When our government collects 2.5 trillion and spends 3.5 trillion who gets hurt the most? The poor, they have the least to spend. Look at it this way, If government taxes were to cover expenditures, a dollar would be worth a dollar. But if the government spends 1/3 more than it collects, they have to print dollars. So now each dollar will only buy what 66 cents used to buy. You have just been taxed 33 cents on every dollar you earn after taxes by inflation. Notice, you didn’t have to fill out any forms or mail in a check to the government. Your dollars don’t go as far as they did yesterday.
These trillion dollar a year deficits will bankrupt the government. If you are on the receiving end of entitlements, who cares? They owe it to me, pay up. The concept of a train wreck is not there. Give me my benefits until you can’t and then we will sue for back payments. It’s kind of like adding more vehicles to the freeway until it clogs up and stops moving.
Here is what happens in a financial collapse. Nobody gets paid. Nothing gets delivered. You want to buy something, currency and credit cards would be worthless. A driver in Colorado with a full truck load of potatoes is not going to transport them to Pennsylvania without clear cut payment for fuel. Food distribution on the retail level would stop, if looting hadn’t already solved the distribution problem for what was already on the shelf.
At some point, the trillions of printed money will leave little to consume. The farmers this year have a very bad corn crop. But with insurance, the losses will be minimal. But notice one thing, the farmers get their dollars for a failed crop, but half of the corn is not available for consumption, it doesn’t exist. This is what happens when you print money, you’re not producing anything for consumption, you are only enabling consumption.
So the real problem will be that can of beans now selling for 98 cents and that gallon of gas at $4.20. If the can of beans increases in price to $9.98 and a gallon of gas rises to $42 dollars a gallon everyone will be out to crucify the local Arab or farmer with glee. Notice how the government is out of the loop.
Looks like the old farts in Florida will vote for Obama because of the free health care. Look at it from a different perspective. If you worked all your life and saved up one million dollars, an 8% return on you nest egg (80K), would cover most of the bills. With T-bills now paying a half a percent, how do you retire on 5K in interest a year? What caused it? The FHA has financed another 4 million homes with nothing down because the home buyers have no money saved up for a down payment. These loans merit an 8% interest rate just from the risk involve, but alas, they are government insured.
It pays to be a deadbeat. Why not tax everyone one months labor or let them pay someone to work for them? The concept of tax the rich has some merit, but why not tax everyone at least one month of their wages or one month of their life? Rome asked for two months and built a lot of roads. We need everyone contributing to make a better America, not just the rich.
There is a chance of reform with the next election, but will it happen? Its hard to say, If interest rates were to jump to 8%, Federal Income tax collections couldn't pay the interest on the national debt and the "Game Over" light starts flashing. We are almost there, and Congress is still stacking more hay on the camel. What's one more straw?
Copyright 2012 by Jim Brubaker