This fascinating article looks at what it calls “Generation Flux” – the new economy where everything is changing so fast, you need a different mindset to survive. And what makes the idea so fascinating is that the state as we know it, probably won’t.
By Doug Casey
Everyone knows that the US government is bankrupt and has been for many years. But I thought it might be instructive to see what its current cash-flow situation actually is. At least insofar as it’s possible to get a clear picture.
As you know, the so-called Super Committee recently tried to come up with a plan to cut the deficit by $1.5 trillion and failed completely. To anyone who understands the nature of the political process, the failure was, of course, as predictable as it was shameful. What’s even more shameful, though, is that the sought-after $1.5 trillion cut wasn’t meant to apply to the annual budget but to the total budget of the next 10 years – a fact that is rarely mentioned.
Now whenever the chattering classes talk about cuts, it’s always about cuts over the course of 10 years. Which is a dodge, partly because most of the supposed cuts will be scheduled for the end of the period, but also because new programs, new emergencies and hidden contingencies will creep in to offset any announced cuts. So the numbers below aren’t a worst case; they’re the rosiest possible scenario. People have thought I was joking when, asked how bad the Greater Depression was going to be, I answered that it would be worse than even I thought it would be. But I haven’t been joking.
Paul Craig Roberts hits the nail on the head regarding the “false” hope and recovery announced by the media regarding the Euro zone’s plans to shore up its finances and the USA’s supposed ‘surge’ in consumer spending. Just spin, spin and more spin:
Ron Paul is perhaps the only US politician to overtly side with Austrian Economics. And in that sense his criticism of the US Federal Reserve (as the creator of federal reserve notes and manipulator of interest rates) is based on the Austrian analysis that money is a “good” like any goods in the market. And because money is a good, it has a market price – the interest rate. But when the government, through its central bank, manipulates the price of money it distorts the economy – with disastrous consequences.
If you’re trying to grasp this concept and want to get your head around it, then I recommend you read this excellent article by Ron Paul in the Wall Street Journal: Blame The Fed For The Financial Crisis
The Euro zone’s debt woes won’t go away. As I write this note there is one last “barrier” to the Greek bailout – Slovakia, which is balking at the idea. In fact, Richard Sulik- leader of Slovakia’s Freedom and Solidarity Party – was quoted as saying: “The rescue fund is simply buying time in an incredibly costly way, but it’s not solving the problems.”
And he’s right.
The only solution is to let Greece default. All this talk about bailing out “Greece” is a cover story. The bailout is for the banks that have been lending money to Greece. Banks made bad loans and they want their losses covered by taxpayer-funded bailouts. It’s not the Greeks who will benefit from this – not, not at all – as they will be screwed down by ever-increasing austerity measures.
All this is just good money after bad. The planned bailout will not fix the underlying problem, only put it off. Then there will be the need for an even larger bailout in the not-too-distant future – and more pleading by the special interests.
At the end of the day, Greece will default. And all that bailout money will have been for naught – except to prop up the banks bad lending policies.
Those who lend to governments need their heads read. I have no sympathy. Let them lose their money for being wrong-headed. Who said investing in anything was a safe?
If you and I can go bankrupt, if companies can go bankrupt, then so can banks – and even nations.
Just get on with it, offload all the toxic debt – and start over.
In the following article, Paul Craig Roberts – a previous Assistant Secretary for the US Treasury – outlines the dire state of the EU and US economies.
Saving The Rich, Losing The Economy
His essay is descriptive, not prescriptive, and raises a lot of important issues.
One of his contentions is that the US has been “offshoring” its jobs for some time now – with US companies setting up offshore (in China and India for example) in order to benefit from much lower labour costs.
I can see this is indeed what has happened – and also see this is an inevitable consequence of economic globalism.
After all, if you run a business and are able to set up shop wherever you want, then it’s entirely logical and rational to maximise one’s profits by seeking lower costs. And if that means manufacturing overseas, then so be it.
The MacBook Air I’m typing this on is brought to market by Apple Computer, a hugely successful US company that sells its products worldwide. But I also note it is made in China.
However, from recent news, I also note that Apple Computer is to build a huge “campus” in Los Angeles, and from memory I believe it is intended to house around 2,000 employees.
Obviously these people are not manufacturing computers as such, rather designing them – as well as software – and doing all the “brain” work behind Apple’s success. But the fact remains, there are plenty jobs on offer there – if you have here necessary skills.
So while I can see how this “offshoreing” process has caused manual job losses in the USA, I cannot see how such would be stopped in any free society. And Mr Roberts doesn’t say so either.
Another fact to consider is that the jobs being lost are usually of the sort that locals don’t want to do. I know that FoxConn – one of Apple’s contractors in China – employs many people to do manufacturing and assembly work, but the question remains as to how many such jobs Americans would be willing to take up.
I see this development as one of the transition problems we are facing as nation states deal with the reality of an increasingly interdependent world. After all, who is to say that the life of a Chinese worker is any less valuable than that of a US worker – except a US politician out to get votes?
Either the current economic woes are the death throes of the old order, or the birth pangs of a new order – or perhaps both.
Right now the mainstream bigwigs are all talking about the necessity for “action” to stave off the impending economic train crash that’s headed our way. As usual, their solutions are to create more debt in order to avoid debt implosion.
Austerity seems logical, until you realise that the more you cut back the economy the more the country is unable to pay the interest on its debts or raise more debt. As the economy shrinks, the state takes in less taxes, more people are out of work, and consumption is reduced , businesses stop investing – all of which contracts an economy.
So if austerity by itself may not be the answer, and money-printing is a fool’s game, what’s to be done?
Bill Bonner has a simple yet profound plan – to wipe out the debt by defaulting on it, and start over – out outlined in his article: Give Collapse a Chance
Lew Rockwell has written a punchy essay on the US debt downgrade – and notes it was not downgraded nearly enough.
China’s official response to the US credit rating (read debt rating) downgrade was surprisingly harsh, condemning the US of financial irresponsibility. The following article by Stephen S Roach casts some light on the Chinese thinking:
