I digress.
We decided that we were not going to be a colonial power. The people chose to pull back from the world stage and follow the wisdom of Washington who warned us about overseas involvement. World War One raged for four years before we finally got into it. For a time, there were those that wondered on who's side would we fight!
After we came late and knocked out an exhausted Germany, we once again pulled back to our own shores. Wilson railed and fought so hard to get us into the League of Nations that it literally gave him a stroke. What a nice little Progressive he was, but that is another blog.
The people of this country as expressed through the will of the Congress, kept us out of the League and out of the world spotlight for another twenty years. Over that time we had a booming economy and then a Great Depression (made Great by the polices of FDR, but that is another blog). We spun up and began letting our territories taken from Spain in 1898 to make their own choices. Nicaragua, Cuba, Haiti, the Philippines and others began to chart their course. World War Two had been ripping Europe apart for about four years before we were finally pulled into it.
Once again, we made the differnce and fought back the darkness that threatened to consume the world. FDR failed to ever realize the danger that the Soviet Union posed, probably because he secretly admired their ruling classes ability to maintain control...
The people decided that it was time to create the United Nations and base it in New York. Some people felt that had we been more active participants on the world stage, then the evil of the 1930's and 40's may never have come to pass. Was this hubris on our part?
We were of mixed feelings at the time, though. Truman slashed the military to nothing even as the Soviets and their puppets continued production on a war footing. We may now be involved with the UN, but we were an equal nation among nations. We were not to be its police man.
North Korea put paid to that thought in a hurry in June of 1950. To his credit, he did not flinch and fought the communists back into the North and did not quit, even when the Chinese involved themselves.
However, back then, we still resisted Communism. Today, we embrace it.
The Korean War sputtered and cost the lives of thousands of young Americans as the nation no longer had the heart for "Total War". Truman fired MacArthur and fought for hills to "straighten" some line on a map. The people were more interested in the rising affluence at home.
The veterans of WW2, the GI generation, used that affluence to build the great institutions that are crumbling today.
They chose to shelter their children from the harshness of their upbringing. They did not want their children to feel the sting of hunger or the pang of wont. They gave them comfortable homes, cookie cutter neighborhoods and a conformist, well-ordered society.
Their children chose to rebel and ignite the culture wars of the 1960's and 70's. The Progressives, who never went away, decided that it was not fair that old people did not have better access to healthcare, so in 1965 Medicare was created. They decided that it was not fair people could not find affordable homes, hello Freddie Mac. Questions were asked and debates raged in the Arena of Ideas. Great speeches by Reagan, warning us of our condition today can be found on YouTube. In the end, Populism won out. Eventually, the Progressives co-opted the energy of the Boomer Generation. Today it is hard to tell the difference between a Progressive, a Socialist, a Communist, or a Marxist.
Once the thin wedge was rammed in, the crack could be widened. The State was going to help returning soldiers with the GI Bill. Very well intentioned. It gave us the University grads we needed as our nation expanded into its new role as the World's Superpower. However, it was not "fair" that only soldier got this benefit, so now student loans would be offered to help those who could not afford a college education. One of my favorite lines in the movie "Caddyshack" is from the Judge to a young University wanna-be student, "The world needs ditch diggers too, you know". Look at the cost of education today.
Social Security was expanded, Medicare and Medicaid expanded. The percentage of government growth as it related to the private sector would have made FDR proud.
The proto-Nanny State had truly come with the 1960's.
Look at the above chart. It demonstrates the government sector in relation to the private sector for the last several decades. Basically, you want the red line to always be higher than the blue line. The government pays its employees through tax collections. If your tax base is smaller than your payout population, then you are going to have problems. We can not all work for the government, someone must actually produce something other than large reports and expensive legislation. Note that this rather horrible trend (divorce from the blue line) began under Clinton, was reversed somewhat under Bush, who then reversed himself and began the nosedive in 2006 and 2007. Obama has simply decided that everyone should work for the government and is currently seeing if the crumpled paper that was this chart can reach the trash can in one shot from across the room.America has also chosen to become a nation of consumers. Our manufacturing base is in shambles because the choices of taxation, corporate and private have driven that manufacturing to other countries. We also are more highly automated and efficient. Sitting at your computer desk, try to find something made in America? The very wood that makes up your floor likely comes from Canada (mine does). If we are not producing, we are consuming. Is it any wonder the "Trade Imbalance" has not been in positive numbers since before I can even remember? Our treasure has been draining overseas for decades, enriching other nations, as the laws of Capitalism dictate.
