James Quinn's  Instablog

The BEA reported the latest figures for personal income, personal consumption expenditures and the savings rate last week. The government mouthpieces in the mainstream media obediently reported that personal income and expenditures reached an all-time high in March. The chart below shows the ever increasing level of expenditures by consumers since this supposed economic recovery began in the 4th quarter of 2009. All good Keynesian economists know that consumer spending is always good for America, no matter how it is achieved. We must be in a recovery if income and spending are reaching new highs, right? That is the fraudulent storyline being propagandized to the non-questioning lapdog public. A false storyline and data that has been massaged harder than a Secret Service agent by a Columbian hooker will not lead to a happy ending. Some critical thinking, a calculator, and some common sense reveal the depth of the fraud and expose the theft being committed by the avaricious governing elite at the expense of the prudent working middle class.

(click to enlarge)

Digging into the data on the BEA website to arrive at my own conclusions, not those spoon fed to a willfully ignorant public by CNBC and the rest of the fawning Wall Street worshipping corporate media, is quite revealing. It divulges the extent to which Ben Bernanke and the politicians in Washington DC have gone to paint the U.S. economy with the appearance of recovery while wrecking the lives of senior citizens and judicious savers. Only a banker would bask in the glory of absconding with hundreds of billions from senior citizen savers and handing it over to criminal bankers. Only a government bureaucrat would classify trillions in entitlement transfers siphoned from the paychecks of the 58.4% of working age Americans with a job or borrowed from foreigner countries as personal income to the non-producing recipients. How can taking money from one person or borrowing it from future generations and dispensing it to another person be considered personal income? Only in the Delusional States of America.

If you really want to understand what has happened in this country over the last forty years, you need to analyze the data across the decades. This uncovers the trends over time that has led us to this sorry state of affairs. The chart below details the major components of personal income over time as a percentage of total personal income. It tells the story of a nation in decline and on an unsustainable path that will ultimately result in a monetary collapse.

It is always fascinating to compare data from 1970, prior to Nixon closing the gold window and allowing bankers and politicians to print and spend to their hearts delight, to present day. The chart above paints a picture of a nation of workers and savers descending into a nation of parasites and spenders. Any rational person knows that income comes from one of two methods: working or investing. A country can only grow by working, saving, investing and living within its means. Money taken from workers and investors and transferred to the non-working and spenders is NOT INCOME. It is just redistribution from producers to non-producers. The key takeaways from the chart are:

• Working at a job generated two-thirds of personal income in 1970 and barely half today. This explains why only half of Americans pay Federal taxes.
• One might wonder how we could be in the third year of a supposed economic recovery and wages and salaries as a percentage of total personal income is lower than pre-crisis and still falling.
• Government transfers have doubled as a proportion of "income" in the last forty years. The increase since 2000 has been accelerating, up 122% in 12 years versus the 55% increase in GDP. The slight drop since 2010 is the result of millions falling off the 99 week unemployment rolls.
• Luckily it is increasingly easy to leave unemployment and go on the dole for life. The number of people being added to the SSDI program has surged by 2.2 million since mid-2010, an 8.5% increase to 28.2 million people. Applications are swelling with disabilities like muscle pain, obesity, migraine headaches, mental illness (43% of all claims) and depression. Our leaders have set such a good example of how to commit fraud on such a grand scale that everyone wants to get a piece of the action. It's like hitting the jackpot, as 99% of those accepted into the SSDI program (costing $132 billion per year) never go back to work. I've got a nasty hangnail. I wonder if I qualify. I'd love to get one of those convenient handicapped parking spaces. Once I get into the SSDI program I would automatically qualify for food stamps, a "free" government iPhone, "free" government cable and a 7 year 0% Ally Financial (85% owned by Timmy Geithner) auto loan for a new Cadillac Escalade. The SSDI program is now projected to go broke in 2016. I wonder why?

