Rather than accepting at face value the many mixed, and often revised messages from government economic reports and reporting, and rather than attempting to decipher the often twisted curves and angles of deliberate main stream interpretation and commentary on the state of the economy, we should instead try and not become a victim of paralysis-of-analysis, and use our own common sense and logical reasoning abilities to self-check the state and direction of the economic situation that we are in.

A simple view of the U.S. economic situation

On a cash basis, the U.S. federal government has a national debt of $14 trillion.

The annual U.S. budget deficit is $1.3 trillion.

The Bureau of Labor Statistics data states that the U.S. work force amounts to 138 million people.

It would take more than $100,000 from each working person to bring the cash portion of the government ‘business’ back to neutral.

Adding in unfunded liabilities including social security, medicare, and prescription drugs, the total liability becomes $126 trillion.

It would take more than $900,000 from each working person to bring all government spending, liabilities, and debt back to neutral.

Putting it in perspective

How many in the American work force have $100,000 lying around to give the federal government, let alone $900,000?

It is obvious isn’t it, that this will never happen? It is simply not possible.

As the interest on the national debt continues to compound, how then will the U.S. ever be able to recover from this looming financial Armageddon?

There really only is one way, a lesser of evils, that is through inflation rather than eventual default or bankruptcy.


Inflation is a devaluing of currency.

It is logical to imagine that the government could determine the maximum dollar amount (in present value) that they would would dare to tax it’s citizenry to bail itself out of it’s mess. Once that value is determined, they could proceed to devalue the dollar to the point until ‘that amount’ is reached to break even with the current debt obligations, or somewhere close.

In other words, let’s say that instead of forcing American workers to fork over $100, 000 each, in order to just pay off the cash portion of the U.S. debt, they instead will determine an amount that they believe could successfully be squeezed from each worker, let’s say for example $20,000 (today’s value). They will figure that this, along with some spending cuts and a certain amount of ongoing debt load, will be enough to remain solvent with average or good financial ratings.

How they will do it

Well, for that $20,000 to effectively pay off $100,000 of debt (money already spent at today’s dollar value), the $20,000 would need to be inflated to $100,000, or 5 times it’s current value at some point in the future. Another way of saying this is they would need to devalue today’s dollar to 20 cents. That would, in effect, reduce the $100,000 debt (today’s value) to $20,000 (tomorrow’s deflated value).

This is how they will do it. There is no other way. The amount they choose to devalue the dollar will be determined by a complex set of formulas that will determine their most optimum and maximized outcome based on many things from global political agendas to agendas in America itself, all the while trying not to tip the apple cart.

How fast will it happen

Although they could do it overnight (it has been done this way before), the devalue (inflation) process will unfold as quickly as is necessary, which itself may be pretty quick and shocking for many.

Today’s rapid deficit spending and compounding interest is quickly catching up with us. As many people know, the shape of the compound curve reaches a point of exponential growth, and since we are on the wrong side of that curve, that is, debt, it will rapidly bury us for good unless drastic measures are put in place.

Despite the fact that America’s creditors (China, and others) will be badly burned by dollar inflation, the charade is nearly up, and the ending cannot be delayed for that much longer.

Prepare

As inflation ramps up, prices and values of assets will rise, which will at first seem like a good thing to many, but as it really takes hold, it will become a very bad thing as your old dollars will not keep up pace with new prices.

If one believes this simple evaluation to be reasonable, then a reasonable thing to do would be to become better prepared for it, position yourself as you must, and buy certain assets now, before it takes more dollars to by them later.

I need to create a "Like" button for posts :)

It's good to have you back, Michael.

It won't happen.  With the Republicans in control of the House and de facto control of the Senate, they will not allow inflation.  Large amounts of the American public will slip into poverty, but the Republicans (and Democrats) will, quietly, allow enough social programs to go through to keep them above absolute poverty.  As more people end-up on the dole (such as myself), more jobs will open-up in the private sector, allowing more people (hopefully, me) to go back to work.  This process will continue via fossil fuel consumption until the environment collapses and much of the US coastal areas find themselves now part of their respective oceans.

