A cheery update.

The drywall in the shop is essentially done. The next step will be paint. Then I can run conduit and wiring and lighting, a water heater, pressurized water, a toilet, etc. I'm also building a food dehydrator out of one sheet of plywood, some 1x2's, fiberglass window screening, and light bulbs for the heat source, oh, and a muffin fan for air exchange. Further updates to come when I have something to show for it.

In the mean time, here is some educational reading concerning our (U.S.) national debt. We have become so accustomed to hearing about this, most have become insensitive. That is a dangerous condition to be in. The national debt, and all the governmental irresponsibility that it represents, will become one of the two defining issues of the next decade. The other being peak oil. I'm working on a brief update to help folks winnow through the BS and find some modicum of truth about peak oil in the next week or two.

Here's a teaser quote from a nice, reasonably unbiased, reasonably non-inflammatory article about our national debt:

"The total national debt right now is $12.3 trillion. So we owe five to six times more than we make every year. But that's not the big deal.

In addition to that, there is another $45 trillion to $50 trillion in unfunded obligations that are off the balance sheet, which I think you ought to count. Medicare is the biggest part of it by far, and Social Security is a large part, too. So in reality, we owe between 25 and 30 times what we make every year."

What every american should know about the national debt

Here's the link all spelled out if the one above doesn't work:

http://www.politicsdaily.com/2010/02/01/what-every-american-should-know-about-the-national-debt/




Just to stick some numbers to that to get a sense of the scale, if you make $50,000 a year, and you have a debt proportional to what the Feds have, you owe at least One million, two hundred and fifty thousand dollars to somebody. Numerically, that's $1,250,000. Now, stop for a minute and just think about that in your life and your situation. You make 50 grand, which is a respectable income. Above average. But you owe somebody 1.25 MILLION dollars. How are you going to pay that off? How are you even going to pay the interest on that? If you tried to really imagine that situation in your real life, you should have gotten a little breathless and alarmed. A not unreasonable response to this little thought experiment might be, "There is no effing way I can pay that back, ever." You would not be the only one to think that.

Both China and Japan and some of our other creditors are already making demands about how we run out economy and how the government services its debt. I don't blame them a bit, and am frankly surprised it has taken them this long for them to realize we might not pay back the debt.

If we turn off the propaganda talking heads on the idiot box for a minute, it's not hard to realize the Feds only have a four options.

1. They could dramatically cut back on services, particularly those services called "entitlements". This would include Social Security, Medicare, Medicaide, the big "drug plan" for our seniors. And realistically, we'd have to cut back a significant percentage on everything else too. We are talking about Draconian cuts, or it won't work. Under the current administration (or under McCaine's administration, it wouldn't matter a bit), the chances of this happening are vanishingly close to zero. So, we can pretty much dismiss this. Well then, what are the other options?

2. They could raise taxes on private individuals, a lot. Again, we're talking Draconian levels of tax increases. This option is problematic on several fronts. How do we distribute the new taxes? Well, if we taxed everybody who makes more than 250K at 100% tax levels, that might eventually make a dent over the next two decades. Yeah! Let's do that! Just tax the rich guys and leave me alone. The problem with that solution is that all the evil successful business people will leave. Trust me, they would do that. There have been a couple of states who tried this, and their net revenue did not go up as expected. Rich people and business owners moved out of the state in droves.

Well, we could raise taxes on everybody by a certain fairly high percent, but not 100%. Hopefully, since this is somewhat more "fair", the evil rich successful business people would not abandon the country in droves. Again, numerous problems. First, raising taxes tends to slow the economy down, and the economy is already hanging by a thread. Since the money collected in new taxes would 100% have to be spent just to service the debt and (mostly) leave the country, we might as well just burn all that money. It won't do the US economy any good at all. People now have less to spend because of all those taxes and the economy takes a nosedive. The chances of this happening are very extremely low. This would be the antithesis to the so-called stimulus package that we're still spending like crazy. Really, the chances of this are zero. What else is on the table?

3. We could just tax the crap out of those evil soulless corporations. Sorry, numerous additional problems. They could leave the U.S. In fact, one of the main reasons so many corporations have already done exactly that, it the current tax structure. Taxes on evil successful corporations are substantially higher in the U.S. than elsewhere. You would leave too, right? And one of the reasons the wages are relatively high (expensive) for the corporations, is the worker gets taxed substantially, so he or she has to make more to compensate.

Why hang around and get excessively punished and have the Feds badmouth you all the time? Just move somewhere where the people and the government appreciates you for all the jobs you provide.

Oh yeah, and that economy thing again. For every additional dollar you forcibly take from the corporation, that's one less dollar they have to pay their workers, or pay their shareholders, or invest in new and profitable ventures or equipment. It would raise unemployment in a pretty linear fashion, more taxes, more job cuts. And it would crash the stock market. The chances of this happening are a big fat ZERO.

So, if we can't generate a bunch more revenue through taxation, and we can't cut expenses dramatically, and they certainly don't have the backbone to do both, what's left? There are two other options that I know of.