(click to enlarge)

• A nation that rewarded and encouraged savings in 1970 degenerated into a country that penalizes savers and encourages consumption. The government, mainstream media, and NYT liberal award winning Ivy League economists encourage borrowing and spending as the way to build a strong nation. Americans have been convinced that borrowing to appear successful is the same as saving and investing to actually achieve economic success.
• Americans saved 7% to 12% of their income from 1960 through 1980. As Wall Street convinced delusional Boomers that stock and house appreciation would fund their luxurious retirements, savings plunged to below 0% in 2005. Why save when your house doubled in price every three years? Americans rationally began to save again in 2009 but Bernanke's zero interest rate policy put an end to that silliness. Why save when you are being paid .15%? Buying Apple stock at $560 (can't miss) and getting in on the Facebook IPO (PE ratio of 99) is a much better bet. The national savings rate of 3.8% is back to early 2008 levels. I wonder what happens next?

(click to enlarge)

• The proportional distribution between interest and dividends which had been in the 3 to 4 range for decades is now virtually 1 to 1, as Ben Bernanke has devastated the lives of millions of poor senior citizen savers while continuing to subsidize his wealthy stock investors buddies on Wall Street.

Now for the bad news. The Baby Boom generation has just begun to retire en masse. Government transfers will automatically accelerate over the next decade as Social Security and Medicare transfer payments balloon. Government transfer payments have already increased by 3,250% since 1970, while wages and salaries have increased by 1,250%. The non-existent inflation touted by Ben Bernanke accounts for 590% of this increase. We have passed a point of no return. As the number of Americans receiving a government EBT into their bank account grows by the day and the number of working Americans remains stagnant, the chances of a politician showing the courage to address our un-payable entitlement liabilities is near zero. Americans choose to deal with problems in a reactive manner rather than a proactive manner. Until the next inescapable crisis, the fraud and looting will continue until morale improves.

"Every effort has been made by the Federal Reserve Board to conceal its powers, but the truth is the FED has usurped the government. It controls everything here (in Congress) and controls all our foreign relations. It makes and breaks governments at will… When the FED was passed, the people of the United States did not perceive that a world system was being set up here… A super-state controlled by international bankers, and international industrialists acting together to enslave the world for their own pleasure!" - Rep. Louis T. McFadden

(click to enlarge)

The largest fraud and theft being committed in this country is being perpetrated by the Central Bank of the United States; its Wall Street owners; and the politicians beholden to these evil men. The fraud and theft is being committed through the insidious use of inflation and manipulation of interest rates. The biggest shame of our government run public education system is their inability or unwillingness to teach even the most basic of financial concepts to our children. It's almost as if they don't want the average person to understand the truth about inflation and how it has slowly and silently destroyed their livelihood while enriching the few who create it. Converting the chart above into inflation adjusted figures reveals a different picture than the one sold to the general public on a daily basis. Even using the government manipulated CPI figures from the BLS, the ravages of inflation are easy to recognize.

Total wages and salaries have risen by only 112% on an inflation adjusted basis over the last 42 years. This is with U.S. population growth from 203 million in 1970 to 313 million people today, a 54% increase. On a real per capita basis, wages and salaries rose from $16,079 in 1970 to $22,060 today, a mere 37% increase in 42 years. That is horrific and some perspective will reveal how bad it really is:

• The average new home price in 1970 was $26,600. The average new home price today is $291,200. On an inflation adjusted basis, home prices have risen 85%.
• The average cost of a new car in 1970 was $3,900. The average price of a new car today is $30,748. On an inflation adjusted basis, car prices have risen 33%.
• A gallon of gasoline cost 36 cents in 1970. A gallon of gas today costs $3.85. On an inflation adjusted basis, gas prices have risen 81%.
• The average price of a loaf of bread in 1970 was 25 cents. The average price of a loaf of bread today is $2.60. On an inflation adjusted basis, a loaf of bread has risen 76%.

In most cases, the cost of things we need to live have risen at twice the rate of our income. This data is bad enough on its own, but it is actually far worse. The governing elite, led by Alan Greenspan, realized that accurately reporting inflation would reveal their scheme, so they have been committing fraud since the early 1980s by systematically under-reporting CPI as revealed by John Williams at www.shadowstats.com:

The truth is that real inflation has been running 5% higher than government reported propaganda over the last twenty years. This explains why families were forced to have both parents enter the workforce just to make ends meet, with the expected negative societal consequences clear to anyone with two eyes. The Federal Reserve created inflation also explains why Americans have increased their debt from $124 billion in 1970 to $2.522 trillion today, a 2000% increase. Wages and salaries only rose 1,250% over this same time frame. Living above your means for decades has implications.

