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alstry (35.42)

A New Kind Of Civil War Brewing

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April 03, 2010 – Comments (18)

50,000,000 Government workers....government sponsored health care workers....and Wall Street financed workers are getting paychecks because they or their employers are borrowing about $3 trillion dollars per year from our pension/retirement/investment accounts for basically free through the issuance of treasuries, municipal bonds, and corporate bonds.

NOT BECAUSE A SUFFICIENT AMOUNT OF TAX RECEIPTS/REVENUES ARE BEING GENERATED TO PAY THEM.

However, while the above are borrowing for free and getting generous salaries....the private sector is being cut off from credit and facing much higher interest rates.

As a result, the private economy is in a MASSIVE depression as construction has come to a grinding halt (down about 80%), bankrupticies are skyrocketing, and un/underdemployment is now over 20% and climbing.

One begins to wonder why government workers even get a paycheck when their employer must borrow money from the public's retirement accounts to pay them yet private workers must lose jobs and potentially go bankrupt.

Why can't private workers/employers also borrow for free in a similar fashion?  It is easy to see anger rising as more and more figure out what is going on.

What will the trigger be?????  That is an easy one, if a distraction is not created first......once the public learns that its investment/retirement/pension accounts are simply accumulations of toxic debt and essentially worthless instruments to pay public and public financed workers....the reaction could be interesting.

18 Comments – Post Your Own

#1) On April 03, 2010 at 10:25 PM, oshiri (< 20) wrote:

Greeting Semapi . . .

     I've been off the mainland U.S. for a while, so I don't know if you've mentioned this, but the number government union employees now exceed the number of union members in private employ.

     This basically means a self-perpetuating tough-to-mouth situation. Unions support legislators that support unions. Thus the union/government's appetite for our money will simply keep on increasing. And good luck dislodging the 10's of millions in AFGE, AFSCME, and NPMHU -- they, and their political buddies, have a constitutionally guaranteed license to take as much of our money as they see fit.

     Sorry Al, but I don't see anything triggering anything. As long as people keep watching the skewed mainstream media, change becomes simply more of the same -- capitalism has lost.

     And you're oh so politically incorrect by mentioning "trigger." You must be one of those bitter clinger gun nuts :^D

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#2) On April 03, 2010 at 10:45 PM, alstry (35.42) wrote:

Osh....

There will most definitely be a trigger.....

There is only so much money collectively in our retirement accounts to fund this nonsense.....if the government ever resorts to outright printing....the currency will devalue so fast and interest rates rise so quickly that the world as we know it would come to an end faster than we could smoke a Cohiba churchill.

My guess is was are much closer to the inflection point than many think.......pay attention, it will come from a direction you never expected.

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#3) On April 03, 2010 at 11:21 PM, oshiri (< 20) wrote:

Semapi Al --

     I just remember the late 1970s -- inflation over 10% -- it's now but 3%. Interest rates over 10% -- it's now around 4.75% for a 30-year mortgage. Unemployment was over 10% -- similar to what we have now. Then we were hit by the oil crisis with Jimmy Carter in a cardigan sweater, Iran taking over our embassy, and the Soviet invasion of Afghanistan.

     It was a far more grinding and horrible time than now and nothing happened but the election of Ronald Reagan.

     The pressure is off the dollar right now due to the Euro-zone being so hosed. And China's not rushing into anything that would upset their reserves.

     I just see too many lemmings in America going with whatever is spoon-fed to them. I'm always watchful, but the whole healthcare debacle showed American's are too lazy and too gullible to do anything. Yes, "long-term" many people's retirement funds will be wiped out, but the government will do what it always does -- lie. And most people will believe that everything is going to get better soon.

     Again, I'm sorry, but we've lost, capitalism has lost.

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#4) On April 03, 2010 at 11:29 PM, IMIraqable (< 20) wrote:

I cannot agree more. I currently live/work, in Iraq. I see an 'apocolyptic" end to our current system, and way of life. I am new to investing and putting almost $8k/month into different things. I want to be patriotic, but seems like putting all my money, into American, investments at this point is dangerous. When this house of cards falls, I want to be safe. I am watching what happens and trying to diversify, into countries, that would benefit from an American collapse. It REALLY angers me off that I cant safely invest 100% U.S.A, but because a run-a-way Gov't and liberal/social/communist agendas seem the norm now. I do believe a trigger will set off an internal civil war, but it will be the people that suffer, because not only will will collapse, economically but Obama is just waiting to bring in Martial law and his "new" civilian army. Let's just hope and pray this will turn around.

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#5) On April 03, 2010 at 11:36 PM, alstry (35.42) wrote:

You can't compare the 70s to today.  Back then we were a creditor nation with less than $5 trillion of total public and private debt.  Today we are a debtor nation with over $55 trillion of public and private debt.

It is amazing how borrowing $50 trillion over thirty years can create a wonderful illusion of growth.

Back then, it was relatively easy for Volker to step in and correct the problem before conditions escalated to where they are today.

