Several months ago I wrote an article entitled "Three Months to Live?" about the end of the Fed's "Quantitative Easing II" ending on June 30. That time is upon us. Where do we stand? Here are the facts.
In nine months the Federal Reserve has bought $600 billion worth of treasuries issues following $1.75 trillion in "QE I" from March 2009 to March 2010. It is this printing that has kept the economy going at all the last two years and created the illusion of normalcy for most. Now that printing is supposedly going to stop. The first question is "who is going to buy them?" We are running a deficit of around $1.5 trillion a year and right now the Fed is buying up 70% of that debt. If the Fed stops buying, who’s going to lend us over a trillion dollars a year? Where is the government going to get the money required for its insatiable spending? The debt ceiling may be immaterial if no one buys any more of our debt. We’ll deal with that in a minute. What happens when the printing presses cool down for a moment? It’s speculation because no one’s ever done this much printing. We could see a short term rally in the dollar and a drop in commodity prices, including precious metals. People will think that prices will stop going up and start "hoarding" dollars (also refered to as saving) and Bernanke’s greatest fear, deflation, may rear its ugly head. Economic activity will slow even more. Then chairman Bernanke will crank up the presses again with "QE III". When that happens, it will send a clear message to our creditors that they will never get the full value of their money back, that all debts will be repaid in devalued dollars. When "QE III" begins it will be the final nail in the coffin for the dollar.
Several months ago the debt ceiling was background noise. It has now moved front and center. Since the financial crisis of 2008, a crisis caused by government, we have nearly doubled our national debt. In his first, and hopefully only, term, president Obama will likely add $6,000,000,000,000 to the debt. It is expected that deficits will run between $1.5 and $2 trillion for the foreseeable future. Government spending at all levels now accounts for 45% of the economy and the same percentage of people now receive direct payments from the government-welfare, unemployment, social security, etc. That is unsustainable, we cannot afford that and it is why we have had to borrow so much from the federal to the municipal levels of government. Two things are possible with the debt ceiling. It will be raised, perhaps with some concessions to reduce spending over the next ten years, a meaningless gesture. A few trillion over ten years does nothing to reduce a $1.5 trillion deficit now. Any rise in the debt ceiling will demonstrate to the world that we are not serious about addressing our fiscal mess, causing confidence in our bonds and currency to collapse. Ratings agencies, who usually downgrade an entity after its collapse, are already talking about lowering the credit rating of the US. The other, albeit remote, possibility is that it will not be raised. If that happens we will pay our interest and cuts, drastic cuts, will be made elsewhere. If we are borrowing 40 cents of every dollar we spend, we will have to reduce spending by 40%. The Obama administration will make those cuts in areas that will be most advantageous to him and his party. When the Social Security checks stop coming and Medicare reimbursements are suspended, the people will cry out for more debt even if it represents the country’s last gasp of normalcy before it all comes crashing down.
Regardless of what happens with the debt ceiling, our debt level is unsustainable for another reason. 61% of all marketable treasury debt will mature within four years. That means that the treasury must either repay or refinance one trillion a year in addition to financing the $1.5 trillion deficit. That means the treasury must borrow or refinance ten trillion dollars over the next four years! Do you see that there is no way out of this mess? Our insatiable desire as a people for entitlements has put us on this path that will either end in default and collapse or hyperinflation and collapse.
The failure of socialism in the United States is only one of the most obvious that will affect the world this summer. The crisis in European socialism will lead to actual defaults and the end of the Euro. Greece is the most obvious problem but Portugal, Italy, Spain and Ireland are on the brink as well. In 2009 Greece’s deficit was 14% of GDP. The same year Ireland’s was the same and it’s debt was 90% of its GDP. Portugal’s deficit was 9.3% of GDP. Either the EU will do what Bernanke is doing and crank up the printing presses for the Euro with more bailouts or these nations will start defaulting. Neither way ends well for them, or for us. Its just like dominos.
As these three things culminate this summer, we are ill equipped to handle the fallout. We are in a depression although for the moment it is hidden. Housing, real unemployment, and economic activity are all comparable to the levels found in the Great Depression. We just don’t see it because the bread lines and tent cities aren’t obvious-everyone gets a check from the government. Food stamps are just a credit card away, there is 99 weeks of unemployment, and a plethora of other government programs exist to keep the poor and unemployed invisible to most, including the media. That all is dependent on the government maintaining its ability to borrow and print dollars effectively. When that comes to an end, the unrest in Greece will look like a picnic compared to what will happen here.
