The framers of our Constitution often viewed the US democracy as an experiment. This experiment came under the severest test during the Civil War and once again during the Great Depression.
As I listen to our politicians blame each other, the President, external factors, and spin issues to deflect attention away from themselves to ensure re-election, I often wonder whether this grand experiment is rapidly approaching its failure point.
Serious financial issues such as Social Security, Medicare, and our mounting debts continue to be the proverbial can being kicked down the road.
I believe that if the incoming Congress does nothing to curtail spending in the next session, then the can will have been kicked further down the road only to roll off a very steep cliff in the not so distant future.
The Korean Penninsula at Night
In his book "Decision Points" former U.S. President George W. Bush mentioned this satellite photo of the Korean Penninsula at night. This photo clearly highlights the difference in how these two countries are faring under their respective governments. Sadly, President Bush cites the estimate of 1 million North Koreans who have died due to malnutrition in 6 years. Hard to argue with that fact and the photo as to which country has fared better.
Warnings by Paul Volcker and William E. Simon
The foreword to former Treasury Secretary William E. Simon's "A Time for Truth" dedicates the book to his children so that they "can never say that they were not warned". This book was written in the late 70's and was followed by "A Time for Action" as Ronald Reagan entered the presidency. .
Around the time that the Reagan team was taking shape, then Federal Reserve Chairman Paul Volcker described the election and electoral mandate to right the nation's economic house as a "rare opportunity that does not come along too often".
Though a Democratic President, Bill Clinton, presided over four years of budget surpluses during the 90's, the warnings uttered by William Simon and "rare opportunity" described by Paul Volcker were neither heeded nor seized.
Let's hope that there is another opportunity in the horizon.
Around the time that the Reagan team was taking shape, then Federal Reserve Chairman Paul Volcker described the election and electoral mandate to right the nation's economic house as a "rare opportunity that does not come along too often".
Though a Democratic President, Bill Clinton, presided over four years of budget surpluses during the 90's, the warnings uttered by William Simon and "rare opportunity" described by Paul Volcker were neither heeded nor seized.
Let's hope that there is another opportunity in the horizon.
Comparing Dr. Jeremiah's Predictions to Bloomberg's Reports
In the most recent chapter of "Economic Armageddon", Dr. Jeremiah describes how the United States' reign as the world's foremost economic power will decline once it loses its "reserve currency" status (the currency against which all foreign currencies are pegged). Having the world's reserve currency has benefits that, once lost, will relegate America to a 2nd tier financial power. Dr. Jeremiah believes that our nation will lose this longstanding status in the future.
Today's Bloomberg podcasts on the economy interviewed international economists who discussed the merits of regional reserve currency standards to be held by China, Europe, and Australia/New Zealand. So, the long held reserve currency status appears to be fleeting.
Meanwhile, our leaders in Washington are posturing for the 2012 election while our economic house of cards continues to shimmy towards collapse.
Today's Bloomberg podcasts on the economy interviewed international economists who discussed the merits of regional reserve currency standards to be held by China, Europe, and Australia/New Zealand. So, the long held reserve currency status appears to be fleeting.
Meanwhile, our leaders in Washington are posturing for the 2012 election while our economic house of cards continues to shimmy towards collapse.
The Four Horsemen of the Apocalypse (Wall Street)
Nobel Prize-winning economist Joseph Stiglitz’ Four Horsemen of Wall Street — Greed, Mendacity, Stupidity and Arrogance: the source recent financial crises.
The National Debt
The national debt hit $1 trillion while Ronald Reagan was President. It is now estimated to be approximately $12 trillion. Many used to say that deficits don't matter since we owe it to ourselves. Not now. Countries such as China, Japan, Saudi Arabia, and even Russia now own our debt.
But, Dr. Jeremiah stresses that $12 trillion is just the tip of the iceberg. There are approximately $25-30 and $75 trillion in unfunded liabilities for Social Security and Medicare, respectively. Plus, there are the hidden government guarantees associated with our alphabet soup entities: FDIC, Freddie Mac, Ginne Mae, Fannie Mae, and the Pension Guaranty Trust -- the proverbial moral hazard. The current demographics and economics point to either sovereign default at best or financial collapse at worst. This is quite sobering.
