system.

A little extra water in the plumbing can’t fix pipes that have been corroded and are thoroughly rotten. The government hasn’t even tried to replace the leaking sections of pipe in our economy.

Quantitative easing can’t patch a financial system with giant holes in it.

Of course, the loss of America’s manufacturing base, encouraging jobs to be shipped abroad, out of control derivatives and other shenanigans are giant holes as well. And the government has been throwing money at the big banks instead of the little guy, which is not an effective way to stimulate the economy.

Why isn’t the economy getting better, even though the government is pumping trillions of dollars into bailouts and stimulus packages and intervening in markets left and right?

Because the government is treating the wrong patient.

The Government is Strengthening the Parasite while the real economy is:

(1) People making things or providing real, useful services

(2) People saving money, and

(3) People investing the money they saved into productive businesses which will make more things or provide needed services.

According to top federal reserve official and economists, the government’s actions will encourage big financial players to make even riskier gambles in the future.

Indeed, the government is in the process of giving hundreds of billions – if not trillions – of dollars and guarantees to hedge funds (hedge funds are some of the biggest speculators of all). Indeed, the various bailout programs are giving huge sums to companies that make money by pushing paper around without actually producing any useful goods or services. The heads of the big banks and financial companies are still getting huge bonuses even though they have driven their companies so far into the ditch that they need government bailouts. Even Paul Volcker says the incentive system is broken. Indeed, the government is making the CEOs richer by giving them billions of dollars of bailout money with which to feather their own nests.

And credit derivatives [at least to the extent they are unregulated and opaque] act as a parasite on the real economy: credit default swap buyers bet that the referenced company will go down the tubes . And yet the government is allowing the credit default swap trades to increase, driving CDS spreads against many companies and governments to reach all-time highs.

Once again, I am afraid the inept Government we have is literally Poisoning the Real Economy. Not only is the parasite being boosted by government actions, but the patient – the real economy – is being poisoned as well. No wonder the patient is getting worse.

Manufacturing has been shipped out of America for decades, and the government is still actively encouraging companies to move manufacturing abroad.

Taxpayers will be on the hook for trillions of dollars of obligations through taxes/or inflation (even Bernanke has admitted that inflation is a tax, because people have less money in their pockets after buying necessities). So Americans will be able to save less.

You can think of the financial sector as being wrapped around the real economy, almost like a parasite, and that’s why it’s been called parasitic for so long. The financial sector extracts interest from the economy, the property sector extracts economic rent, as do monopolies. Now the key thing about parasites, is that it’s not simply that they extract nourishment from the host. The parasite takes over the host’s brain, to make it think it’s part of the economy, to make it think it’s part of the host’s own body, and, in fact, that’s it almost like a child of the host, to be protected. And that’s what the financial sector has done today.

You have Obama coming out and saying, “We have to save the banks in order to save the real economy”. The fact is, you can’t serve both the parasite and the host. And our luminaries policy makers have been helping the parasites, not the patient. Well unless they clean out the parasites and close the gaping wound, the patient has no chance.

We have to realize what this country’s economy has become. Our monetary policy, through the Federal Reserve Act of 1913, privatized the money supply, gathered the wealth, put it in the hands of the few while the Federal Reserve created money out of nothing, gave it to banks to park at the Fed while our small businesses are starving for capital.

Mark my words — Wall Street cashes in whether we have a default or not. And the same type of thinking that created billions in bailouts for Wall Street and more than $1 trillion in giveaways by the Federal Reserve today leaves 26 million Americans either underemployed or unemployed. And nine out of ten Americans over the age of 65 are facing cuts in their Social Security in order to pay for a debt which grew from tax cuts for the rich and for endless wars.

There is a massive transfer of wealth from the American people to the hands of a few and it’s going on right now as America’s eyes are misdirected to the political theater of these histrionic debt negotiations, threats to shut down the government, and willingness to make the most Americans pay dearly for debts they did not create.

These are symptoms of a government which has lost its way, and they are a challenge to the legitimacy of the two-party system.

Now you either wake up, get educated, start caring for these all important issues and expose the total breakdown of the Rule of Law or you can rot in all this crap….

Just don’t come back crying when the shit hits the fan…. I warned you all one more time.

Your call.

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