China is really a non issue....it holds less than 4% of total US debt.  They could convert debt to cash and buy up a bunch of farmland and be happy as clams.

At this point....government may have few options.....pay attention and the facts will unfold before all of our eyes.

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#6) On April 03, 2010 at 11:49 PM, oshiri (< 20) wrote:

IMI --

     First off, I'm no "liberal/social/communist" -- I'm actually extremely fiscally conservative and dislike both major parties. I complete disagree with everything happening in Washington right now and what they have done (so far) to our country. That said, the overwhelming majority of Americans are still too lazy and too gullible to do anything about what is happening -- I just don't see your or Sempai Al's disaster playing out. (Again, think the lack of rebellion in the 1970s and over healthcare).

     What is going to happen soon is the implementation of a national sales, or value-added tax. More money for the government (and union workers) so they don't have to print as many dollars as we've surmised. And the mainstream media will proclaim it to be Obama being a responsible steward for the fiscal health of America. And he'll be re-elected come 2012.

     I'm sorry, I absolutely hate this scenario, but nothing cataclysmic is going to happen. We've lost.

     And my recommendation for your overseas investments -- decide what country you want to live in after America's decline. Look for a nice warm, perhaps tropical country, then put some money into its growth. But look to invest in things that yield local currency, not U.S. Dollars.

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#7) On April 04, 2010 at 12:33 AM, IMIraqable (< 20) wrote:

oshiri,

I agree with you. By apocolyptic I don't mean "end of world" scenario. I mean just the way of life as we know it ending. I also believe most Americans are WAY TOO LAZY to actually uprise. I am very fiscally conservative and probably more Libertarian than Republican. I am very angry with both parties. I have about 15% invested overseas, currently. I love my Country but not enough to hand over my personal wealth (completly acquired from my hardwork) to a Gov't that hands it out to the lazy. I am smart enough to invest, in companies, that Obama is propping up to fulfill his agenda. I just am saddened that it can't be companies that are being propped up by capitalism and for the greater goo, of our country. I have already sold all my belonging, in America, except my Vette!!!! Thus being said, I will probably retire in an area that is tropical and safe!! BTW I am only 39 so hopefully by 55 I will be able to do that. 95% of my income goes to investments and savings.

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#8) On April 04, 2010 at 12:50 AM, alstry (35.42) wrote:

Looks like we all agree.....

It is not the end of the world....simply the end of a world as we know it.

The Alstrynomic driver is the morphing from the industrial age into the digital age....coupled this with a historic delveraging and we have a convulsion like we have never seen before.

A convulsion where at least 50% of the current jobs will be obsolete in the next few years....same with much of the current real estate as more and more tasks and business move online....same with government structures as entities set up to control industrial age systems will be irrelevant in the digital age.

Notice how we are constantly told we are in a recovery but practically every city, county, and states are facing the worst financial crisis in history.

And business after business are cutting back or shutting down due to slowing business conditions.....

It really is not very complicated...but what I think few appreciate is how convulsive the changes will be.....all over the world.

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#9) On April 04, 2010 at 1:07 AM, oshiri (< 20) wrote:

IMI . . . at the sake of taking over Sempai"s blog . . .

     I wouldn't question anyone's patriotism for investing overseas -- Caps-Fools would be crazy not too. I also see that you're committed to your own fiscal conservatism by investing and saving. My hat's off to you! And thanks for taking a thankless job in Iraq. That's probably your riskiest investment :-P

     Seriously, as far as tropical, growing areas, you may want to consider settling in a northern coastal area of Chile. Obviously the recent earthquake/tsunami has given the country a bruise, but they have a conservative government, and a growing economy. Big brother Brazil is near-by to provide stability, and Generalisimo Chavez is way north -- an American problem, not Chile's. There are plenty of growth companies to invest in in this region. You probably already know this, but avoid putting any money into Argentina -- they are a precursor to what the U.S. will become.

     I have quite few years on you, but claim no wise man role here. That said however, I really think you're in your prime money-making years, and retiring at 55 is doable if you keep on with your strategy. Good luck with it bro IMI.

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#10) On April 04, 2010 at 1:44 AM, alstry (35.42) wrote:

ohsi...

I think you are missing the forest for the trees......

We have never experienced any period in American History where the tax receipts from the citizens could no longer pay the salaries of government workers.

Sure we have had deficits in the past......but the deficits were only a small percentage of GDP....and a growing GDP I might add.  WW2 was an anomaly which is easy to distinguish from the present.

Right now, the Federal Gov is spending twice as much as it is taking in, and receipts are collapsing......Wall Street is borrowing OVER $1.5 trillion per year.....and both are paying us practically nothing for the privelege so polticians and executives can get paychecks.

In addition, government financed health care is approaching 20% of GDP...vs. 1% not too many decades ago.

At some point.......you simply can't borrow anymore to fund something you can't afford......Madoff lasted 30 years....this nonsense has been going on about the same amount of time...........my guess is time is running out.

I hope your guess is right.

