I'm in one of those Crystal Ball moments: What's going on in the nation and world, and how will it effect us?
Most have heard reported that QEII ends this month. Bernanke swears the Federal Reserve won't be buying any more Treasury Bills. Really? There has been no movement whatsoever that the federal government is going to curb its spending anytime in the near future, let alone by the end of this month.
I believe old Uncle Ben is word-smithing us again. Like when he said the Federal Reserve wasn't printing up hundreds of billions of dollars to buy our debt. He was creating electronic dollars. The result was the same. He and his cronies will do something similar with whatever is coming up in the future.
So, at least in the short-term, we will have to keep borrowing to pay the bills. Through August 2nd, they will be robbing from the federal employee retirement funds to keep the cash flow coming. After that, they will either have to, (1) reduce spending to equal tax receipts or, (2) raise the national debt limit and continue borrowing to fund expenditures.
Option 1 by itself is highly unlikely. The government will not cut its spending by August, nor can it increase taxes quickly enough to cover the shortfall. Neither of these can realistically happen in such a short timeframe.
Option 2 is much more likely. The Republicans will cave in and vote to raise the debt limit. They'll get promises to cut future spending. Some may actually happen, but future Congress' will pooh-pooh the "draconian measures", and we'll be back where we were. Some slimy-dog Congressman always seems to be able to find a loophole, or simply enact new "emergency" legislation that effectively counteracts the older restrictions.
Perhaps more importantly, if the limit is raised, who will buy our debt? Who is going to pick up the $100 billion per month slack that the Federal Reserve was purchasing?
I heard Larry Kudlow on the radio yesterday, and he seems to believe Bernanke. He thinks things are turning around, the dollar is going to get healthy. I didn't hear his whole show, so I don't know if anyone asked him how the US plans on paying its bills if the Fed doesn't buy our own debt.
He sounded like he was trying to convince himself that economically, things are swell.
On a micro-economic level, he might be right. You can find a company here or there that is prospering. It might be in a niche market that prospers during tough economic times. Discount stores and the like. Places that offer value.
But in the macro-economic view, I just don't see it. Kudlow said he expected this to be a, "jobless recovery." What the hell kind of recovery is that? Who's buying the goods and services if they don't have a job? It was just about the most stupid thing I've ever heard. At best, it could last for a short period of time, but there is no way for it to be sustained.
Let's play Devil's Advocate, and say that the Republicans hold strong, and the debt limit is not increased. That would mean our expenditures would drop by 40%. Immediately.
Where are they going to cut?
You may remember that in 2010, for the first time since The Great Depression, more direct cash payments were made to individuals than was received in taxes by the federal government. That means the money for the rest of the federal government was borrowed. Every federal department - defense, commerce, education, Congress, the White House, the court system... whatever - was loaned to us.
So, will they cut Aunt Millie's Social Security payment, or shut down an NEA art exhibit? How about choosing between funding student loans or making Section 8 housing payments?
[I know I ask this a lot, but can anyone show me the article or amendment in the Constitution that allows for federal taxation and payments for ANY of those things? At least Aunt Millie MAY have paid into the Social Security system and is being reimbursed for her forced participation in the plan. The rest are nothing but bald-faced thefts.]
If they cut Social Security, the seniors will vote them out. If you cut student loans, the twenty-somethings will riot. If you cut the Section 8 housing, you'll have massive Dependent Class rioting. Cut the NEA... hmmm, that one might be kinda painless.
The problem is, there aren't enough painless NEA-type cuts to be made. Too many have become too dependent on handouts.
So, I'm putting my bettin' money on the feds keeping up the borrowing game. At this point in time, I think this is the best option for those of us who don't want big government.
It buys us time. Time to prep. Time to acquire tangible assets. Time to train. Time to plan.
Eventually, things will go squirrel-y on us, and the Greece-style austerity riots will ensue. Social Security will be a fraction of its current promised value, so you'd best not make it the centerpiece of your retirement plans.
I'm re-thinking my whole plan on owning land. At least the concept of adding permanent structures to a piece of property. The higher the value, the higher the taxes. Local governments are hard pressed right now for money, and increasing property taxes is one way to keep their boat afloat.
We've got Prop 13 here in California which currently limits how much property taxes can be raised, but I don't know how long it will stay intact. I think we're going to end up like may other states that raise taxes as they see fit, regardless of the market value of the property.
I'm not a member of any special interest group, union or racial minority group, so I can't expect any special union deals, minority discounts/affirmative actions or other special dispensation that will allow me to suckle for free at the Nanny's teat.
I've worked hard my whole life and saved a couple of bucks. I've chosen to risk a huge proportion of those saved dollars on the two businesses I own.
Those formerly noble choices will be used against me when I belly up to the bar to get my Medicare and Social Security re-payments. If I am successful, I will be reducing the amount of money I will be able to recuperate from the federal government because "means testing" will surely be a part of the equation when my time comes. Only if I fail, will I get the money.
What kind of crazy system is that, where failure is rewarded?
What an idiot I've been.
It always comes back to self-reliance, doesn't it? Acquire and retain as much as you can. Retain being the operative word. Hold on to as much as you can while going through the rough spots so you can prosper on the other side...
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