Our government isn’t the only entity in debt here in America. If you add up all of America’s debt; federal, state, municipal, as well as private debt; mortgages, student loans and other credit, we are talking about a number greater than $56 trillion. This does not include the unfunded liabilities of our "entitlements" which total over $100 trillion more. To service this debt at the low interest rates we currently enjoy we must pay $3.6 trillion a year. Those interest rates will go up. Add our tax burden to our debt burden and we are flushing almost five trillion dollars down the toilet every year, money that could be used to grow our economy. That is unsustainable and we will never grow our way out of our financial difficulties with more of the same. Yet this is all our government knows. Helicopter Ben Bernanke admitted in his most recent press conference he has no idea why his efforts haven’t put the economy on more secure footing. He reiterated the President’s loss for an explanation, repeating Obama’s frustration at the mysterious "head winds" buffeting the economy. Could it be those "head winds" are the result of the President and the Fed chairman turning a massive wind turbine against the ship of our nation!? The contrary winds of regulation, taxes, entitlements, anti-business and energy policy, and money printing? Could that be it? I don’t have a Harvard education but I do believe those may be major contributing factors.
The sad fact is that we will have to go through a very difficult time. We have put off the day of reckoning for far too long and now we must pay a very steep price. The question is, what will we, the American people, do about it? It is we who have sold our future for a little government candy now. We have traded our dignity and humanity for government largess we cannot afford. We have exchanged our precious liberty for an illusory safety and soon we may have neither. When all we know is in ruins, when the checks no longer come, when the looters have nothing to give the moochers, what will we, the American people, do? Will we plead in humble supplication before our masters in government, the very ones who have brought us to our sorry state, willingly holding out our wrists for the chains that accompany false promises of deliverance? Or will we stand up on our own two feet as Americans, brave and free men and women for whom liberty, family, community and capitalism are the values most dear? Can you muster the fortitude to be that kind of person? Do you have the ability and courage to convince your neighbors that freedom is better than slavery, that capitalism is better than socialism, that government is the problem and not the solution? If those of us who love freedom do not show the courage, foresight and intelligence needed in these dark times to raise the torch of liberty, we will condemn our posterity to a life of slavery and misery. How will your children and grandchildren remember you?
Monday, June 27, 2011
Wednesday, June 1, 2011
First, They Came for the Jews...
President Obama dropped a rhetorical bomb on Israel last week when he proclaimed his support for a “peace plan” that was based of their pre-1967 borders. Israel, her friends and enemies both know those borders are indefensible, that a plan that begins there ends with the Israelis drowning in the Med. It makes no sense strategically. It makes as much sense historically as it does Mexico's claim to the southwest. Those issues, while important, are superficial. The president’s proposal may say more about us than it does about our relationship with Israel.
One of the ways we judge the morality of societies is by observing how they treat the powerless among them. Does the society persecute or kill them, or does it protect them, recognizing their equality and value, their rights to life, liberty, property and the pursuit of happiness? In the history of the world, no group, no minority, has been so oppressed, so persecuted, so subject to irrational hatred than the Jewish people. They have been exploited, enslaved and subject to repeated attempts at extermination from Ramsees to Hitler. In the face of the unimaginable death and destruction wrought by total world war in the forties, the majority of the nations in the world took serious stock of humanity's moral compass in the face of such an abuse of technology and progress. Western nations in particular, having experienced the slow, halting progress toward freedom and the recognition of human rights and staring long and hard at the results of the deviation from that march to freedom into totalitarianism, took several actions in response. One of these was the creation of the United Nations, a lofty goal that has turned into an abysmal failure, an institution that more often supports tyranny than opposes it, but that is another story. Immediately following the conclusion of World War II, in a moment of moral clarity, the world understood its need to compensate for its failure to protect the powerless from one of their own, the modern European social state of Germany. Its response was to recognize the right of the Jewish people for self determination in their own land, the land of their ancestors, the land of Israel.
For several decades prior, particularly due to the tireless efforts of Theodore Hertzl who built the Zionist movement practically single-handedly, Jews had been moving to the British protectorate known as Palestine, slowly turning a barren land fertile once again. In anticipation of “independence day” the trickle of immigration became a stream became a river became a flood. Of course, the Arab Muslims that lived there and those surrounding the new nation believed that any land conquered for Mohammed was perpetually theirs and immediately attacked this idea, the settlers and, when independence was declared, the new nation itself. Partition wasn’t, and never has been, good enough. The so called “Palestinian problem” was created at this moment when their Arab brethren encouraged them to flee so they wouldn’t be caught up in the death and destruction the mighty Muslim nations would rain down upon the Jews. It didn’t quite work out that way. With little help from the outside and against incredible odds, Israel earned the right of self determination.