Since WWII, we have gone from the benefactor to the world to the ultimate sovereign debt crisis waiting to happen.
Many believe that unless we see some form of a new fiscal policy and soon from Washington, we are destined to join the ranks of Ireland, Spain, Portugal, and Italy. The scary thing is that our leaders in Washington do not seem to have this iceberg in their sights. The last 3 years has not served as a wake-up call.
But, Dr. Jeremiah stresses that $12 trillion is just the tip of the iceberg. There are approximately $25-30 and $75 trillion in unfunded liabilities for Social Security and Medicare, respectively. Plus, there are the hidden government guarantees associated with our alphabet soup entities: FDIC, Freddie Mac, Ginne Mae, Fannie Mae, and the Pension Guaranty Trust -- the proverbial moral hazard. The current demographics and economics point to either sovereign default at best or financial collapse at worst. This is quite sobering.
Since WWII, we have gone from the benefactor to the world to the ultimate sovereign debt crisis waiting to happen.
Many believe that unless we see some form of a new fiscal policy and soon from Washington, we are destined to join the ranks of Ireland, Spain, Portugal, and Italy. The scary thing is that our leaders in Washington do not seem to have this iceberg in their sights. The last 3 years has not served as a wake-up call.
Social Security - Our Government's Ponzi Scheme
The term "Ponzi scheme" is a widely known description of any scam that pays early investors returns from the investments of later investors. (source: Wikipedia)
Bernie Madoff is the most recent Ponzi schemer. As I continue to delve into Dr. Jeremiah's book "The Coming Economic Armageddon", I never considered our Social Security (SS) system as being a modern day Ponzi scheme but it does fit the definition. Current workers are contributing to benefits of retired workers.
Dr. Jeremiah states that his research reveals approximately $25-30 trillion dollars in unfunded SS. That means current day contributors will probably see very little in return for a lifetime of SS taxes.
Tomorrow - Dr. Jeremiah's view on our current national debt.
Bernie Madoff is the most recent Ponzi schemer. As I continue to delve into Dr. Jeremiah's book "The Coming Economic Armageddon", I never considered our Social Security (SS) system as being a modern day Ponzi scheme but it does fit the definition. Current workers are contributing to benefits of retired workers.
Dr. Jeremiah states that his research reveals approximately $25-30 trillion dollars in unfunded SS. That means current day contributors will probably see very little in return for a lifetime of SS taxes.
Tomorrow - Dr. Jeremiah's view on our current national debt.
"The Coming Economic Armageddon" by Dr. David Jeremiah
Over the years, there has been a plethora of economic doom and gloom books. The "doom crew" seems to draw much attention these days as millions are unemployed and many are in economic despair. I recall reading Howard Ruff's "How to Prosper During the Coming Bad Years". Mr. Ruff encouraged his readers to invest in gold which is now trading at well over $1,000 an ounce.
This book, here, though cites Bible prophecy as the basis of Dr. Jeremiah's Armageddon.
More on this book in future posts.
This book, here, though cites Bible prophecy as the basis of Dr. Jeremiah's Armageddon.
More on this book in future posts.
"The Bucket List"
The movie was a bit slow at times and was not what I expected. However, it was a very nice movie with themes of friendship, value, family, and impacting others. At the very end, we saw that Frank Capra III was the executive producer of this movie. Not sure of his involvement and influence on the movie, but it did have Capraesque qualities.
The combination of two great talents in Morgan Freeman and Jack Nicholson can result in a good movie.
The combination of two great talents in Morgan Freeman and Jack Nicholson can result in a good movie.
Why do we reward bad behavior?
Recently, I saw where former NY Governor Eliot Spitzer now has a show on CNN. It was just a few years ago that he resigned in disgrace. Several years earlier, I saw Monica Lewinksy who had landed a role on a TV reality show. I had read recently that former Illinois Governor Rod Blagojevich may have a TV show in the works.
