21 December 2010

How Much Crap Will Americans Take from Their Governments?

Before the US could become an independent country, it had to fight a bloody revolution in order to force Britain to release its claim on the colonies. The US experienced its ups and downs, over the centuries, but other than a brief civil war its people have remained relatively loyal to the crown government. But things do tend to change over time, and we may soon see just how far royalty-imitating US governments can push their subjects before the people decide to rebel.

Many members of the ruling classes suffer under the delusion that "The Tea Party Movement" is as bad as rebellions in the US are likely to get. Consequently these pseudo-intellectual twits tend to direct their most concentrated bile against people such as Sarah Palin or Sharron Angle. These complacent fools have a lot to learn, and a long way to fall.

The US federal government is spending its way into oblivion -- but the US government can have new money printed to make up its deficits. US states, cities, and counties, are likewise spending themselves into perdition, but they cannot print their own money. Consequently, they must issue bonds and otherwise borrow money to operate. But as these local governments continue to spend beyond their means, eventually even bond investors begin to wise up. Their bonds lose value, and such governments must pay more to borrow more.

When governments reach the end of their ability to borrow, they will be forced to cut services and other obligations. But even cutting services and all obligations except for public sector union contracts will not save the cities, states, and counties. These profligate spenders are going to have to do the unthinkable -- declare bankruptcy and slash their union contracts to the bare bones.

Even that will not be enough. They will have to go back on their word to workers and retirees, and in many cases dump public sector union contracts altogether -- and make public sector unions illegal for many occupations such as police and fire.

The unions will not sit still for this, in fact they will become even more violent than we are accustomed to seeing them become. In addition, when police and fire departments go on strike, let the public beware. Many cities, counties, and states have already begun cutting back on essential services, so when law enforcement and fire departments go on strike, a lot of people may not notice very much difference.
The Pew Center on the States estimates $1 trillion of underfunding for the pensions and health benefits of states.

Economists Robert Novy-Marx of the University of Rochester and Joshua Rauh of Northwestern University have higher totals for pensions alone; their gaps are about $3 trillion for states and almost $600 billion for localities.

Underfunded health benefits for states and localities together are reckoned by different studies between $500 billion and $1.5 trillion, report economists Robert Clark and Melinda Morrill of North Carolina State University.

Whatever the ultimate costs, they threaten future levels of public services. The generous benefits encourage workers to retire in their late 50s or early 60s after 25 years of service. The health benefits typically provide coverage until retirees qualify for Medicare at 65.

To pay for unfunded benefits, either government services must be cut or taxes must be raised. _Samuelson
Here is the public union problem in a nutshell: Union members lobby vociferously for untenable wages and benefit packages. Greedy politicians willing to accept bribes to get reelected, go along. On any threat of reduction in benefits, union organizers get out the vote with massive fear-mongering campaigns promising ruin if they do not get what they want. At election time unions donate massively to candidates willing to back union sponsored agenda. Over time, school boards, city halls, and legislative bodies in general get packed with politicians accepting bribes (campaign contributions) from the unions. _Mish
Like homeowners, states and cities splurged on debt and found inventive ways to get around borrowing limits to finance projects they couldn’t pay for otherwise. And recently the federal government encouraged investors to pour their money into the coffers of these less-than-creditworthy borrowers.

Now some of those investors, like the few lonely mortgage-industry short sellers in 2005–06, have started betting against the borrowers. Time reports that some of them “are jumping into the credit default swap market to bet against cities, towns and states.” A CDS is an insurance contract that protects a bond holder against default. But there’s a difference: You don’t necessarily have to be exposed to the underlying bond to buy a CDS. They can be bought or sold, and are priced depending on the market’s perception of bond default probability. If the risk increases, it is likely that the demand for CDSs will too, leading to an increase in their price. Brian Fraser, a partner at the law firm Richards Kibbe & Orbe LLP, told Time, “The spreads on CDSs have been growing, and the dollar amount of CDSs on municipals has grown in the last year. That’s a clear warning sign that people are effectively starting to short the muni market.”

The state and municipal debt crisis could culminate in a request for the third near-trillion-dollar bailout of the last two years. That much federal borrowing on top of the current debt could very quickly have an impact on interest rates and on the dollar. And at that point, we can just forget about the recovery. _ReasonMag
The last quote above suggests that once the repercussions from state and municipal defaults and overspending percolate through the federal government bailout process, we can forget about any economic recovery.

But that is just the author's optimism speaking. In reality what you can forget about is any kind of domestic harmony between government worker and taxpaying citizen.

What should you expect, ultimately? When all of the money-grubbing corruption at the state, municipal, and federal levels impacts the total economy and sinks through the thick skulls of the average citizen, producer, employer, and investor, there will be more anger and hostility within the citizenry than can be contained by traditional and legal means.

Anticipating this, the federal government and many states have tried for several decades to strip US citizens of their US Constitutional Bill of Rights 2nd Amendment right to own firearms equivalent to weapons used by average soldiers in the national infantry. Since most Americans do not own or practise with firearms regularly, the reaction against such rights-limiting moves have been only sporadic and limited. But some people have been paying attention.

Americans tend to think in narratives -- stories -- so the stories that are passed from parents to children and from peer to peer are significant, in terms of how Americans will act in the public sphere. The more oppressive and "lordly" governments and government employees tend to act toward ordinary citizens, the more often stories such as "Unintended Consequences", "Let Us Prey," and the long list of similar narratives will be passed from person to person.

