Every rational person knows that too much debt is harmful and that irrational people often sink into debt and destroy themselves through stupidity and greed. Today government debts built up through decades of overspending are threatening the entire world economy. Telegraph.co.uk, the website of the British newspaper The Daily Telegraph, recently reported:
Much of the Western world will require defaults, a savings tax and higher inflation to clear the way for recovery as debt levels reach a 200-year high, according to a new report by the International Monetary Fund.
The IMF working paper said debt burdens in developed nations have become extreme by any historical measure and will require a wave of (losses), either negotiated 1930s-style write-offs or the standard mix of measures used by the IMF in its “toolkit” for emerging market blow-ups.
“The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point,” said the paper, by Harvard professors Carmen Reinhart and Kenneth Rogoff.
The paper said policy elites in the West are still clinging to the illusion that rich countries are different from poorer regions and can therefore chip away at their debts with a blend of austerity cuts, growth, and tinkering (“forbearance”).
The presumption is that advanced economies “do not resort to such gimmicks” such as debt restructuring and repression, which would “give up hard-earned credibility” and throw the economy into a “vicious circle”. (end of telegraph.co.uk excerpt)
OK, so you get the point. “As debt levels reach a 200-year high…” Shocking. And remember that Euro nations have for decades proudly touted their heavy-spending socialist credentials. Now America has joined them with spender-in-chief Obama in charge.
And the time has come to pay the piper. After all, debt is debt, debt must be paid off and too much debt is harmful whether you are rich or poor. But to American Democrats and Euro socialists debt is not a problem, or they even say that it is a good thing. They point to allegedly positive effects of debt – that it can spur economic growth, which can be true only up to a minor point, or that it funds all of these “programs”. Yet after a certain point debt becomes increasingly destructive. This is the point that US debt has reached under Obama and that debt reached in Europe and Japan decades ago. Japan has been in a severe recession for more than 20 years and has by far the highest percentage debt load of all of the advanced nations.
Many leftists like New York Times columnist Paul Krugman even have claimed that debt is irrelevant, which utterly contradicts historical experience and common sense. Under this false paradigm Obama has jacked up US debt substantially over his presidency. Obama said that debt spending would save the economy after the 2008 collapse but it has not. US debt has almost doubled so far under Obama as the economy has gone into the tank. Today America pays $400 billion per year just to service the national debt, but not to pay off any of it.
Here is a revealing quote from Democrat US president Franklin D. Roosevelt’s own Treasury secretary Henry Morgenthau talking in 1941 about years of heavy government spending for make-work jobs during the depression of the 1930s:
“We are spending more money than we have ever spent before, and it does not work. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started and an enormous debt, to boot.”
So even though liberals like to say that Roosevelt’s make-work government spending “saved” America even his own Treasury secretary knew that it did not.
Just look at what caused the US economic collapse of 2008; it was the collapse of the quasi-government agencies Fannie Mae and Freddie Mac which were guaranteeing trillions in housing loans (debt) to “poor people” who were bad credit risks, i.e., socialism.
Then consider America today. Where is much of the national wealth concentrating as debt explodes and tens of millions lose their jobs and hope?
Answer: In the area around the nation’s political capital in Washington, DC, funded by federal tax dollars, much of it debt dollars. You would think that wealth would be concentrating in Silicon Valley or somewhere near Wall Street in New York or in Denver or Florida or Dallas. But no, the richest counties in America today per-capita are populated by government bureaucrats living in the Virginia and Maryland suburbs around Washington. This is classic socialism. Here is an excerpt from CNSNews.com:
The small suburban independent city of Falls Church, Virginia—which is treated as the equivalent of a county by the Census Bureau–had a higher median household income in 2012 than any county in the United States, according to data released in December by the Census Bureau.
In the Census Bureau’s ranking of the 30 counties with the highest median household incomes, the City of Falls Church rose from the No. 2 spot in 2011 to the No. 1 spot in 2012, overtaking Loudoun County, Va.
(Falls Church is) a place where, the Census Bureau estimates, 31.3 percent of the civilians who are 16 or older and who are employed work for the (federal) government.
The median household income in the City of Falls Church in 2012 was $121,250; in Loudoun County it was $118,934. Loudon had an estimated population of 336,898 in 2012. Falls Church is less than nine miles by road from the District of Columbia (Washington, DC) line, according to Google Maps, while the Loudoun County line is about 25 miles by road from the D.C. line.
The only county among the Top 5 for median household income not located near Washington, D.C., was No. 3 Los Alamos County, N.M.—which is the smallest county in that state, and which is also home to the U.S. Energy Department’s Los Alamos National Laboratory.
The median household income in Los Alamos County in 2012, according to the Census Bureau, was $112,115. In Los Alamos County, the Census Bureau estimates, 28.2 percent of the civilians 16 or older who have a job work for government.
After No. 1 Falls Church City, No. 2 Loudoun County, Va., and No. 3 Los Alamos County, Howard County, Md., ranked No. 4 with a median household income of $108,234; and Fairfax County, Va., ranked No. 5 with a median household income of $106,690.
The other Washington, D.C.-area jurisdictions in the Top 30 included: No. 7 Arlington County, Va.; No. 9 Stafford County, Va.; No. 12 Montgomery County, Md.; No. 13 Prince William County, Va.; No. 18 Charles County, Md.; No. 23 Calvert County, Md.; No. 24 Anne Arundel County, Md.; No. 25 Fairfax City, Va.; and No. 29 St. Mary’s County, Md. Santa Clara County, Calif., home to Silicon Valley, ranked No. 17 with a median household income of $91,195. (end of CNSnews.com excerpt)
Look at that – Silicon Valley, the home of American computers, is only #17. Astounding. Yet even with all of America’s debt and a shrinking middle class there is one group of people that is getting richer and richer – federal government workers, at least half of whom our nation easily could do without. This is classic socialism/communism… more and more money for lesser and lesser people. And rest assured that these people vote overwhelmingly Democrat as the Democrats funnel more and more wealth their way. This is killing the American economy and the world economy too since America has served for the last 150 years as “the economic engine of the world”.
Meanwhile here is yet another way – out of thousands of ways – that government debt gets built up. The state of California has been proposing for several years now to build a $68 BILLION high-speed passenger train line between Los Angeles and San Francisco.
Rest assured that this train would move very few people because ticket prices would be sky-high and there already are faster, cheaper and shorter ways to travel between the two cities. The proposed train route is 520 miles long in order to serve out-of-the-way population centers while the direct distance by highway between the two cities is 382 miles and the distance by air is 350 miles. So why should the state of California spend $68 billion (actually it will end up being many times that) to cover all of that extra distance? There are many flights and bus schedules between the two cities every day for people who are not driving their cars.
This train shows how states and nations are sucked into debt. They just keep spending and spending despite the warnings, because there are many powerful forces in places like California advocating projects like this train. And the reason is simple: This whole project would be a huge financial gift to the public-employee labor unions, state bureaucrats, college professors and “environmentalists” who would plan, consult on, advocate for, report on, build, operate, manage and maintain this boondoggle. Fortunately this proposal is stalled and is unlikely to be built, but certain people will pursue it because it would mean money for them.
(Please bookmark this website and visit my Google sponsors. And please click the Google button (g+1) at the top of this page and recommend this site to all of your friends via Facebook, MySpace and any other means. Let’s make Nikitas3.com the #1 conservative site by word of mouth. And if you would like to contribute to Nikitas3.com, please click the link at the upper right where it says “support this site”. Thank you, Nikitas)