The Economic Philosophy That Has Destroyed Capitalism & Democracy

An orgy of government, business and personal debt. Prior to the 1930’s the US government paid its bills off as soon as possible, had balanced budgets and even surpluses. The excesses of spending in the roaring 20’s caused a depression. The economist John Maynard Keynes said it was ok for governments to do deficit spending to get the economy running again. FDR tried it but the depression dragged on for more than 10 years until World Ward II put everyone back to work in armament production and saved the economy. But the politicians loved the idea of deficit spending and began promising everything to the people to get their votes. Keynes didn’t mean for the spending to continue forever, but it has, using the sale of government Bonds & Notes to finance our debt. Prior to 1971, the US backed up the dollar which could be redeemed in gold by foreign governments. France called our hand asking to be paid in gold when the Bonds/Notes came due. Pres. Nixon had no choice but remove gold backing because LBJ had financed his great society programs with too much borrowed money, now in the hands of foreign governments. Unchecked government spending caused prices to rise, resulting in manufacturers moving to Asia. The US became a consumer economy instead of a producer. To finance the consumer, everyone was given plastic money cards. The government got into the mortgage business with Fannie Mae disrupting sound financing practices for homes. The politicians spending orgy now infected State & Local governments, private businesses and individuals. By the 1990’s it was clear to anyone who cared that America was headed for bankruptcy. But the lure of unlimited paper, plastic and electronic money had infected everyone with endless greed. Now the whole rotten greedy system is falling apart. Yet the politicians are still clamoring for more grants for more spending. We’re all caught in a damned if you do, or damned if you don’t fiscal situation. The gov’t must sell Treasury Bonds to finance the debt and bail- out, but with interest on the treasury notes paying 1%, and inflation nearing double digits, how much longer will foreigners continue to buy these losing investments. Interest rates must rise to continue financing the debt, which is now $11 Trillion. If interest rose to a nominal 5%, the yearly interest on the debt alone would rise to $550 Billion. The US auto industry, once the envy of the world is bankrupt, with GM, Ford & Chrysler begging for bail-out money. But the recent $850 Billion bail-out is a less than 2% of total US government, business and individual debt of $52 Trillion. When investors decide that US Bonds are too risky to buy, the gig is up, the US is bankrupt and the worst depression in our history is upon us. Now Treasury Sec. Paulson says the bail-out is not working and must be re-accessed.

The question is, what can be done about it? Obama wants to finance a new stimulus package, but where will he get the money? I want all the big spending politicians who voted for all this spending to tell us what to do now? Can the Fed bail-out all failing businesses? Will the Obama stimulus package cause everyone to start spending again to keep business from closing and unemployment from rising? Do unemployed people spend money for needless consumptions? Will a college degree guarantee a job in a failing economy? Should local governments build more schools? Can we continue to borrow ourselves out of debt? Can Capitalism and Democracy be saved? If so, How?

The Answer, My Friend, Is Simple....

Submitted by Mike King on Thu, 11/13/2008 - 10:03am.

....we as a country must accept the fact that we are in a fiscal crisis and that no amount of political grandstanding will cause any change. Once accepted, then governments at all levels must live with an across the board reduction in revenue so as to rid themselves of the debt they created within a mutually agreed timeframe.

The three branches of our Federal Government could easily get by on a thirty percent reduction in revenue simply by eliminating all the unnecessary trips, useless programs, and likely half their staffs. Has Congress considered a teleconference lately?

State and local governments must also get aboard this bandwagon, even our affluent town of Peachtree City exists as an indebted government. Make the goal of becoming debt free within a decade and let's all get behind it and once established, stay the course. Our President-Elect has an opportunity to do something that would surely mark his greatness, hopefully he is up to it.

The standard of politics as usual at both federal and local levels will not work now as we are too far along. I fear many are not going to like the "change" that circumstances dictate our new administration bring about, but leaders usually arise at time of crisis.

Mr Obama, the circumstances surrounding 9-11 pale in comparison to what you inherit come January, don't stumble.

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