The country, its leaders, its banks and the American people should have come to their senses after the 2008-2009 melt-down. Politicians should have used the crisis to address our oncoming long-term fiscal train wreck, the recklessly guilty Wall Street banks should have been liquidated and their shareholders and bondholders wiped out, the bad debt rampant throughout the financial system should have been purged, and American consumers should have reduced their debt induced consumption while saving for an uncertain cloudy future. These actions would have been painful and would have induced a violent agonizing recession. It would be over now. We would be in the midst of a solid economic recovery built upon reality. Iceland told bankers to screw themselves in 2008. They accepted the consequences of their actions and experienced a brutal two year recession.

(click to enlarge)

The debt was purged, banks forced to accept their losses, and the citizens learned a hard lesson. Amazingly, their economy is now growing strongly. This is the lesson. Wall Street is not Main Street. Saving Wall Street banks and wealthy investors did not save the economy. Stealing savings from little old ladies and funneling it to psychopathic bankers is not the way to save our economic system. It's the way to save bankers who made world destroying bets while committing fraud on an epic scale, and lost.

Despite the assertion by the good doctor Krugman that there are very few Americans living on a fixed income being impacted by Bernanke's zero interest rate policy, there are actually 40 million people over the age of 65 in this country that might disagree. There are another 60 million people between the ages of 50 and 64 years old rapidly approaching retirement age. We know 36 million people are receiving SS retirement benefits today. We know that 49 million people are already living below the poverty line, with 16% of those over 65 years old living in poverty. Do 0% interest rates benefit these people? Those over 50 years old are most risk averse, and they should be. Despite the propaganda touted by Wall Street shills and their CNBC mouthpieces, the fact is that the S&P 500 on an inflation adjusted basis is at the same level it was in 1996. Stock investors have gotten a 0% return for the last 16 years. The market is currently priced to deliver inflation adjusted returns of 2% over the next ten years, with the high likelihood of a large drop within the next year.

Ben Bernanke's plan, fully supported by Tim Geithner, Barack Obama and virtually all corrupt politicians in Washington DC, is to force senior citizens and prudent savers into the stock market by manipulating interest rates and offering them no return on their savings. A fixed income senior citizen living off their meager $15,000 per year of Social Security and the $100,000 they've saved over their lifetimes was able to earn a risk free 5% in a money market fund in 2007, generating $5,000 or 25% of their annual living income. Today Ben is allowing them to earn $150 per year. From the BEA info in the chart above you can see that Ben's ZIRP has stolen $400 billion of interest income from senior citizens and prudent savers and dropped it from helicopters on Wall Street. This might explain why old geezers are pouring back into the workforce at a record pace. Maybe Dr. Krugman has an alternative theory.

(click to enlarge)

Another doctor, with a penchant for telling the truth, described in no uncertain terms the depth of the fraud and theft being perpetrated on the American people (aka Muppets) by Ben Bernanke, the Federal Reserve, their masters on Wall Street, and the puppets in Washington DC:

"We are not doing very well. The economy is just coming along at a snail's pace. The first quarter numbers that we just got last week were not very good at all. The GDP number was 2.2%. That was a disappointment, but you know, it was all automobiles. 1.6 out of the 2.2 was motor vehicle production. So, people were catching up after not being able to buy them the year before. So, this is a very weak economy… I think the real danger is that this is a bubble in the stock market created by low long-term interest rates that the Fed has engineered. The danger is, like all bubbles, it bursts at some point. Remember, Ben Bernanke told us in the summer of 2010 that he was going to do QE2 and then ultimately they did Operation Twist. The purpose of that was to make long-term bonds less attractive so that investors would buy into the stock market. That would raise wealth and higher wealth would lead to more consumption. It helped in the fourth quarter of 2010 and maybe that is what is helping to drive consumption during the first quarter of this year. But the danger is you get a market that is not with the reality of what is happening in the economy, which is, as I said a moment ago, is really not very good at all." - Martin Feldstein