Surrounded by nations populated by millions of people taught by their religion that the annihilation of the Jews is a sacred duty, Israel has survived and thrived. Even comprehensive and coordinated military attacks in 1956, 1967, and 1973 along with the constant level of violence directed against them by terrorists, have not defeated them or crushed their spirit. In the midst of a region dominated by tyranny, prejudice and barbarism, Israel has developed a society of respect for individual rights, liberty and equality. It is the only place in the Middle east where Jew and Arab and Muslim and Christian live together in peace and prosperity. Even under the constant pressure entailed in their very survival, Israel has sought and attained a society that encompasses the best ideals of humanity.
They have done this with the support and friendship of the United States from the beginning. They have been among our best friends and staunchest allies because we share with Israel, more than any other nation, the idea of the melting pot, of unity among diversity, of ideals and ideas providing cohesion among individuals of different races, religions and creeds. They are the proof that freedom and equality work, that they will produce happiness and prosperity no matter where they are implemented. Israel is a thorn in the side of all the surrounding Muslim nations whose values are the complete opposite and, aside from the beneficiaries of oil wealth, whose people live under oppression in poverty. They are a stick in the eye to nations where minorities are oppressed and persecuted. They inspire the jealousy of the anti-Semites around the world. Except for the last, the nations of the world react to Israel the same way they react to America, for the same reasons. While not perfect by any means, both Israel and the United States have demonstrated the superiority of liberty and equality as the basis for social and governmental systems like no other nations in modern history.
Because of its size, Israel is a much easier target than the “hyperpower” that is the United States, at least for the moment. We have supported Israel, we have had Israel’s back since her independence. Thus, we have given them confidence and their enemies pause for decades. Now that has turned on a dime with the advent of Barak Obama. With one speech, he has sided with Israel’s enemies and proposed a plan of action that can only lead to her destruction. As President, he is speaking on behalf of all of us. He is saying that we no longer view Israel as a kindred spirit, that our common values are no longer important, that justice and right are no longer considerations in solving the “problem” of Israel, the Palestinians and the surrounding counties, only pursuing solutions that will stop the fighting. Unfortunately, the only thing that will stop the shooting in the eyes of Israel’s enemies is the annihilation of the Jews. The Palestinians and their Muslim supporters have never been interested in peace, land for peace does not work, a two state solution will not end the conflict. Invasion and war have not worked so isolation and incremental encroachment coupled with violence have been the tactics of Israel’s enemies. All of a sudden the president of the United States, the greatest impediment to their progress in the past, has come out in support of a plan that encompasses more than they could have ever expected in the near future.
Whether this antagonism to Israel is a result of president’s Muslim sympathies, an anti-Semitic environment or contempt for her values is beside the point just as evangelical or humanitarian support for Israel is secondary to the real issue. Israel is the “canary in the coal mine,” the Jews are the bellwether for humanity. For all its historical anti-Semitism, a result of the distortion of the Jewish sect that became Christendom, western civilization is based on Moses. Respect for individual life which is the basis for individual rights, the principles of justice and morality, the subjection of temporal authority to higher principles, protection of the powerless, all our best ideals originated with the Law of Moses, the law of the Jews. Our founding fathers quoted the Bible, particularity the “Old Testament” more often than any other source, it is the ten commandments and not the law of Hammurabi that adorns our courtroom walls where the ACLU has not forced their removal. Israel and the United States are based on the same principles, on the same sources, on the same ideals.
If we turn our back on Israel we are demonstrating contempt for our own values. Where the principles of Moses are rejected, tyranny results. Persecution of the people responsible for these principles is merely the beginning. First they came for the Jews, and I said nothing, for I was not a Jew. Then they came for the libertarians, survivalists and TEA partiers and still I said nothing for I was not part of those groups. Then they came for the conservatives and the “rich” and still I said nothing. Then they came for me and there was no one left to speak on my behalf. America and Israel have embodied the principles of Moses and demonstrated their value and effectiveness to the world. More than anything else, this is the basis for our mutual friendship. If we abandon that friendship and embrace the totalitarian, the oppressor, the terrorist, we are not merely abandoning one nation in favor of another as part of some grand geo-political strategy. We are turning away from the values and ideals that have made us the great nation we are. If we stop supporting those who value freedom and equality, we are demonstrating the fact that we have ceased to value freedom and equality. It is not just a matter of supporting Jews but the ideals and values Israel embodies.
