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alstry (36.27)

Stuck between Barack and a Hardplace

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17

June 12, 2009 – Comments (12)

President Obama faces THE MOST DIFFICULT economic issue ever to confront an American President.

Throughout our nations history, we have been a nation where the PRIVATE economy generated sales and profits and supported our government and its currency.  As time passed our private industry grew and so did our government......but a few decades ago our private side failed to keep up with the growth of government and government grew and grew and grew becoming a more important part of the economy as each year passed.

Right now our total government speding is about $6.5 Trillion dollars........about half of our GDP.

http://www.usgovernmentspending.com/index.php?year=2009

Unfortunately, after popping the debt bubble of the last ten years....our private economy is simply too small to sustain a government with $6.5 Trillion in spending.....and that spending drives our entire economy including health care, defense, and welfare which drives trillions into the private sector.

As a nation, we are now only generating about $3.5 to $4 Trillon dollars in tax revenues......and a HUGE gap is forming......and the outlook for the gap to widen is almost assured with an aging populuation and more and more becoming un/underemployed.

HERE IS PRESIDENT OBAMA'S MASSIVE PROBLEM:

If government slowed spending to match receipts, our nation, and the world, would immediately implode into the biggest depression in history.......if government keeps spending money it doesn't have......our currency will collapse as few will want to deal with a country that produces very little and has such a MASSIVE social welfare spend while their own citizens are living at a much lower standard.

In sum, our President has two choices.......a depression where we restructure and start over or hyperinflation with a depression where our currency is worthless and nobody can afford to fill up their cars with gas unless they live outside the U.S...

You pick.

12 Comments – Post Your Own

#1) On June 12, 2009 at 11:04 AM, 4everlost (29.56) wrote:

It seems to me as if option 2 will inevitably lead to option 1.

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#2) On June 12, 2009 at 11:09 AM, usmilitiadude (31.99) wrote:

Would this be a choice of hyperinflation, deflation or something else?

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#3) On June 12, 2009 at 11:10 AM, alstry (36.27) wrote:

Option 2 leads to a much worse option one.....a hyperinflationary depression.....where there are NO survivors.....option one at least has some survivors and can be controlled through equitable revision of the bankruptcy laws.

Option 2 leads to complete collapse and is effectively a taxation of 100% on everything you have on every American.

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#4) On June 12, 2009 at 11:26 AM, outoffocus (23.43) wrote:

Wow alstry the headlines are getting better!!

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#5) On June 12, 2009 at 11:50 AM, ralphmachio (28.44) wrote:

Option 1 would save us some face, and goes directly against America's MO.  Option 2 will result in one world government, and therefore fits the classic problem reaction solution government model that we have allowed to steer us to this point.  

Problem-American currency destroys world economy.

Reaction-Save us, omniscient leaders from this terrible mess.

Solution-International Reserve Currency, bringing us one step closer to one world government because you can't have a currency without a regulatory body.  Coincidentally, this is exactly what these people want, but need the consent of the masses.  They will get their way by causing the mess in the first place, and act like it was an accident.  

If it was your job to figure out how to unify the worlds currencies without one nation in control, how better would you orchestrate it?  When the dust settles from this, people will be as receptive of the solution as they are to O'bama after W.  

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#6) On June 12, 2009 at 12:02 PM, leohaas (30.99) wrote:

There is a third option. This one would go something like this:

 1) Government INCREASES spending money it does not have.
 2) This increased spending leads to both increased debt and more economic activity.
 3) The increased economic activity gets us out of the recession.
 4) After the recession ends, tax revenues increase and the government slows down spending, paying back the debt it built up in Step 2.

Bottom line: both severe depression and hyperinflation avoided.

John Maynard Keynes is famous for inventing this option as part of "The General Theory of Employment, Interest and Money". He got a Nobel Prize for his efforts. President Obama is betting the nation on the validity of this theory. We'll see if he is right before he is up for re-election...

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#7) On June 12, 2009 at 12:06 PM, jesusfreakinco (28.97) wrote:

Barack doesn't have the balls for number 1.  If he did, everything he has done thus far would be different.  We all know we are headed for number 2.

Liberalism in this country has taken away the concept of personal responsibility and told everyone that Uncle Sam will take care of them.  The Sheeple have bought into this and won't accept less.

Our only hope is that California's crisis wakes up the national politicans and they change course quickly.  Apparently, the Supreme Court isn't gone to uphold the rule of law to keep the executive and legislative branches in check.  It's a shame.  225 plus years of reputation and hard work being thrown out the window.

And before a bunch of you bash me for picking on liberals - Bush didn't exactly help the cause with his drunken-sailor spending habits.

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#8) On June 12, 2009 at 12:20 PM, alstry (36.27) wrote:

Leo,

Your solution fails at the outset...spending money the gov't doesn't have in SUCH MASSIVE amounts raises interest rates to unsustainable levels and cause hyperinflation before we ever make it around the first turn.

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#9) On June 12, 2009 at 12:21 PM, russiangambit (29.36) wrote:

>  1) Government INCREASES spending money it does not have.
 2) This increased spending leads to both increased debt and more economic activity.
 3) The increased economic activity gets us out of the recession.
 4) After the recession ends, tax revenues increase and the government slows down spending,

--------------------------------------------

I think that is what the government is trying to do. The issue is with step 2. Economic activity just for the sake of economic activity is unsustainable since it is based on boorowed money and money will eventually run out. It needs to be productive activity that can be sustained. That is what everybody is griping about - we can't find a productive outlet for all this economic activity. So, as soon as spigot of stimulus money is closed we are heading for a double dip recession and it will be worse because people will completely loose the confidence.

 This is why truth is always the best course. The more they lie, the harder it will be to accept the truth in the end.

It is disturbing to see how little respect the US powers have for their citizens.US government has been acting as a big brother  for a while now.  They think they know better than the people.  But it isn't so. Everybody has a common sense. It is just the population is trained time and again to turn off the common sense, suspend the disbelief and expect eveything to be magically fixed.  It looks like it isn't going to work this time.

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#10) On June 12, 2009 at 1:39 PM, jesusfreakinco (28.97) wrote:

Russian,

Didn't know if you had seen this article:

No. 2 House Republican compares Obama to Putin

http://www.breitbart.com/article.php?id=D98OOJCG0&show_article=1

JFC

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#11) On June 12, 2009 at 2:07 PM, leohaas (30.99) wrote:

Alstry,

Maybe you are right. We'll see in Obama's third and fourth year. At that point, we'll either live in Zimbabwe (like you predict), or the recession is over (like I hope; note that I am not so sure about this).

Russian,

The whole idea behind the extra spending is that it is temporary. Once the economy starts recovering, tax revenues increase and the government should decrease its spending. So your argument that it is unsustainable is irrelevant. We'll have to see if they actually decrease the spending enough, though...

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#12) On June 12, 2009 at 4:01 PM, wrparks (70.98) wrote:

Rec from me, for the headline alone. 

 Leo, if we are out of the recession by Obama's 4th year, I'll eat my hat.  

Also, Keynes never seemed to address what would happen if a government already in massive debt tried to enact his ideas.  This is a as good a test as any.  I'm not a guns, gold,  and lead depressionist, but this is definitely going to get uglier before it gets better.

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