Americans are very forgiving. But, we have to ask ourselves: why do we reward individuals with the limelight of TV shows? What message does this send to our children and those who strive to do the right thing daily?
Americans are very forgiving. But, we have to ask ourselves: why do we reward individuals with the limelight of TV shows? What message does this send to our children and those who strive to do the right thing daily?
Once the great and mighty Blockbuster
Today, I rode by "Blockbuster" in Short Pump. There were no cars in its parking lot. At first, I wondered if if had gone out of business. Then, I realized that it had no business. The once bustling store for video rentals was completely empty. I recall waiting in long lines to check out. The impact of NetFlix, cable's pay-per-view, iTunes, and other on-line services have brought this business close to the brink.
Then, I drove past Staples to see signs for Amazon's Kindle. Hard to believe that a few years ago, the Kindle was the rage. Bragging rights belonged to those who owned one. Then, Apple introduced the iPad. Now, the Kindle is far more affordable but less attractive than the iPad.
Now, Amazon is being challenged by an upstart on-line service via http://www.diapers.com/.
Today's business climate does not let the successful to sit back on their laurels too long. The pace of change is as Bill Gates's book "Business At the Speed of Thought".
Then, I drove past Staples to see signs for Amazon's Kindle. Hard to believe that a few years ago, the Kindle was the rage. Bragging rights belonged to those who owned one. Then, Apple introduced the iPad. Now, the Kindle is far more affordable but less attractive than the iPad.
Now, Amazon is being challenged by an upstart on-line service via http://www.diapers.com/.
Today's business climate does not let the successful to sit back on their laurels too long. The pace of change is as Bill Gates's book "Business At the Speed of Thought".
Time for another clarion call
In the 1960's, President Kennedy communicated his vision for America to successfully land a man on the moon and return him safely to Earth before the end of the decade. That call and challenge unleashed the American pioneer and competitive spirit. With that clarion call, many Americans entered our engineering programs and became direct or indirect contributors to our space program. We were going to beat the Russians to the Moon, no matter what.
Fifty years later, most of those engineers have either retired or passed away. Now, China and India produce 7 engineers for every 1 that our country graduates.
We need a President with the vision and boldness to exhort: "we as a nation will free itself from the twin evils of foreign oil and capital by 2020 through living within our means, shared sacrifice, and unleashing our innovative spirit to develop new technologies to fuel transportation." With that, we need a new call for engineers and scientists to help us to accomplish this.
That is leadership and that is what we desperately need. Americans need to hear that encouragement and be part of that vision.
Fifty years later, most of those engineers have either retired or passed away. Now, China and India produce 7 engineers for every 1 that our country graduates.
We need a President with the vision and boldness to exhort: "we as a nation will free itself from the twin evils of foreign oil and capital by 2020 through living within our means, shared sacrifice, and unleashing our innovative spirit to develop new technologies to fuel transportation." With that, we need a new call for engineers and scientists to help us to accomplish this.
That is leadership and that is what we desperately need. Americans need to hear that encouragement and be part of that vision.
The next bubble?
Some market watchers seem to believe that the Chinese have begun dumping U.S. treasuries and will reduce their purchases of them. What does this mean? Hard to say. Some would say this spells doom and gloom in terms of the Federal Reserve printing money, euphemistically referred to as quantitative easing, which translates in time into hyperinflation. Others predict higher interest rates which will choke off a housing recovery and impact consumer spending. Some predict for the U.S. the same as what has happened in Japan: over a decade of stagnant economic growth.
Regardless, we as a nation must reduce our reliance on foreign capital and soon. The Arabs have had us over the oil barrel for years. Detroit responded with SUVs and other gas guzzlers. It seems to me that the Chinese have us over the proverbial financial barrel. To this, we have responded by borrowing more money. What happens if our actions anger the Chinese and they refuse to lend us any more money? Hard to believe that we have allowed ourselves to be so indebted to the Chinese. They are now the world's banker and we the world's largest debtor.