The entire bogus recovery is again being driven by subprime auto loans being doled out by Ally Financial (85% owned by the U.S. government) and the other criminal Wall Street banks. The Federal Reserve and our government leaders will continue to steer the country on the same course of encouraging rampant speculation, deterring savings and investment, rewarding outrageous criminal behavior, purposefully generating inflation, and lying to the average American. It will work until we reach a tipping point. Dr. Krugman thinks another $4 trillion of debt and a debt to GDP ratio of 130% should get our economy back on track. When this charade is revealed to be the greatest fraud and theft in the history of mankind, Ben and Paul better have a backup plan, because there are going to be a few angry men looking for them.

(click to enlarge)

Henry Ford knew what would happen if the people ever became educated about the true nature of the Federal Reserve:

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

It is three and a half years since the Great Recession hit in 2008 with the collapse of our financial system caused by the Wall Street banks and their captured politician cronies in Washington D.C. Their mouthpieces in the mainstream media have been telling the American sheeple that we have been out of recession and in recovery since the 4th quarter of 2009. It truly has been a recovery for the Wall Street bankers and the mega-corporations that have laid off millions and opened new factories in the Far East while generating record profits and rewarding their executives with millions in bonuses. The stock market has doubled from its 2009 lows. All is well on Wall Street - not so much on Main Street.

The compliant non-questioning MSM reported that GDP in the 1st quarter rose 2.2%, less than expected. This pitiful government manipulated result confirms that we are back in recession. The first quarter had the huge benefit of fantastic weather, an extra day, and a supposed surge in jobs. And this is all we got? Take a good long hard look at this chart.

(click to enlarge)

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/04/Q1%20Prelim%20GDP.jpg

To factually assess the fake recovery reported by the Federal Government, Wall Street and the MSM, you need to check out the data on the BEA website regarding REAL GDP. The average schmuck still doesn't understand how the government and Federal Reserve are screwing them through the insidious taxation of inflation. I urge you to look at this inflation adjusted data:

http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1

According to the BEA, REAL GDP was $13.3 trillion in the 2nd quarter of 2008 before the crisis. As of today, the BEA says REAL GDP is $13.5 trillion. These government drones have calculated these figures by having the balls to tell you that the CPI is only up 6% since the 2nd quarter of 2008. Gas prices are up 20% since the 2nd quarter of 2008. Even the BLS manipulated inflation figures show that Food has gone up 11% since the 2nd quarter of 2008.

The truth is that inflation is underreported by the Federal government by at least 5%. Therefore, if GDP was properly adjusted for real inflation, we have never left the recession.

Even if we use the REAL GDP figures provided by the BEA, the result is absolutely horrific when analyzed in comparison to what our "leaders" have done:

• Real GDP has gone up by $200 billion since the 2nd quarter of 2008, a 1.4% increase.
• The National Debt has gone from $9.5 trillion in the 2nd quarter of 2008 to $15.6 trillion today, a 64% increase. Not too much bang for our Keynesian buck.
• There were 146 million Americans employed in the 2nd quarter of 2008. Today there are 142 million employed Americans. The working age population has risen by 10.5 million over this same time frame. According to the fine drones at the BLS, almost 8 million Americans willingly decided to leave the workforce during this time and do not count as unemployed.
• Profits of the mega-corporations making up the S&P 500 are at all-time highs.
• Wall Street Too Big To Fail banks have paid out average bonuses of $130,000 per employee from 2009 through 2011. The average compensation is $350,000.
• Wall Street banks reaped $102 billion of profits between 2009 and 2011, as Ben Bernanke bought their toxic debt and continues to loan them hundreds of billions at 0% interest.
• Five million Americans lost their homes to foreclosure since 2008.
• There will be at least 6 million more foreclosures in the next three years.
• Consumer expenditures accounted for 69.7% of GDP in the 2nd quarter of 2008. After three years of supposed austerity consumer expenditures account for 70.7% of GDP.
• Senior citizen savers are earning $400 billion less of interest income today than they were in the 2nd quarter of 2008, but don't worry - Paul Krugman says that has only affected a couple senior citizens. These seniors need to embrace their poverty and learn to love the taste of cat food.
• Real GDP went up by $73 billion in the 1st quarter. A full 70% of this increase was due to durable goods purchases by consumers. This increase was solely due to ALLY FINANCIAL (85% owned by the Federal Government) and the rest of the Wall Street banks peddling auto loans to subprime (aka deadbeats) borrowers.

