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Wednesday, January 6, 2010

2009 Is Just The Begining .... The Worse Is Yet To Come

Most small business people I speak to can't wait for 2009 to be put to bed. They suddenly awoke to the realization that everything they have worked so hard to achieve in their lives could be seized from them, because their economy had failed them.

Like everything else in this world, we always wait until its too late before taking drastic action, and 2009 epitomized this reactionary mindset that dominates so much of our society.

But what really gets my goat is that we keep on making the same mistakes over, and over again. One can only hope that the lessons of this year will have broader ramifications than simply learning how to bail out banks and save our stock market from total collapse. Somehow I doubt it; 2009 was just the beginning of the realization that our short-term mentality has to change, but we will - alas - likely need to endure another bout of pain and hardship before we'll eventually do something about it. We got off too easy this time and somehow managed to paper over some pretty cavernous cracks.

For example, the same "boom/bust" cycle seems to be kicking back in. Wall St. realized it was too important to fail, and the taxpayer footed the bill. Now it's starting all over again... the stock market is rising despite uncertain economic conditions and continual rising unemployment. The environment continues to be destroyed and our governments can only (again) paper over the cracks. We've never seen a global response to saving our wealth like this, so why can't we do something to save our world for our children? It seems that as soon as we stabilize our stock market and our house valuations, all is well in the world again.

But that is way too rosy an outlook.

We reached into the future, took the money out of our kids and grandkids wallets, and used it to paper over the cracks. We only "got off easy this time" because we handed the bill to future generations, stole from them, and bankrupted them.

We doubled down on the profligate spending of the last administration and are intent on borrowing our way out of a debt crisis.

Until this generation realizes that WE are the ones who ought to pay for our own economic stupidity and not kick the can down the road we will have learned nothing and we will continue to be a danger to America's future. I believe we will rightfully be damned by history for generations to come for what we are doing to America. Sadly, we won't be alive to realize the full measure of our guilt and our shame.

Whether or not the average US Citizen knows it, the United States is creating the second-largest government/industrial complex in our nation's history. It is envisioned as a tail of bailouts to the financial industry, the automotive industry and others who show up with their hands out and their lobbyists in tow. It is also comprised of state governors who are poised to invent yet another form of pork with federal representatives and senators at their sides while raising local taxes for the citizen back home. This speculative panacea cannot survive.

HISTORY

The longest running and largest consortium of this type is the US Military Industrial Complex (MIC), funded historically at an amount many times the Wall Street and automotive bailouts combined. It is the elephant in the room in the burgeoning financial crisis, carrying the weight of wars, weapons systems and a pentagon/corporate financial relationship based on cost plus and time and material contracts since World War II.

IMPORTS AND EXPORTS

We are importing goods and services and borrowing money from the Chinese, the European Union, Japan, Korea, India and other developing countries at a rate unmatched in our history. Loan proceeds are being used to fight wars and bail out our bankers, carmakers and state governors.

Our largest export today is our public debt and our credit rating is slipping.

FACTS

The MIC will be scaled down by collapse. The Russian MIC led to that country's financial demise. It is now apparent that we did not outspend the Russians at weaponry and interventions. We simply had a better credit rating that is now maxed out

The other government agencies will be re-scaled and downsized as well but not by any specific action taken by the pending or future federal establishment. The over 50 entities that make up the federal government, together with their corporate outsource services, will be shrunk dramatically because the US is broke. The feds will fight to preserve the artificial reality, but US financing and credibility on the world stage are drying up and the creditors are suffering.

No new administration can change the above facts by riding on the taxpayer's back with "Social Improvement", " Public Works" and "Creating Democracies in Other Countries" mantras. Such policies in the past have led to foreign interventions, thousands of young soldier’s s, bureaucratic growth in Washington and bloated corporations performing low quality service contacts.

Annual budget deficits and the national debt are at intolerable levels.

ECONOMIC REALITIES

The US will come home from military adventures abroad because it will no longer have the money to run them and it will cease bailing out failing commercial establishments because there will be no funding for that.

The US will re-align priorities at the state and the national level much like all the little "Joe the Plumbers" throughout the country, who are toting skinny 401K's without jobs. They represent the present and future tax base upon which this country will run. America will not spend its way out of this dilemma because there will be no cash or credit left to spend.

The US will demonstrate financial prudence out of necessity, align spending with available revenue, downsize the federal government and its corporate cadre, cultivate technology and the small business base and take care of its most important constituent here at home - the average tax payer.

The US will understand the above are not political objectives but economic realities that are here and now. World economics will not allow a new, financial, government/industrial complex to emulate or replace the MIC.

Bottom line ... we can't keep doing what we're doing now. And we can't have those "doing it" (politicians and White House) ...... be allowed to last past the end of their current terms. Otherwise it will just get even worse.

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