Death of America: The coming storm

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Written By Roderick T. Beaman

Chickens come home to roost. That’s an old saying. The problem with America is that in our case, the birds coming home to roost are vultures and not chickens.

I have just read, ‘Financial Reckoning Day’ by William Bonner and Addison Wiggin. The book is a fascinating and easy read and manages to incorporate a lot of history , including financial swindles and military blunders, into 276 pages. The only conclusion anyone can draw is that we are in a lot more trouble than the pessimists think.

The stock market is tremendously overvalued. The P/E ratio of Dow-Jones stocks, is far higher than justified by historic average. By this measure, even 5,000 Dow-Jones is too high. A massive correction is overdue but has been frustrated by a number of other factors.

Bonner and Wiggin cover demographics and show the tide of retiring social security beneficiaries that will swamp the system when the costs of Medicare are factored in. N.B. that the book was written before the drug provision was enacted a few weeks back. First estimates are that it will cost $40 billion for the first ten years. Ted Kennedy has called that merely a down-payment. That may be the most honest thing Kennedy has ever said. Costs of Medicare and Medicaid outstripped original estimates by a factor of at least ten.

Another fly in our ointment is the declining fertility rates to produce workers to support the huge entitlements that the politicians have promised. In America, the ratio is about three workers to one beneficiary and declining. They cover a morbidly humorous statistic – at current birth and life expectancies, Japan will have a population of 500 by the year 3,000!

Interestingly, the political forces that have been most vociferous in pushing the welfare state are the very same forces that have been pushing abortion rights. Since New York legalized abortion in 1969, there have been over 25,000,000 performed in this country alone. By this time, one third, or about 8,000,000 of those fetuses would have entered the work force and been able to contribute to the postponement of this coming reckoning day. Maybe this is God’s way of punishing us.

Also, figuring into this coming mess are the private and government pension plans that are heavily invested in the stock market and have been depending on the value of their portfolios to help the obligations. Those private funds include many unions of both public and private employees. Bonner and Wiggin go on to show that these plans will have to convert much of their holdings into cash by liquidating them. There will be fewer buyers with more sellers so what does that mean? This is another factor for downward pressure on the stock market in addition to the historically
overpriced P/E ratio.

The final nail in the coffin of our economic system is the funny money that has been pumped out by the Federal Reserve Board. FDR made it illegal for Americans to won gold which effectively isolated gold from citizen demand. Silver certificates, the last true money, ceased being printed in the 1960s. The pace of production of empty FRNs (Federal Reserve Notes) has been accelerating since President Richard Nixon, seeing the possibility that our entire gold reserve could be wiped out, made our money unredeemable with gold by other nations. That helped usher in the stagflation of much of his administration. It was that peculiar economic scenario that led to the, seemingly, contradictory term.

Wiggin and Bonner predict a long, soft recession/depression as a result of all this. I’m not so sure. History shows, and they even use a similar observation, that anything which is based upon a lie, ultimately dies. Our system is based upon multiple lies. The Soviet Union ended with a thud but the groundwork had been laid years before. The internal contradictions of the system led to stresses that could no longer be contained. Within months, it seemed, the dominos fell in Eastern Europe. The same thing could happen here. All that is needed is one, unexpected, simple push. In fact, Wiggin and Bonner seem to hint at it with the observation that the expected results of the various recent policies have not materialized. They seem to be betting that government will be able to keep a lid on the whole thing. I think that the longer the postponement, the greater will be the internal pressures and the bigger the final collapse will be. Once it begins, social upheaval and even violence could follow.

I was even more alarmed when I looked at a map of the 2000 election by counties; the infamous red (Bush) vs. blue (Gore). It is a perfect outline of cities, with high concentrations of welfarites and pseudo-intellectuals of the Left, vs. more productive areas. Looked at this way, it is self-perceived payers vs. self-perceived payees. Once again, this will be fuel for the fires.

There is an old saying that you can’t repeal the law of supply and demand. You can frustrate it but it asserts itself eventually. All of these things will be happening around the same time. The collapse of the stock market, runaway inflation, heightened demand for benefits. It could not have been timed worse if it had been planned. Once again, I do not see this country being intact by 2012. Something will happen after the 2008 election that will tear us apart or place the country under martial law. Once a beacon of light for the world, we may be one more set of ashes for the dustbin of history.
Published originally at EtherZone.com : republication allowed with this notice and hyperlink intact.”

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