This reminds me of one of the final scenes in "The Patriot" when General Cornwaliss, seeing surrender at Yorktown as inevitable, lamented to himself something to the effect "how could this have happened?"
Regardless, we as a nation must reduce our reliance on foreign capital and soon. The Arabs have had us over the oil barrel for years. Detroit responded with SUVs and other gas guzzlers. It seems to me that the Chinese have us over the proverbial financial barrel. To this, we have responded by borrowing more money. What happens if our actions anger the Chinese and they refuse to lend us any more money? Hard to believe that we have allowed ourselves to be so indebted to the Chinese. They are now the world's banker and we the world's largest debtor.
This reminds me of one of the final scenes in "The Patriot" when General Cornwaliss, seeing surrender at Yorktown as inevitable, lamented to himself something to the effect "how could this have happened?"
Tax versus subsidize
Their is an economic adage: want more of something, subsidize it; want less, tax it.
Our government subsidizes home ownership via tax deductions on mortgage interest and certain property taxes. For decades, the government subsidized social welfare and corporate welfare.
The government taxes income, property, investment, savings, and many commodities. Hence, look at our convoluted tax system that perpetuates both legal and illegal tax avoidance. The politicians bemoan our nation's low personal savings rate yet taxes the interest on our savings accounts.
Oddly, the politicians demagogue reduced capital gains, accelerated depreciation, and investment tax credits as favoring the wealthy and corporations despite how these measures have historically been a boon to the economy.
Several respected economists have recently lamented over the lack of business acumen and market understanding by those in Congress. We have to ask ourselves as we approach the November elections: should we continue to entrust our nation's economic future to those who have never owned a business, had to make a payroll, or even picked up an economics textbook? Our collective lack of such scrutiny has given us this dysfunctional government and we have indeed subsidized it.
Our government subsidizes home ownership via tax deductions on mortgage interest and certain property taxes. For decades, the government subsidized social welfare and corporate welfare.
The government taxes income, property, investment, savings, and many commodities. Hence, look at our convoluted tax system that perpetuates both legal and illegal tax avoidance. The politicians bemoan our nation's low personal savings rate yet taxes the interest on our savings accounts.
Oddly, the politicians demagogue reduced capital gains, accelerated depreciation, and investment tax credits as favoring the wealthy and corporations despite how these measures have historically been a boon to the economy.
Several respected economists have recently lamented over the lack of business acumen and market understanding by those in Congress. We have to ask ourselves as we approach the November elections: should we continue to entrust our nation's economic future to those who have never owned a business, had to make a payroll, or even picked up an economics textbook? Our collective lack of such scrutiny has given us this dysfunctional government and we have indeed subsidized it.
de Todqueville on "Democracy in America"
"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."
I sought for the greatness and genius of America in her commodious harbors and her ample rivers - and it was not there . . . in her fertile fields and boundless forests and it was not there . . . in her rich mines and her vast world commerc - and it was not there . . . in her democratic Congress and her matchless Constitution - and it vas not there. Not until I went into the churches of America and heard her pulpits flame with righteousness did I understand the secret of her genius and power. America is great because she is good, and if America ever ceases to be good, she will cease to be great.
-- Alexis de Tocqueville
I sought for the greatness and genius of America in her commodious harbors and her ample rivers - and it was not there . . . in her fertile fields and boundless forests and it was not there . . . in her rich mines and her vast world commerc - and it was not there . . . in her democratic Congress and her matchless Constitution - and it vas not there. Not until I went into the churches of America and heard her pulpits flame with righteousness did I understand the secret of her genius and power. America is great because she is good, and if America ever ceases to be good, she will cease to be great.
-- Alexis de Tocqueville
David McCullough and "1776"
In an interview about his book "1776", the author David McCullough explained why he wrote it. He described the seemingly hopeless state of our fledgling country at that time. There were British warships menacing and sinking American ships at sea with little our nation could do in response. General George Washington commanded an unskilled, undermanned, and ill-equipped army to fight the world's greatest military power at that time. Things looked very bleak indeed.