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#11) On April 04, 2010 at 2:21 AM, oshiri (< 20) wrote:

Sempai --

     America is now a "soft tyranny of low expectations." No one really cares as long as they get their iPads and Final Four. It is not my America anymore, I lost -- we lost.

     Over the course of the last year I haven't disagreed with any of your analysis, and I still don't. It's just that government continues to find a way to perpetuate itself and the vast majority of people simply sit there and take it.

     Yes, eventually there will be some dramatic changes, but government always find extra ways of sucking money out of us. As a former city councilman, I suggest that you can just take a look at your electric bill to see how they do it (electric bills are larded with 30 percent or more in non-electrical taxes). We are still a far cry from the confiscator income taxes of the late 1960s thru 1970s. That not to say we're not over taxed, again look at all the hidden taxes, the double taxes, the utility taxes, the liquor taxes, and on, and on, and on. Once a 15% VAT tax is in place, no one will even notice, and the "poor" will even get a rebate.

     Yes my friend Al, these are dark days. The government is still going to borrow more-and-more, all the while their tax tentacles will be drilling into every orifice we have to keep the debt churn going, and the union vote happy.

     Does it ever come to an end? Eventually . . . we hope. 

      

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#12) On April 04, 2010 at 7:45 AM, alstry (35.42) wrote:

It's just that government continues to find a way to perpetuate itself and the vast majority of people simply sit there and take it.

So true......

But with credit being cut off to the private economy...the private economy can no longer mathematically afford to support government in its current form....even if you doubled income taxes.

And as we discuss this, tax receipts are continuing to decline despite increasing tax burdens........at some point, you can only take so much blood from a rock where the only thing left is rubble.

From this perspective...the only question now is how much longer government and Wall Street can continue to borrow over $3 trillion from our retirement accounts and pay salaries as $3 trillion exceeds the total income of the entire population paying taxes.

It is the math that is different today compared to the past, not so much the behavior....and the numbers simply no  longer add up.

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#13) On April 04, 2010 at 8:10 AM, JackCaps (26.43) wrote:

Dan Henniger in the 3/25 WSJ had an opinion piece titled "Repeal the Democrats" that concurs with this blog's sentiment.

In this article, Henniger states ...

The Democrats are now the party of the state. The 20th century hybrid version of the Democratic Party, which included private-sector industrial unions and Wall Street liberals, is being abandoned by its leadership as unwanted and increasingly unnecessary. 

...

Liberals in the private sector have to come to grips with the fact that what they do for a living is an abstraction to the people they are sending to Washington. Nobody at the top of the party is much interested in them anymore. House and Senate Democrats hammered insurance, pharma and medical-device makers with taxes and intimidation. It wasn't just politics. It was belief. With this [healthcare reform] bill, the party made the transition from market unionism to Alinskyism, from a politics tempered by the marketplace to one that milks the marketplace.

By default more than design, the Republicans now find themselves the party of the private economy. Their members, even in faraway Maine, should figure out how to align themselves with the interests of what is still the world's most dynamic economy.

 

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#14) On April 04, 2010 at 8:18 AM, alstry (35.42) wrote:

I think to distinguish this issue by political party is a distinction without a difference.

The budget of the Federal Government doubled under the past administration.....there is enough blame to go around on all sides.

At this point, our nation operates simply because $3 trillion dollars is being siphoned from our retirement accounts to pay the salaries of politicians, government workers, government supported heatlh care workers, and employees of money losing public companies like most of the public home builders.

The consequence of the latter is that it put many solid private, non Wall Street funded, home builders out of business as they could not indefinitely compete at a loss....and time ran out for many as they ran out of credit.

This borrowing has really increased over the past year.....the only issue now is how much longer can our retirement funds afford to maintain purchasing this much debt before running out of money???

America has never had to face the issue of its government running out of credit.....especially a government this large.

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#15) On April 04, 2010 at 10:46 AM, JackCaps (26.43) wrote:

I agree that no political party is blameless regarding deficit spending. But, government spending becomes especially out of control whenever one party controls both the legislative and executive branches.

With one party dominance, there are no speed bumps to curtail spending on behalf of their interests. The only surplus is in doublespeak on how bad fiscal policies are for the public good.

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#16) On April 04, 2010 at 12:58 PM, OneLegged (< 20) wrote:

oshiri, I agree with much of what you are posting, but I think you give far too much weight to unions.  Union members are only a small fraction of the private work force. 

 

www.nytimes.com/2010/02/14/business/14count.html 

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#17) On April 04, 2010 at 6:06 PM, oshiri (< 20) wrote:

Uno-leg . . .

     I was indeed only referring to the "government" unions and the fact that the number of government union employees now exceed the number of union members in private employ. Thus a self-perpetuating AFGE, AFSCME, and NPMHU union partnership with the politician for votes and money -- that's their votes and our tax money.

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#18) On April 06, 2010 at 12:38 AM, SuperPicks (29.09) wrote:

Wow, there was great discussion in this thread in addition to a good blog post. Props, still reading it...

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