Our beloved leaders have done so much for so few while impoverishing so many. It makes me so proud to live in the corporate fascist states of America.

The reality is that we have never left recession and are sliding deeper into an ultimate Depression. Enjoy your slavery and keep believing the government and MSM propaganda. Docile sheep are so much easier being led to slaughter.

"I believe that it is better to tell the truth than a lie. I believe it is better to be free than to be a slave. And I believe it is better to know than to be ignorant." - H.L. Mencken

H.L. Mencken was a renowned newspaper columnist for the Baltimore Sun from 1906 until 1948. His biting sarcasm seems to fit perfectly in today's world. His acerbic satirical writings on government, democracy, politicians and the ignorant masses are as true today as they were then. I believe the reason his words hit home is because he was writing during the last Unraveling and Crisis periods in America. The similarities cannot be denied. There are no journalists of his stature working in the mainstream media today. His acerbic wit is nowhere to be found among the lightweight shills that parrot their corporate masters' propaganda on a daily basis and unquestioningly report the fabrications spewed by our government. Mencken's skepticism of all institutions is an unknown quality in the vapid world of present day journalism.

The Roaring Twenties of decadence, financial crisis caused by loose Fed monetary policies, stock market crash, Depression, colossal government redistribution of wealth, and ultimately a World War, all occurred during his prime writing years. I know people want to believe that the world only progresses, but they are wrong. The cycles of history reveal that people do not change, just the circumstances change. How Americans react to the undulations of history depends upon their age and generational position. We are currently in a Crisis period when practical, truth telling realists like Mencken are most useful and necessary.

Mencken captured the essence of American politics and a disconnected populace 80 years ago. Even though many people today feel the average American is less intelligent, more materialistic, and less informed than ever before, it was just as true in 1930 based on Mencken's assessment:

"The Presidency tends, year by year, to go to such men. As democracy is perfected, the office represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day the plain folks of the land will reach their heart's desire at last, and the White House will be adorned by a downright moron."

You can make your own judgment on the accuracy of his statement considering the last two gentlemen to occupy the White House. His appraisal of U.S. Senators and citizens in our so-called Democracy captures the spirit of the travesty that passes for leadership and civic responsibility in this country today.

"Democracy gives the beatification of mediocrity a certain appearance of objective and demonstrable truth. The mob man, functioning as citizen, gets a feeling that he is really important to the world-that he is genuinely running things. Out of his maudlin herding after rogues and mountebacks there comes to him a sense of vast and mysterious power-which is what makes archbishops, police sergeants, the grand goblins of the Ku Klux and other such magnificoes happy. And out of it there comes, too, a conviction that he is somehow wise, that his views are taken seriously by his betters - which is what makes United States Senators, fortune tellers and Young Intellectuals happy. Finally, there comes out of it a glowing consciousness of a high duty triumphantly done which is what makes hangmen and husbands happy."

People still read newspapers in the 1930s to acquire credible information about the economy, politics and economy. Today's corporate owned rags aren't fit to line a bird cage. The mainstream media is a platform for the lies of their corporate sponsors. Each TV network or newspaper spouts propaganda that supports the financial interests and ideology they are beholden to. Does anyone think they are obtaining the truth from Paul Krugman, Chris Matthews, Sean Hannity or Rush Limbaugh? Evidently the answer is yes. The upcoming presidential campaign will be a nightmare of endless negative advertisements created by Madison Avenue maggots and paid for by rich powerful men attempting to herd the mindless sheeple towards their ultimate slaughter. Whichever corporate controlled party can more successfully scare the masses into pulling their lever in the voting booth on November 6th will get the opportunity push the country closer to its ultimate collapse. This collapse was destined from the time of Mencken when the Federal Reserve was created by a small group of powerful bankers and their cronies in Congress. Fear has worked for 100 years in controlling the masses, as Mencken noted during his time:

"The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary."