Upon reading and hearing the countless commentaries on how 9/11 was America's darkest hour, Mr. McCullough asserts that the period circa 1776 was far darker, even darker than the Great Depressions. Most Americans just do not realize it. "That is why I wrote it" asserts Mr. McCullough.
As dark and gloomy as things seem now, we can draw strength from our storied past. If we, as a nation, are willing to take the strong medicine to cure our financial and social ills, we can restore ourselves to good health. We need only to look to our past.
Upon reading and hearing the countless commentaries on how 9/11 was America's darkest hour, Mr. McCullough asserts that the period circa 1776 was far darker, even darker than the Great Depressions. Most Americans just do not realize it. "That is why I wrote it" asserts Mr. McCullough.
As dark and gloomy as things seem now, we can draw strength from our storied past. If we, as a nation, are willing to take the strong medicine to cure our financial and social ills, we can restore ourselves to good health. We need only to look to our past.
Social Security to go without increase for 2nd straight year - NBC12 News, Weather Sports, Traffic, and Programming Guide for Richmond, VA |
This article misses the point. Sadly, many Americans rely upon Social Security as their sole source of retirement income. It was never intended as such. It was designed to be a supplement.
The consumer price index (CPI), the measure used to calculate cost of living increases, is heavily weighted toward energy costs and interest rates. Typically, the elderly are not purchasing homes with mortgages and not having to buy large quantities of gas for their cars.
In the early 80's when inflation was running in the 13-14% range, Social Security recipients were receiving hefty cost of living increases while those supporting the fund were receiving far less in terms of raises. In essence, "fixed incomes" was a misnomer in the realm of Social Security. Now that inflation has been very low, there are no increases.
The sad truth is that we cannot have it both ways: hefty increases when inflation is high and increases when there is no inflation as per the CPI.
Social Security to go without increase for 2nd straight year - NBC12 News, Weather Sports, Traffic, and Programming Guide for Richmond, VA
The consumer price index (CPI), the measure used to calculate cost of living increases, is heavily weighted toward energy costs and interest rates. Typically, the elderly are not purchasing homes with mortgages and not having to buy large quantities of gas for their cars.
In the early 80's when inflation was running in the 13-14% range, Social Security recipients were receiving hefty cost of living increases while those supporting the fund were receiving far less in terms of raises. In essence, "fixed incomes" was a misnomer in the realm of Social Security. Now that inflation has been very low, there are no increases.
The sad truth is that we cannot have it both ways: hefty increases when inflation is high and increases when there is no inflation as per the CPI.
Social Security to go without increase for 2nd straight year - NBC12 News, Weather Sports, Traffic, and Programming Guide for Richmond, VA
The government we deserve
Less than 50% of Americans vote. That statistic is startling given the enormous privilege it is to vote. Plus, we have a civic responsibility to hold our elected officials accountable. Sadly, myself included, we have not held up our end of the bargain. We have let our government do as it pleases. It passes legislation, like health care reform, that most Americans are against. It borrows money from foreign nations to fund programs we can no longer afford.
We have the government we deserve because we have abdicated our responsibility to hold elected officials accountable. The late Dr. Milton Friedman once said that we need no more than to look in the mirror to affix blame. I do not believe that the framers of our government envisioned career politicians serving sometimes up to 40 years in Congress. This should not be and we have the power to make a change.
We have an opportunity in a few weeks to send a warning shot across the bow of Congressional hubris. Let's all use that power individually and collectively lest we let the current group in Congress to continue pushing us toward the precipice. Let's not continue giving these out of touch officials a free pass.
We have the government we deserve because we have abdicated our responsibility to hold elected officials accountable. The late Dr. Milton Friedman once said that we need no more than to look in the mirror to affix blame. I do not believe that the framers of our government envisioned career politicians serving sometimes up to 40 years in Congress. This should not be and we have the power to make a change.
