The Decalogue’s 10th precept is “thou shalt not covet (another man’s wife or property).” This commandment is at the heart of all free governments. It’s wrong to take what is rightfully another person’s property. Only socialist governments (“from each according to his ability; to each according to his need”), take property from us that they have not owned. Our “socialist” government taxes us way beyond the needs of the federal government, as set forth by the Constitution.
The trick is to keep the socialists from taking over the government, and that is why we are failing in America. Most of our politicians, and most of our federal workers, are socialists. Socialism will never work because it can only be advanced by government. Government is not the Good Samaritan. Government is force, not compassion. Since 2009, the federal government has borrowed $4.2 trillion, after the Fed printed it, which was used to redistribute to “people in need.” That’s one-third of the country’s entire annual production. It will take years of income for us to pay it back. We have no plan to pay it back. We have no plan to keep the deficit from increasing dramatically.
Congress appointed a SuperCommittee to help figure this out. We have sent this SuperCommittee on millions of dollars worth of fact-finding missions, and it has spent hours in front of the TV with these results: The SuperCommittee could find nothing to cut out of current spending; the SuperCommittee then concentrated upon proposed future budgets and tabled that for two years until after the next election; and, finally, the SuperCommittee was unable to agree upon reductions of proposed future spending increases in proposed future budgets. With national income going down, and taxes and government deficits increasing, the velocity of our problems is likely to increase.
What is meant by velocity?
Average family income continues to decrease. Average family income is the primary source of income-tax revenues. Government expenditures are increasing while tax revenues are decreasing. To continue to pay for government expenditures that are not covered by taxes, the government (through the Fed) prints money. That’s awesome power. And it continues to be abused. Why should the government be allowed to borrow money for current expenditures so the taxpayer can pay interest on the borrowings forever (because there’s no plan to pay anything back)?
Is it the conservatives or the liberals that are causing this problem?
The terms, “liberal” and “conservative,” are misused. Liberals are stereotyped by the media as people who want to help others and are generally portrayed as Democrats. Conservatives are characterized to be less compassionate, more pragmatic, and they are generally portrayed as Republicans. Those terms are simply posturing and misleading. A conservative believes the Constitution represents the best way to govern the U. S. They believe success or failure in life should be based upon individual efforts. The conservative believes in limiting the powers of the federal government so that government cannot get big enough to limit our individual liberty. That’s a political conservative. A liberal believes in redistributing wealth by taxing the middle and upper classes in order to provide for those who are “underprivileged.” That, by definition, is the antithesis of believing in individual effort and liberty. That is socialism, and there are a huge number of elected officials and government department heads who are socialist. And they are not “party specific” — they are both Democrats and Republicans.
Isn’t that an all-encompassing and radical statement?
No, it’s the reason we can’t get this mess straightened out. Have you ever met a politician who was in favor of, or who was going to vote for, deficit spending? No! We know of no such politician. Then why have we had years of trillion-dollar deficits? Both the Democrats and the Republicans love government. They make their livelihoods from government. If either one of those two parties wanted to balance the budget, it would have been done.
The problem is further exacerbated by the position the Congress and Senate currently find themselves in. They run the world: awesome power, prestige and financial rewards. To re-examine their oath of office and sworn duty to uphold the Constitution, and to vote accordingly, they would have to drastically reduce their own importance and power. They would then really be “serving” us. The majority of our elected officials, however, are serving themselves, not us.
How does Market Watch think the markets will react to our current economic problem?
Politically these are unstable and uncertain times, and that affects economics. Market Watch wrote 20 years ago that the decrease in tax revenues coupled with the increase in government spending that resulted in printing money to cover the government’s bills “could not be sustained.” We are in the same situation today, and our risk of a currency crash is greater than ever. When such an event may occur it is not known. It may continue to take the form of inflation. The Fed has chosen to use inflation as one of the ways to relieve the central government of the real cost of our debts in future years. Our question should be: Do we trust the college professors and politicians who run the Fed to continue to manipulate inflation so that it does not get out of hand? The Fed’s efforts since its creation in 1913 have reduced the value of the dollar to 1/50th of the 1913 value. With so many uncertainties, and absolutely no evidence that any political body is trying to reverse the trend, the stock and bond markets are likely to remain volatile.
How long will this volatility last?
Until the uncertainty is removed from major structural economic cash drains that cause the government to borrow money. These are some of those programs: Social Security, broke; Medicare, broke; Medicaid, broke; U. S. Postal System, broke; and the U. S. Federal Reserve System (and the too big to fail U. S. banks they “regulate”), broke. Obama-Care was broke and underfunded from the first day the legislation was passed.
With all of these programs broke, why would any sane American want health care, or anything else, to be managed by the government? Indeed!
With no federal budget to fix the indebtedness and the continuous increases in government spending, there exists an enormous layer of uncertainty over our economy. Uncertainty is bad for investments. It fuels anxiety, and anxiety provides volatility to the stock and bond markets.
The wise investor will continue to accumulate cash, will have a nice position in gold and silver and will own AAA-rated stocks that pay a good dividend. If an investor adds to his AAA stock holdings, it’s wise to purchase additional stocks only if his dividend exceeds 3% of the cost of the stock, and only if those stocks are selling for less than their long-term price earnings ratio, and only if the companies have strong cash flow that can be sustained to pay dividends.
Do not become obsessed with the “good news” one reads about the economy. Most of it does not focus upon what is important. This week we read in great detail about “how consumer borrowing was up $19 billion last month.” This was portrayed as good, and, generally, it can be good. However, the news left out the fact that last month the federal government spent $119 billion more than they taxed the people, and, therefore, had to borrow another $119 billion to “get through the month.” This far offsets the good consumer news. Government borrowing of that magnitude soaks up the economy’s cash. The cash would have been better used by putting it back into businesses that create permanent jobs, not borrowing trillions of dollars to keep government employees employed in programs that are losing hundreds of billions of dollars annually.
Finally, uncertainty will exist as long as the government “covets” our money. Investors are smart enough to realize that the gap between the government’s spending and the government’s income is so great, that the only way it can be brought under control is by drastically reducing spending (which the government refuses to do) or by taxing the middle- and upper-income classes more than they are already taxed. The latter doesn’t work because the middle- and upper-income classes are already struggling, and their income has also been drastically reduced.
The Revolutionary War was fought over an unfair distribution of wealth; the Civil War was fought as a result of uneven and unfair distributions of labor and income; and we are now facing another revolution because the government covets our money in order to improve their power and position, and in order to redistribute that money to their voting base of people on welfare who do not want to work. This economy is beyond the point where we can continue to absorb the cost of our federal government without severe downward pressure on the stock and bond markets.
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2 Florida's Children First 2014 Sarasota Reception
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