The economy WILL implode, sooner or later. When I see friends and family in a bread line, I am going to be one pissed off American. Those scoundrels in DC think they will not be affected.
I have repeatedly said the fiscal cliff is nothing more than a media hype. NOBODY will be immediately impacted because the lazy Congress will immediately pass on Wednesday a stop gap measure to continue the spending and it takes time for the tax increases to be implemented. However the debt is another matter. We cannot borrow from any foreign country now and so must implement inflation to pay the bills. The end result is the masses will either suffer more taxes or higher prices with no increase in incomes.
At this point, I think the problem has become intractable—we are well past the tipping point. Consider:
— Most Americans are either getting some kind of Federal benefit and/or they are directly (or indirectly, as in contractors) employed by the Government—or depend on someone who is. So, a supermajority of people rely on Government spending for their livelihood.
— While most voters SAY they don’t like deficits, when you ask them for specific things to cut, those things are always untouchable. For any proposed cut (or reduction in the rate of increase), the MSM will, on cue, drag out some sob story whose life we be ruined if those cuts are made.
— Politicians have only incentive to spend, not to cut. Any increase in revenue will be spent, period. Even when we had the “surprise” surpluses, the politicials fell all over themselves proposing new ways to spend it.
— The rate of spending is increasing, not decreasing. Government entitlement programs actively go out and market their benefits to new clients (read: voters).
— As more Americans become clients, the percentage who even CARE about how high the deficit is coming down. As Romney indicated, these people want their free stuff and they don’t care how they get it (or who they have to vote for to keep getting it).
— The Federal Reserve enables all this by buying US Treasury bonds with $$ created out of thin air. This depresses interest rates and keeps the expanding deficit affordable. Conversely, it also robs savers of adequate interest on their savings. It has no choice as there just isn’t enough free $$ in the world to finance our annual deficit. If the Federal Reserve did not do this, at some point there would be a failed UST auction and interest rates would spike, and the deficit would become unaffordable.
The only thing saving us right now is that ALL the Industrialized Central Banks (BOE, BOJ, ECB, etc) are doing about the same thing. In fact, Japan is even worse off than we are. When Japan finally fails, UST prices will surge. But that will be a selling opportunity for USTs ‘cause we’re not all that far behind.
What’s the solution? Land, guns, gold, and beans.