We have an opportunity in a few weeks to send a warning shot across the bow of Congressional hubris. Let's all use that power individually and collectively lest we let the current group in Congress to continue pushing us toward the precipice. Let's not continue giving these out of touch officials a free pass.
The long, lost days of financial prudence
During WWII and to stimulate the economy during the Great Depression, our country ran up huge public deficits. President Eisenhower lamented the need to run a negligible federal deficit in the 1950's. Also in the 1950's there was an Iowa Congressman, H.R. Gross, who would ask "who is going to pay for this" when new legislation was introduced in the House. Borrowing money was not taken lightly.
Many economists believe that unless we change our spending habits, and soon, we could be the next Greece and face sovereign default. How long will China continue to buy our U.S. Treasury notes? Should we be so indebted to a Communist nation? How could this happen to the nation that helped win WWII, put the first man on the moon, and brought about the end of the Cold War?
Somewhere in the past, we lost our way on the road of personal financial responsibility, too. Credit cards flourished. Home equity lines became far to easy to obtain and access. Many used their homes' equity like ATMs. Today, many owe more on their home than it is worth. How could this happen to the citizens of the world's wealthiest nation?
The more important question is, can we turn this around? The answer is yes and there is enough time, if we start right now.
Many economists believe that unless we change our spending habits, and soon, we could be the next Greece and face sovereign default. How long will China continue to buy our U.S. Treasury notes? Should we be so indebted to a Communist nation? How could this happen to the nation that helped win WWII, put the first man on the moon, and brought about the end of the Cold War?
Somewhere in the past, we lost our way on the road of personal financial responsibility, too. Credit cards flourished. Home equity lines became far to easy to obtain and access. Many used their homes' equity like ATMs. Today, many owe more on their home than it is worth. How could this happen to the citizens of the world's wealthiest nation?
The more important question is, can we turn this around? The answer is yes and there is enough time, if we start right now.
A time for boldness
"The world's largest borrower cannot be the world's greatest power indefinitely" -- Dr. Larry Somers, current Chairman of President Obama's Economic Council.
For over 30 years now, I have heard of our country's national debt and unfunded Social Security obligations referred to as "a ticking time bomb". The bookstores have been littered with the "doom and gloom" and "economic Armageddon" books. Eventually, the time bomb is going to detonate unless bold action is taken.
In the 1980 book "A Time for Action" former Treasury Secretary William Simon outlined bold and drastic steps to bring our fiscal house in order. Some of those measures have been implemented. Many have not.
Our dysfunctional Congress continues to thumb its collective nose at the very electorate that voted its members into office.
Want to take a bold step and send an ear-shattering message to Washington? Vote AGAINST EVERY incumbent this November, including those affiliated with your political party of preference. I plan to do so, even against Rep. Eric Cantor. They need to hear from us.
Be bold and encourage your friends to be bold. It is time to send Congress a message that we the people want to avert a financial calamity. It can start with voting in responsible representatives who will do the right thing; not what their lobbyists, political supporters, and biggest donators want.
We have just enough time -- if we start right now.
For over 30 years now, I have heard of our country's national debt and unfunded Social Security obligations referred to as "a ticking time bomb". The bookstores have been littered with the "doom and gloom" and "economic Armageddon" books. Eventually, the time bomb is going to detonate unless bold action is taken.
In the 1980 book "A Time for Action" former Treasury Secretary William Simon outlined bold and drastic steps to bring our fiscal house in order. Some of those measures have been implemented. Many have not.
Our dysfunctional Congress continues to thumb its collective nose at the very electorate that voted its members into office.
Want to take a bold step and send an ear-shattering message to Washington? Vote AGAINST EVERY incumbent this November, including those affiliated with your political party of preference. I plan to do so, even against Rep. Eric Cantor. They need to hear from us.
Be bold and encourage your friends to be bold. It is time to send Congress a message that we the people want to avert a financial calamity. It can start with voting in responsible representatives who will do the right thing; not what their lobbyists, political supporters, and biggest donators want.
We have just enough time -- if we start right now.
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