It doesn't take but a cursory glance at the headlines of any newspaper to figure out that the gig is up. Yesterday there was news that Americans were spending more. The official number was .6% in January over .3% in December. Hurrah! It sounds like we just turned the corner on this danged old recession and are progressing quickly to the recovery so well documented at every Obama press conference. One little problem and it's so minor I hate to be a downer by bringing it up, but increased spending does not mean increased economic activity. In this case, it means inflation, which is what the Bernank wants because at least it isn't the more terrifying deflation.
If you were looking for an end to the old America, I think we have found it. Here's how it plays out from here: In a few days or weeks the congress is going to hold a vote to raise the debt ceiling. That vote is the starter pistol to the final sprint toward oblivion. From there, there are only two things that can happen: A) we raise the debt ceiling that will signal to all of our creditors that we will never stop spending and U.S. Treasury bonds start to wobble. To stabilize the bonds the government increases the interest rate paid to those still gullible enough to purchase our debt. Every auction sets a new, higher interest rate to attract buyers and consumer credit begins to reflect this and soon purchasing on credit comes to a halt as the going rate for an auto loan (even to those with good credit) shoots up to 20% or more; B) We don't raise the debt ceiling and checks either start to bounce or are never issued, no cops, no commuter trains, no welfare. This leads to Egypt. I mean, when those on unemployment and welfare can't get paid all hell will break loose.
So, the government, being made up of hearty souls willing to endure any criticism in order to do the right thing, decides to take the soft-landing approach in which the economy is squeezed between high interest rates, inflation and an already high unemployment rate hoping that the self-anesthetized will just go back to their video games, their weed and extra-marital affairs to keep their minds off the fact that the day will come when they will be pulled off the couch by Sheriff's deputies and put on the lawn with the rest of their household goods.
Here's the problem, to lay blame for all of this one would have to go so far back it would be pointless. This is the fundamental problem with democracy that the founders so detested, it leads to populism and populism denies the existence of responsible governance. When success is gauged in spoils brought back to the district, there is no room for fiscal discipline and every election becomes an auction. The very system itself works against responsive government. There is no better example of this than the economic meltdown threatened in 2008. When the government tried to be responsive, it had to abandon the most intricate safeguards against tyranny and tyranny is all that it ultimately produced. Of course, you will never get George Bush to admit to that, but it is true.
So, here we are with a debt that cannot be paid and promises that cannot be met. We have a president more intent on demonizing, belittling and threatening industry on behalf of his socialist and labor union cronies than he is on solving the problems of the economy. Unleashing oil drilling across the nation on public lands and in the gulf would immediately affect spending, the unemployment rate and taxation, but he won't do it because it isn't green and it isn't (for the most part) unionized. He is not a difficult man to understand. If it does not benefit labor unions, government employees, or (hopefully) both, he won't do it.
Sit back, pop some corn and watch it all unfold on television while you try to ignore the deputy banging on the door. Do you really think you are safe?
Graciously linked and quoted at Refreshing The Tree of Liberty.
Graciously linked at Western Rifle Shooters Association.
Graciously linked at Ramblings From Oz.