In the 1930s you needed to count on newspapers for the truth. The purpose of those who wield power is to keep the masses dumbed down and paranoid regarding terrorist threats and artificial enemies. By convincing the dense public that acquiring material goods on credit was a smart thing to do, they have trapped them in a web of debt. By making life an inexhaustible bureaucratic nightmare or rules, regulations, forms, ID cards, registrations, and red tape, those in power maintain control and accumulate power. H.L. Mencken would be proud:

"Democracy is a pathetic belief in the collective wisdom of individual ignorance. No one in this world has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby."

"The worst government is often the most moral. One composed of cynics is often very tolerant and humane. But when fanatics are on top there is no limit to oppression." - H.L. Mencken

(click to enlarge)

The corporate / government / banking oligarchy started the fire. The world is burning to the ground and politicians have thrown gasoline onto the fire with passage of debt financed stimulus programs, Obamacare, bank bailouts, the Patriot Act, NDAA, and a myriad of other government "solutions". To anyone willing to think for just a few minutes, the picture is unambiguous. This requires the ability to think critically - a missing gene among the majority of Americans.

Critical thinking is the careful, deliberate determination of whether one should accept, reject, or suspend judgment about a claim and the degree of confidence with which one accepts or rejects it. Critical thinking employs not only logic but broad intellectual criteria such as clarity, credibility, accuracy, precision, relevance, depth, breadth, significance and fairness. Critical thinking requires extensive experience in identifying the extent of one's own ignorance in a wide variety of subjects ("I thought I knew, but I merely believed.")

One becomes less biased and more broad-minded when one becomes more intellectually empathetic and intellectually humble. I have observed little or no critical thinking skills in the pompous asses that write daily columns in today's newspapers and zero critical thinking skills among the vacuous pundits and big breasted brainless fashion models that yap all day long on CNBC, MSNBC, CNN, Fox and the Big 3 dying networks.

Any thinking would be a shocking change of pace from the corrupt corporate owned politicians in Washington DC. Other than Ron Paul and a few other truth tellers, critical thinking from a politician or a government bureaucrat is about as likely as Obama not using a teleprompter. Everything being spewed at the public from the MSM, Wall Street, and Washington DC is intellectually dishonest, manipulated and packaged by pollsters and PR firms. I've come to the conclusion that those in power desire that public school systems of the United States churn out ignorant, non-questioning morons. A populace that is incapable or uninterested in critically thinking about the important issues of the day is a politician's best friend. Half the population doesn't vote and the other half unquestioningly obeys what they are told by their parties.

Ignorance is the state of being uninformed about issues and unaware about the implications of those issues. It is not about intelligence. A huge swath of America is ignorant due to lack of education and a low class upbringing. But, I know many college educated people who haven't read a book in 20 years or could care less about economic issues. They made a choice to be ignorant. They prefer being distracted by their latest technological toy to dealing with reality.

Most Americans are incapable of looking beyond a 2 to 3 year time horizon. That is why the median 401k balance in the US is $13,000. That is why the average credit card debt per household is $16,000. That is why 25% of all homeowners are underwater on their mortgage. Politicians, banks, and marketers take advantage of this witlessness to enslave the average American. We've come to love our slavery. Appearing successful because you drive the right car, wear the right clothes or live in the right house is more important than actually doing the hard work to actually become successful, like spending less than you make and saving the difference.

An informed, interested, questioning public would be a danger to the government as described by H.L. Mencken:

"The most dangerous man to any government is the man who is able to think things out ... without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, intolerable."

