All Trick, No Treat

We can talk about terrorism or the Middle East crisis. We can talk about our military readiness or lack of it. We can talk about Obama’s sinking presidency or our country’s plunging morality or maybe Hillary Clinton’s latest scandals. But the other gorilla in the closet, the ugly witch slowly knocking at the door, the hideous monster following you while you’re walking home at night…is our nation’s economy. If the government is good at anything, it’s lying. We are NOT in a recovery. The unemployment rate is NOT down. Our economy is NOT growing to any significant degree. Yet, almost no one in Washington wants to talk about it or when they do, they are in denial. We can’t see it because, unlike the thirties of the past century, it is purposely being hidden. There are no bread lines or soup kitchens because people are getting welfare, food stamps, section eight housing, free cell phones, disability checks, free health care, you name it.

Let me try to explain in plain language so both you and I can better understand what we are up against. I have tried to make it as simple as I can. I, admittedly, am not an economist. I fly airplanes for a living and understand better than most that takeoffs are optional, but landings are mandatory. As of this writing we are approximately $18.5 trillion in debt. That is almost double since Obama came into office. By the end of Obama’s term we will probably be over $20 trillion in debt. We will NEVER pay it back. The best we can hope for is continually paying the interest to prevent default. We are paying about $400 billion a year in interest payments. That is money out the window. It does not go to education, defense, social security, roads, whatever. It’s gone. The payments have been relatively stable despite the constant increase in our debt balance. Why? Because the Fed, back in 2007, started lowering the interest rate to where it is now, .25% (one quarter of one percent). A .25% interest rate is extraordinary, unprecedented in our nation’s history. Lowering interest rates serves to stimulate the economy AND makes it easier for the Federal government to pay the interest on the debt. By steadily lowering the interest rate, in spite of a greater and greater debt balance, the interest payments can remain relatively the same. That low interest rate has been in affect since mid 2008. Interest rates are an indicator of an economy’s health. The reason interest rates have been so low for so long is because the economy stinks. If the economy was indeed improving, the rates would have gone up, albeit slowly. They haven’t budged.

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Here’s the kicker. Can interest rates remain at or near zero forever? NO! Sooner or later market forces (that thing the government only thinks they can control) will drive the rates up. The government will be forced to make higher and higher interest payments— $500 billion a year, a trillion a year, 1.5 trillion a year. Can we make those interest payments? Probably, for a time, a short time. How long? No one knows. For the time being the government will just print the money it needs. But, what will it do to the value of our money or its spending power? During the past 100 years, our money has lost approximately 96% of its spending power. I remember Motel 6 costing $6 a night. What will happen when it has lost 98%, 99%, 100%? The government is stuck and stuck big time. The Fed is out of tricks. The film flam is nearing its end. They really can’t raise the interest rate. If they lower it further or let it remain where it is indefinitely it will tell the world that our dollar, our economy isn’t worth spit. Neither the President nor Congress can cut spending to what is needed to solve the crisis because, to them, their positions of power are more important than the future of the country. Washington has conditioned voters to expect gifts from the treasury. If you watched the Democrat debate, all you saw were more promises of largess—free college, free health care, free this, free that. Votes cost money, lots of money. Democrats have never had any problem buying votes with your money. The spending bill just passed by congress raises the debt limit, raises spending and shows little interest in solving this ever encroaching fiscal catastrophe. Rather than lower spending, Congress has continually chosen to lower the rate at which spending grows and call it good. To them, “a remarkable achievement in governing.” What will a total financial collapse look like? Many experts think you can expect 25 - 50 million dead within the first 90 days. Sound crazy? Think violence, looting, starvation, disease, no prescription drugs, no health care. The monsters are here. The zombies are gathering at the door and they are getting more insistent. They are steadily approaching with urgent purpose. Unless we grab this monster NOW and deal with it once and for all, as painful as it would be, we are finished as a nation. Happy Halloween.