Such ideas will not likely captivate the majority of Americans' minds, but compared to the number of Americans who sit at the controls of the corrupt governmental enterprises, the number of persons who become indignant at the growing tyrrany of the ruling classes is likely to be significant.

The problems of debt and corruption are not unique to American states, municipalities, or federal governments. Governments in Europe are facing the same problems -- with the added problem of a growing underclass of third world Muslims who are apt to generate bloody uprisings of their own.

The bond markets do not look good in the intermediate term, as all of this excrement contacts the rotating fan blades. The economic picture in general does not look good, which means that demand for economic goods such as commodities -- other than food -- does not look good.

How all of that will play out on the international stage -- who will be tempted to launch a war against whom, and so on -- must be left to your imaginations.

In the opinions of Al Fin economists and sociologists, it is public sector unions and their political partners in the US and other nations in the west who will bear a huge amount of blame for the economic brittleness and lack of flexibility which may ultimately (over decades) lead to governmental collapses across Europe and the Anglosphere. These public sector unions artificially inflate the sizes of governmental agencies to enhance their own power and income -- and prevent all governments and their agencies from downsizing during the inevitable, cyclic economic downturns which occur in any economic system.

As the next economic downturn develops long before we recover from the current one, the underlying dysfunctionality of politically correct, non-assimilated multiculturalism will manifest themselves in a very unpleasant manner.

You must know that those who are forewarned will more likely ride out the storm to reach the other side safely.

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Blogger Bruce Hall said...

So, will we have our version of the Weimar Republic or the "lost decade" of Japan?

Tuesday, 21 December, 2010  
Blogger al fin said...

Perhaps the US will experience "1989" as in Eastern Europe. Except spread out over months or years.

That would be preferable to a US Tiananmen Square in terms of outcome.

Tuesday, 21 December, 2010  
Blogger Bruce Hall said...

Possibly, but just as likely would be a reaction similar to Greece and UK 2010... violence from the left because entitlements are being taken away.

The political right tends to avoid such tactics and cling to "law and order" even in the face of governmental lawlessness.

Tuesday, 21 December, 2010  
Blogger gtg723y said...

"When the going gets tough the tough get going, the smart left a long time ago" ~despair.com for those who want to buy the poster.

Perhaps America will have another 1918 crash. You know the one that was so short lived, due to the government doing nothing and allowing the market to correct its self, that no one will even remember it in a few years..... Or perhaps America will have another Great Depression, maybe we'll even get to use one of those newfangled neutron bombs I've been hearing about. Or to loosely quote my favorite TV coach from Blue Mountain State the American economy will continue to "hang on by a pube" until we can change out another batch of representatives senators, and the entire executive branch. It takes a Carter to get a Reagen, I just hope this Reagen will have the stomach to make some deep cuts. Or we can auction off government run programs and allow the private sector to run things like our schools, roads, fire and police departments, and other sevices.

Tuesday, 21 December, 2010  
Blogger al fin said...

Bruce: Violence from the unions and from the left is inevitable, as you say. And certainly in the US, in general persons on the right and in the center tend to avoid untidy confrontations with the authorities.

Obama's attorney general and the statist media tend to project violent threats and tendencies onto the right, however, and use these fantasies to justify more and more incursions by the feds into the rights of individuals and states.

Hence the title question of this article.

gtg: The best analogy to what is happening is an inoperable cancer that is ultimately resistant to all therapies. It grows mindlessly, part of the patient but certain to kill him in the end.

What will be the trigger for final collapse, and when will it happen? And what will arise from the rubble?

Wednesday, 22 December, 2010  
Blogger Ugh said...

I've vowed to make 2011 the year I get my survival portfolio together. Yes, even a bugout bag. I was genuinely surprised that my wife was not entirely dismissive when I broached the subject. She is someone who detests politics and pays little attention outside election season. She must also sense something is very wrong. She did not even freak out when I mentioned getting a gun. (the guns went when the kids came many years ago). Next step: getting a "posse" of like minded people together.

Wednesday, 22 December, 2010  
Blogger Kinuachdrach said...

StaticNoise is right about the "posse". Groups will survive where individuals will not.

My bet is on combat military units (maybe minus some of their more fabulous accoutrements?); followed by the Mormon Church. The Amish are a shoo-in for survival, of course.

Western political structures today are like a rotted old house, with termites in the basement and leaks in the roof. All it will take is a good push, and the whole thing comes down.

What will that push be? It will probably be from outside the West -- Russian adventurism, Chinese expansionism, Chavez stupidity, or maybe a random virus mutating in Pakistan. But history tells us that an external stressor is almost inevitable.

Thursday, 23 December, 2010  
Blogger al fin said...

Absolutely. Form a community nucleus made up of competent individuals with diverse skills, and the ability to work together. If any lawyers, bureaucrats, or social science professors try to join your group, be sure to dispose of the bodies where no one would ever find them.


Thursday, 23 December, 2010  
Blogger gtg723y said...

Static Noise: Where do you live, your guns, amo, and food are welcome anytime. GA is cooler and wetter than usual, so maybe we won't miss the AC when the grid goes down. Although we do live rather close to a nuclear power plant, I'm not sure how the grid going down will effect it. So far we have a .40, a .380, a .38, a 9mm, a 47 magnum, a 22 long rifle and a pump action shot gun. We have about 4 months worth of food but I'm about to make another trip to Sam's.

Kinuachdrach: The Amish are not a shoo-in for survival, that is where the murdering, raping, zombie like horde from the cities will go first. Remember they don't use/have guns to protect themselves and even if they did they wouldn't use them.

Sunday, 26 December, 2010  

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

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