There were already two fiscal hurricanes of unfunded liabilities and current deficits churning towards our shores before Obama and his non-critical thinking Democratic minions launched a third storm called Obamacare. No matter how many intellectually deceitful mouthpieces like Paul Krugman and Rush Limbaugh misrepresent the facts, the fiscal foundation of the country is crumbling under the weight of unfunded entitlement promises, out of control government spending and far flung military misadventures. Only someone who is intellectually bankrupt, like Krugman, would declare the National Debt at $8 trillion as a looming disaster when George Bush was President, but declare that a $15.6 trillion National Debt headed towards $20 trillion by 2015 isn't a danger now that Barack Obama is President. The intellectual and moral credentials required to write for a major newspaper have fallen markedly since the days of Mencken.

The combination of educationally uninformed, ignorant by choice, and intellectually dishonest will be fatal for the country. Total US credit market debt as a percentage of GDP is just below an all-time high, exceeding 350% of GDP. It is 25% higher than it was at the depths of the Great Depression. Consumer debt fell in 2010 - 2011 because banks wrote off about a trillion dollars of bad debt, while government debt has skyrocketed to unprecedented levels. Now consumers are back racking up more debt, with government encouragement and subsidies responsible for the surge in student loan and auto debt. With GDP stalling out, government debt accumulating at $1.4 trillion per year and consumers back to their delusional selves again, this ratio will pass 400% by 2014.

The financial crisis was caused by excessive utilization of debt. In order to correct these imbalances, the country needed to undergo a deleveraging and reversion back to a country of savers. Savings equals investment. Instead, our "leaders" have reduced interest rates to 0% and have gone on an unprecedented government borrowing and spending spree. Savers and senior citizens are punished, while gamblers and speculators are rewarded. Anyone who thinks about this strategy for a few minutes will realize it is asinine and hopeless. It enriches the few and impoverishes the many.

(click to enlarge)

Based upon a realistic assessment of our current spending trajectory, The National Debt of the U.S. will exceed $25 trillion by 2019. That is more than double the figure when Bush left office. George Bush almost doubled the National Debt from $5.6 trillion to $11 trillion during his reign of error. It seems one thing Republicans and Democrats can agree on is that spending money they don't have will have no negative consequences ("deficits don't matter" - Cheney). When you have a Federal Reserve willing to print to infinity there is no limit to how much you can spend. Only a fool would believe there won't be consequences. That fool writes and opinion column for the NYT and has a Nobel Prize on his bookshelf.

We add $3.8 billion of debt to this figure each and every day. We add $158 million to this figure each and every hour. The interest on the National Debt reached an all-time high of $454 billion in 2011 with an effective interest rate of about 3%. Much of this interest is paid to foreign governments like China, Japan and OPEC nations. This is $1.2 billion per day of interest paid mostly to foreigners. With just the slightest bit of critical thinking one could easily perceive that with a National Debt of $25 trillion and a likely increase in interest rates to at least 6%, our annual interest costs would increase to $1.5 trillion per year. The United States needed to implement a long-term plan ten years ago to address the impossible to fulfill promises made by its corrupt, mentally bankrupt politicians. Americans' inability to deal with reality and fondness for not thinking beyond tomorrow has shown them to be an inferior species, as Mencken noted:

"The one permanent emotion of the inferior man is fear - fear of the unknown, the complex, the inexplicable. What he wants above everything else is safety."

The entire revenue of the US government totaled $2.3 trillion in 2011, with $800 billion of those funds earmarked for Social Security outlays in the future. Does this appear sustainable? President Obama submits budgets of never ending trillion dollar deficits and then gives stump speeches declaring that we must get our deficits under control. He appears on the MSM declaring his dedication to fiscal responsibility and what passes for a journalist these days nods their head like a lapdog and lobs the next softball to the President. You have to be delusional to believe this claptrap. Luckily for the politicians, most Americans are delusional and apathetic. They just got another text message from their BFF. They are consumed by who will get booted this week from American Idol or Dancing With the Stars. The NFL draft is tonight and did your hear that Kim Kardashian is doing Kanye West?

H.L. Mencken understood the false promises of democracy 80 years ago:

"Democracy is also a form of worship. It is the worship of Jackals by Jackasses. It is the theory that the common people know what they want, and deserve to get it good and hard."

We deserve to get it good and hard, and we will.