When that happens, big changes will then, finally, occur!

The middle class will disappear or at least merge with the lower classes.  I have followed politics for many years, and Republicans will "fight to the death" to stop inflation.  It's going to get dirty, I admit, but as long as they are in power, expect subsistence living.

There is already limited inflation, but the hyperinflation pundits are on the wrong track.  

Hyperinflation worked in Weimar because there was almost 100% employment.  People were able to survive the devaluation of their money because they could exchange goods and services and temporarily have a barter economy.  But if you tried hyperinflation here, or even high inflation, you would instantly have massive homelessness and unemployment.   The result of that would be riots and revolutions and chaos that would make what's happening in Egypt now look like Sunday in the park with George.

You will hear the "gold guys" saying that America needs to correct, we need to use austerity measures, we have to stop the printing presses, we need to stop using Keynesian economics -- this is all fantasyland.  It's way, way too late for that.  America has helped put nearly the entire world on this Keynesian scheme where all the money is virtual, where everything is based on debt.  At this point, it is our very identity.  The people are too soft to retrench and to rebuild in another way, and they have no coherent vision about how to rebuild.

The limited inflation we're seeing is a sort of feint.  It's meant to reassure the Chinese that we're tightening our belts and that things are going to get better.  But look at it on a "macro" level.  Fundamentally, our industries are dying, jobs are hemorrhaging, and everyone knows there isn't going to be a recovery.

Sometimes you will see Obama throw a couple hundred of million at a project to "put America back to work," and you'll see maybe fifty ditch-digging jobs being created.  This is all for show.  If we just did NOTHING to get ourselves out of debt, if we didn't even pretend to be trying, it would be insulting to the Chinese who own so much of this debt.

The relationship between China and America is not unlike the one between a rich wrinkly old man and his beautiful young wife.  Both sides know that the relationship is parasitical, no one is fooling anyone.  But they have to go through the motions of pretending there is real love.

Likewise, America is not really fooling China.  There is an economic Cold War going on between us, with lots of protocol and formality, lots of smiles and handshakes covering up a high-stakes and extremely tense Mexican standoff.

What is happening is that they are buying our debt because they need the Western markets to sell their goods.  They are slowly building up their economy in the hopes that one day, when they are strong enough internally, they can drop us and we will be destroyed.  Meanwhile, we are using them just to stay semi-afloat.  As I said elsewhere, both will end up in utter ruins because both are insanely greedy.

Just might be your best post on this forum.  :cool:

BTW, it would probably be a good idea to differentiate between PRICE inflation and MONETARY inflation.  Although related, there is a difference -- especially in the present situation with the USD.

Quote from: gladius_veritatis

BTW, it would probably be a good idea to differentiate between PRICE inflation and MONETARY inflation.  Although related, there is a difference -- especially in the present situation with the USD.

Huh? I don't mind showing what may be ignorance in this area, but What's that supposed to mean?

I think what he means is that we should take into account the factors that would ordinarily increase the price of goods such as supply and demand etc. separately from the factors that cause a currency to decrease in value.

Correct me if I am wrong Gladius.

Bottom line: We have completely lost our way.  We will NOT find the right path again until we are right with God and within ourselves.

IOW, our dilemma is MAINLY spiritual, although it manifests itself in temporal matters in a way we can all see and feel.  Fixing the temporal matters alone would not only NOT get the job done, it is literally impossible to effectively address all of the symptoms without addressing the root cause.

The world was not well ordered in the 13th C because men read the Gospel while making laws.  Their hearts were rightly ordered and disposed, so the laws, other elements of society, etc., naturally reflected their interior lives, harmonizing with the principles of the Gospel.  IOW, right order flows from the inside out, not the other way around.

The way some modern groups put it is this: Happiness is an inside job.  That is an accurate statement.

As the Age of Materialism comes to a painful, spectacular close, many of us still want to continue fooling ourselves into thinking that we can find happiness outside ourselves by possessing, etc., this or that object.