31 January 2009

Econapocalypse? You Tell Me

If you think the economic news cannot possibly get worse, take a look at the 30 minute excerpt of IOUSA THE MOVIE. The full length feature is meant to be shown in theatres and special venues, but 30 minutes is quite enough to get the basic idea.

Actually, anyone who remembers Ross Perot and his famous economic charts will be familiar with most of the ideas. The problem is that the situation has grown much worse since 1992. You want to hear something really scary? Over the next 10 to 20 years, the problem will grow exponentially worse.

Up until now, the surplus in FICA (Social Security) taxes has kept Americans from seeing the true extent of the problem. Bill Clinton's vaunted "balanced budget" years depended upon a blatant theft of the FICA surplus to pay for actual budget deficits. And Bill Clinton depended on Newt Gingrich and his boys to hold his feet to the fire, budget-wise. The US Congress in control now is a far cry from the budget hawks elected in 1994, and the US President now has no executive experience -- and seems to believe that the rules of economics do not apply to anything he decides to approve.

The US electorate is clearly unprepared for what is coming around the bend. The media cannot be trusted for truthful or objective reporting, so it is up to each voter and citizen to make himself informed on the deeper issues involved. That level of personal responsibility is extremely unlikely, among today's voters.

What I am trying to tell you, as gently as possible, is that the underlying economic landscape shaping the next few decades of the US economy, is dismal. Whether the Obama / Pelosi reich enables unions and trial lawyers to destroy private industry, whether nationalised medicine destroys the amazingly productive US pharmaceutical and medical technologies industries, whether the US government nationalises all banks and news media -- or not. The economy is in very big trouble.

The current credit and banking problems are significant but not cataclysmic. They can be dealt with as long as Obama / Pelosi do not come completely unhinged. The way the O / P reich wants to deal with the "climate catastrophe" is a good example of coming unhinged. Wasting a trillion dollars on useless mitigation, doing tens of trillions damage to industry, and creating a "political peak oil" that will make the summer of 2008 energy crisis look like a walk in the park....all that and more, you can expect O / P to attempt.

But all of that would only be hastening the inevitable. Watch the 30 minute clip here. Then look up some books by Peter G. Peterson, such as Running On Empty or Gray Dawn. Link to Peter G Peterson Foundation, for more background.

To Obama and Pelosi, the current relatively small crisis (worst since 1930s!) looks like a golden opportunity to turn the US into the socialist paradise of their dreams. To more disciplined and farsighted thinkers, the current problems are a not-so-gentle reminder that we have allowed too many bloated hogs to feed at a shrinking trough for far too long.

The combination of the commodities boom and bust, the financials crash, the mortgage default crisis, and the recent US election of the perfect storm of fools, should serve as a wake up call -- for those who are capable of waking up. Unfortunately, they appear to be few in number. Which leaves each person with important decisions to make.

We are not currently living through a repeat of the 1930s. Not yet. Obama and Pelosi have a long ways to go -- with the help of the Krugmans of the world -- to get things that bad. But when the demographic bust of unfunded mandates hits the fan, we might look back on the 1930s US with a sense of nostalgia.

Only a perfect storm combination of intelligent, aware, and responsible government officials throughout the congressional, executive, and judicial branches of US government will be able to mitigate the coming nightmare. Or, just maybe, the right combination of technological breakthroughs will give even typically feeble-minded government officials the courage to act responsibly -- or better yet, make government actions inconsequential to the real world.

We intend to cover both angles here at Al Fin. As always, be prepared.

Update: From the Peter G Peterson Foundation website, this link to Indebted.com will keep you up to date on the US National Debt. You can also check out the ultra-short animated clip "Indebted, We're Broke, Let's Fix It" from MTV U. That national debt clock may seem to be moving slowly, but just keep watching it.

The odds are that no one is going to fix this problem. What do you do?

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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

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