Look at the above chart. This shows how bad off the States really are in terms of tax collections. The tax base is shrinking. What have we decided to chose as a nation to do, via our elected representatives? Spend our way out of debt (what?). Money comes from a combination of three sources. You tax it from the economy, you borrow it, or you print it. There is no fairy that just makes it for you.
The government has been borrowing and printing at levels that no nation has ever done before and remained an ongoing concern. Whatever does not get bought at the latest Treasury sale simply gets printed by the Federal Reserve, "bought" by the Federal Reserve and then sent to the Federal Government. Madoff is not in jail, he is running our Federal Reserve.
What is coming?
Continued job losses and a flat recovery if we are lucky. A repeat of the Weimar Republic if the laws of economics are applied.
The above chart shows the percentage of jobs lost in a variety of prior recessions. As you can see, we have not even hit bottom yet.
In what reality is this a good thing?
Our choices narrow every day. Perhaps we don't have many choices left. As I see it, we have the following choices:
1. Stop printing money. Pull back everything that has gone into reserve holdings.
2. Raise interest rates to pull the money supply back farther.
3. Stop spending on anything other than essential services for 10 years, minimum.
Without making your eyes glaze over, I'll jump ahead. We have been funding much of our prosperity over the last 40 years by inflating our currency. Productivity has caused the cost of goods and services to drop. This would make our money less valuable over time and make the cost of those good relative (think paying farmers not to farm their land in order to keep the price of corn up). The value of the dollar has been dropping since the 1960's. What do you think my parents paid for a Dodge van in 1977? What would they pay for the same van in 2010? About 68% more dollars would be needed for the same purchase. We just feel wealthy, but we aren't. We have inflated the currency once too often.
Going off the gold standard and promising to the world that we would not print (inflate the currency) dollars was a bad idea as well (suckers).
Look at the chart below and try not to choke:
President Carter inflated the monetary supply by 21% in 1978 and it resulted in Stagflation. It took until about 1983 for Reagan to break us out of it. He did it by raising interest rates and lower taxes (grew out of the hole). Compare that time frame with the charts above. Think back to how bad times were back then.
Bush began to inflate our monetary supply after 9/11 and then began to pull it back (11% interest rate), but then the various bubbles began popping and the only way to keep value in our goods was to inflate the supply. President Obama has rocketed our monetary supply by over 180%!! Remember, Carter raised it by 21% and look what it did.
There is no escaping the pain of what is coming. There will be another depression and it will be worse and longer than the Great Depression. I hope that someone will come along and shorten the severity and the duration, but I'm not very hopeful.
Those who are in their 30's, 40's and 50's right now are at the height of their earning power in their lives. This recession has hit us, mostly Gen X'ers, younger Boomers and older Milennials, at the worst time.
Even as Pelosi and Reid fund their retirement and health care; provide for everyone over 65 (or earlier if they can expand Medicare and Medicaid to cover everyone) while leaving us to pay the bills. We will be cleaning up after them long after they are gone.
Understand that. Those alive now, those who have yet to enter the workforce and those that have not yet been born will have to pay for what the elected representative are doing to us right now. I will never be wealthy. My children will not be wealthy because of this. Just look at the debt clock at http://usdebtclock.org/ to see what I'm talking about.
If we pull all that money back soon enough we can avoid a Weimar Republic. The bankers have thus far kept most of that money from circulation. They must see their children at night for dinner and realize what will happen if all that money begins moving around the world. So far, that money is just numbers in a reserve account. If we raise interest rates to pull the money supply back in, then we will lock up the credit markets and cause a depression worse than what we are in now. Either way, the path is bleak. There are other options, such as getting rid of the dollar and creating a new currency based on gold, or another currency based on our national resources, a basket currency not our own, or even a world currency. World shaking decisions, though, since so much of the world relies on the dollar. We could just default, but much of that money is owed to ourselves and China.
Choices, choices. Which will we choose. Either way, I know that we will get through it; however I just can't help but imagine what things will look like for my children.
--Zavost
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