The President, through his words and actions, has demonstrated that he has, indeed, turned his back on those values. He is no longer worthy of being called the leader of the free world for he doesn’t believe in or support freedom. He speaks and acts, however, as our representative. Does he represent us? Do the American people as a whole still value liberty and equality? Do you? Is the president’s attitude an aberration or a symptom? If the former, we must loudly raise our voices in support of Israel and demonstrate our displeasure in the President's actions. If it is the latter, we are in a lot more trouble than we realize. It is one thing for an individual who holds our founding principles in contempt to con the people and ascend to the heights of power. It is another thing entirely if the majority of us have begun to agree. If we no longer support Israel and she falls, we will not be able to console ourselves that America still remains as a beacon of freedom in the world. If Israel is forced to stand alone, she will be the last free nation. By our rejection of her we will have proclaimed our embrace of the totalitarian and despot, we will have shown we are joining the rising tide of tyranny through our neglect or outright hostility. If the Jew and the law and principles his ancestors blessed the world with have no friends, liberty has no friends. The enslavement and death of the Jew is vanguard of tyranny. The fall of Israel, not that of the United States, will herald the beginning of a new dark age.
One of the ways we judge the morality of societies is by observing how they treat the powerless among them. Does the society persecute or kill them, or does it protect them, recognizing their equality and value, their rights to life, liberty, property and the pursuit of happiness? In the history of the world, no group, no minority, has been so oppressed, so persecuted, so subject to irrational hatred than the Jewish people. They have been exploited, enslaved and subject to repeated attempts at extermination from Ramsees to Hitler. In the face of the unimaginable death and destruction wrought by total world war in the forties, the majority of the nations in the world took serious stock of humanity's moral compass in the face of such an abuse of technology and progress. Western nations in particular, having experienced the slow, halting progress toward freedom and the recognition of human rights and staring long and hard at the results of the deviation from that march to freedom into totalitarianism, took several actions in response. One of these was the creation of the United Nations, a lofty goal that has turned into an abysmal failure, an institution that more often supports tyranny than opposes it, but that is another story. Immediately following the conclusion of World War II, in a moment of moral clarity, the world understood its need to compensate for its failure to protect the powerless from one of their own, the modern European social state of Germany. Its response was to recognize the right of the Jewish people for self determination in their own land, the land of their ancestors, the land of Israel.
For several decades prior, particularly due to the tireless efforts of Theodore Hertzl who built the Zionist movement practically single-handedly, Jews had been moving to the British protectorate known as Palestine, slowly turning a barren land fertile once again. In anticipation of “independence day” the trickle of immigration became a stream became a river became a flood. Of course, the Arab Muslims that lived there and those surrounding the new nation believed that any land conquered for Mohammed was perpetually theirs and immediately attacked this idea, the settlers and, when independence was declared, the new nation itself. Partition wasn’t, and never has been, good enough. The so called “Palestinian problem” was created at this moment when their Arab brethren encouraged them to flee so they wouldn’t be caught up in the death and destruction the mighty Muslim nations would rain down upon the Jews. It didn’t quite work out that way. With little help from the outside and against incredible odds, Israel earned the right of self determination.
Surrounded by nations populated by millions of people taught by their religion that the annihilation of the Jews is a sacred duty, Israel has survived and thrived. Even comprehensive and coordinated military attacks in 1956, 1967, and 1973 along with the constant level of violence directed against them by terrorists, have not defeated them or crushed their spirit. In the midst of a region dominated by tyranny, prejudice and barbarism, Israel has developed a society of respect for individual rights, liberty and equality. It is the only place in the Middle east where Jew and Arab and Muslim and Christian live together in peace and prosperity. Even under the constant pressure entailed in their very survival, Israel has sought and attained a society that encompasses the best ideals of humanity.
They have done this with the support and friendship of the United States from the beginning. They have been among our best friends and staunchest allies because we share with Israel, more than any other nation, the idea of the melting pot, of unity among diversity, of ideals and ideas providing cohesion among individuals of different races, religions and creeds. They are the proof that freedom and equality work, that they will produce happiness and prosperity no matter where they are implemented. Israel is a thorn in the side of all the surrounding Muslim nations whose values are the complete opposite and, aside from the beneficiaries of oil wealth, whose people live under oppression in poverty. They are a stick in the eye to nations where minorities are oppressed and persecuted. They inspire the jealousy of the anti-Semites around the world. Except for the last, the nations of the world react to Israel the same way they react to America, for the same reasons. While not perfect by any means, both Israel and the United States have demonstrated the superiority of liberty and equality as the basis for social and governmental systems like no other nations in modern history.