4. They could steal, ahem, I mean protect your retirement money in IRA's and 401K's. There's a few trillion dollars in this pot, and the government has recently sent up some test balloons to see if there would be rioting in the streets. Of course, they won't say it like, "Hey, we're gonna steal your hard earned retirement money because we're broke and irresponsible and can't seem to stop spending like drunken sailors and we're out of options." No, they phrased it like this.

In the last downturn in the stock market, a lot of our seniors lost a big percentage of their retirement accounts in IRA's and 401K's. We earnestly feel that we must do something to protect our senior citizens from any additional losses like that in the future. So, what we're going to do is take a reasonable percentage of the money in those investment vehicles and put them in safe annuities with guaranteed rates of return. They will put a lot of emphasis on the guaranteed part, and they will look and talk very serious about the need to protect the investments of our precious senior citizens. It will all be couched in the most benevolent rhetoric you have ever heard.

Eventually, maybe, they will say out loud that these annuities will take the form of U.S. Treasuries, or another similar form of government paper. What could be safer than treasury bills from the United States Government? What indeed. They have been reluctant to reveal all the details, but if it works like a normal annuity, it may also cease to exist upon your death and the government just keeps the rest, so your heirs might get screwed out of that part. Sorry. Hey, that's what you gave up to get that nice guarantee. I wait with baited breath to hear further details. They did such a good job with social security I'm sure this will turn out just like that, only bigger and better.

So the short version is, the Chinese are about to cut the debt junkies off, and rather than be responsible (finally!), the Feds will steal a big chunk of all the retirement money in the U.S. and dump it into the black hole of servicing the U.S. Debt. They will do this so they can keep right on doing all those bad things that got us here in the first place. This begins to look like a Ponzi scheme, and we all know how those turn out in the end. If anyone else did this, it would clearly be illegal. Usually, I think of that as a bad sign.

At this point, I don't know if they can get away with this or not.

I do know that the Feds are absolutely desperate for cash, and about the only people who have enough to make a difference are retirees, and those soon to retire. To me, this looks a lot like the irresistable force finally meets the immovable object. If we ignore all the tragedy and irresponsibility and worse long term consequences and outright theft, this could be fun to watch. Mind your nest egg carefully, it is at risk. Maybe they won't lay a finger on it.

Finally, we come to the last option.

We could just print money like crazy and pay the debt with that. This is how they have done it for the last 30 years, and I'd say there's a pretty good chance they're going to try it. This option is also riddled with difficulty, but it's all relative. The biggest risk is a resurgence in inflation. I have posted before about the monkey business the Feds go through to, ummm, lie about the inflation rate. They under report that number by several to many percent, depending on whose guess you most believe.

Somewhat more worrying is the fact that the Fed stopped reporting a technical indicator of the money supply, called M3, back in 2006. For a little background, there are three numbers that have traditionally been reported to monitor the money supply, M1, M2 and M3. Without leaving out too much detail, M1 is the money in your wallet and checking account, and mine, and all the regular folks. M2 includes M1, plus all the big savings accounts that you don't write checks on. That's a somewhat bigger number. M3 includes M1 and M2, but also adds all the institutional money, banks, investment companies, insurance stuff, money overseas. M3 is the big money. This is the arena of meg-jillionaires and governments. In comparison, M1 and M2 are the little minnows in the little pond, and M3 is the great white whale. M3 is like all the money out there.

Humph you may say. Why would the government stop reporting that number if it's the biggest, and most significant, and includes the other two indicators? Well, I'm glad you asked. M3 translates directly into true inflation. If we once again ignore the counter productive disinformation people that yack about money and money policy on TV, we discover an important fact.

Inflation, if you strip away all the smoke and mirrors, is when the money supply increases. That's it. Don't let anybody ever confuse you over the subject again. Printing money = inflation. Period, full stop. Oh, there are a few other things that can have some minor influence the money supply. But the 800 pound gorilla is the Government and the Federal Reserve, which is not the government, but the banking cartel. They work in concert, and they are not your friends.

Back when we knew the metric M3, we could very easily see how much and how fast the Fed and their shadowy cousins at the Federal Reserve were running the printing presses. When it became embarressing how much they were relying on the printing press to solve every problem known to man, without having or needing a backbone or conscience to do the right thing, they just quit reporting the number. La la la la la la la, I can't hear you, I'm not listening. Everything is under control, just trust us. They had some namby pamby excuse about how not reporting M3 would save taxpayer's dollars, but nobody seriously believed that. A google search about the M3 money supply, and two hours worth of reading would provide you with more hard data on the fiscal policy of the Federal Government and the future of our economy, than a hundred hours worth of crap from the ridiculous mainstream media.

Here's a nice summary:

link

Here's the full link if the short version doesn't work:

http://www.inflationdata.com/inflation/Inflation_Articles/M3_Money_supply.asp


So, get ready for true inflation to take off in the next two to three years. This is an unavoidable consequence of the cumulative bad decisions from Washington for the last 30+ years. It will be a bumpy ride. Please take appropriate measures now while you are able.


Finest regards,

troy