Because of its size, Israel is a much easier target than the “hyperpower” that is the United States, at least for the moment. We have supported Israel, we have had Israel’s back since her independence. Thus, we have given them confidence and their enemies pause for decades. Now that has turned on a dime with the advent of Barak Obama. With one speech, he has sided with Israel’s enemies and proposed a plan of action that can only lead to her destruction. As President, he is speaking on behalf of all of us. He is saying that we no longer view Israel as a kindred spirit, that our common values are no longer important, that justice and right are no longer considerations in solving the “problem” of Israel, the Palestinians and the surrounding counties, only pursuing solutions that will stop the fighting. Unfortunately, the only thing that will stop the shooting in the eyes of Israel’s enemies is the annihilation of the Jews. The Palestinians and their Muslim supporters have never been interested in peace, land for peace does not work, a two state solution will not end the conflict. Invasion and war have not worked so isolation and incremental encroachment coupled with violence have been the tactics of Israel’s enemies. All of a sudden the president of the United States, the greatest impediment to their progress in the past, has come out in support of a plan that encompasses more than they could have ever expected in the near future.
Whether this antagonism to Israel is a result of president’s Muslim sympathies, an anti-Semitic environment or contempt for her values is beside the point just as evangelical or humanitarian support for Israel is secondary to the real issue. Israel is the “canary in the coal mine,” the Jews are the bellwether for humanity. For all its historical anti-Semitism, a result of the distortion of the Jewish sect that became Christendom, western civilization is based on Moses. Respect for individual life which is the basis for individual rights, the principles of justice and morality, the subjection of temporal authority to higher principles, protection of the powerless, all our best ideals originated with the Law of Moses, the law of the Jews. Our founding fathers quoted the Bible, particularity the “Old Testament” more often than any other source, it is the ten commandments and not the law of Hammurabi that adorns our courtroom walls where the ACLU has not forced their removal. Israel and the United States are based on the same principles, on the same sources, on the same ideals.
If we turn our back on Israel we are demonstrating contempt for our own values. Where the principles of Moses are rejected, tyranny results. Persecution of the people responsible for these principles is merely the beginning. First they came for the Jews, and I said nothing, for I was not a Jew. Then they came for the libertarians, survivalists and TEA partiers and still I said nothing for I was not part of those groups. Then they came for the conservatives and the “rich” and still I said nothing. Then they came for me and there was no one left to speak on my behalf. America and Israel have embodied the principles of Moses and demonstrated their value and effectiveness to the world. More than anything else, this is the basis for our mutual friendship. If we abandon that friendship and embrace the totalitarian, the oppressor, the terrorist, we are not merely abandoning one nation in favor of another as part of some grand geo-political strategy. We are turning away from the values and ideals that have made us the great nation we are. If we stop supporting those who value freedom and equality, we are demonstrating the fact that we have ceased to value freedom and equality. It is not just a matter of supporting Jews but the ideals and values Israel embodies.
The President, through his words and actions, has demonstrated that he has, indeed, turned his back on those values. He is no longer worthy of being called the leader of the free world for he doesn’t believe in or support freedom. He speaks and acts, however, as our representative. Does he represent us? Do the American people as a whole still value liberty and equality? Do you? Is the president’s attitude an aberration or a symptom? If the former, we must loudly raise our voices in support of Israel and demonstrate our displeasure in the President's actions. If it is the latter, we are in a lot more trouble than we realize. It is one thing for an individual who holds our founding principles in contempt to con the people and ascend to the heights of power. It is another thing entirely if the majority of us have begun to agree. If we no longer support Israel and she falls, we will not be able to console ourselves that America still remains as a beacon of freedom in the world. If Israel is forced to stand alone, she will be the last free nation. By our rejection of her we will have proclaimed our embrace of the totalitarian and despot, we will have shown we are joining the rising tide of tyranny through our neglect or outright hostility. If the Jew and the law and principles his ancestors blessed the world with have no friends, liberty has no friends. The enslavement and death of the Jew is vanguard of tyranny. The fall of Israel, not that of the United States, will herald the beginning of a new dark age.
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