The National Bankruptcy, How Have We Fell So Far, So Fast?
When individuals run out of money they go bankrupt, the creditors fight over the crumbs, and the debtor moves on with a bad credit rating for a number of years. When corporations run out of money they go bankrupt, creditors fight over the crumbs, and the debtor moves on with a bad credit rating for a number of years. However, when a nation runs out of money, they can just print some more money, raise taxes and pretend that they are not bankrupt. Zimbabwe has done exactly that.
As California goes, so goes the nation. California is broke. While the liberal media moguls were busy making fun of Governor Sarah Palin following a tight budget in Alaska, California was on a spending spree. California is in the hole by over 24 billion dollars. The governor wants to make the hard choices. The legislature wants to make the easy choices. What is happening in California is symbolic of what is happening in the United States government. The main difference is the illusion of wealth at the federal level can be kept alive for several months before the inevitable occurs.
The taxpayers are getting weary of seeing the politicians smiling in their face and picking their pocket. Two huge bailouts have shown no success in turning the economy around. The imposition of taxes (as predictable as the rising of the sun) will prove equally unsuccessful. In spite of all this, the politicians are determined to pass a cap and trap law and a socialized medicine law. Why? It’s because the wind happens to be going in that direction and the politicians need to make the special interests (GE, hospitals, AMA, doctors, drug pushers, etc) happy because they (the special interests) have plugged so much money into the pipeline.
“He that troubles his own house will inherit the wind: and the fool shall be servant to the wise of heart” (Proverbs 11:29).
“…the borrower is servant to the lender” (Proverbs 22:7). After the sleight of hand by the Federal Reserve wears thin, the US could find itself servant to China, or, as a deadbeat nation, could find itself a weakened enemy of China. What an irony that China, a Communist country collects no capital gains tax and no regular tax on capital gains while the US collects both regular tax and capital gains tax on its citizens when they try to get their money to make money. Yet the US makes no claim to be Communist. The US Federal government is trying to feed inflation. It should be trying to feed deflation. Germany is getting the message and making the difficult choices by bringing all prices down, including taxes. They don’t want to repeat the mistake the Japanese made (throwing money at the problem) when they ended up with the lost decade starting in the 1990’s. Unfortunately, the US does not seem to have learned from the Japanese mistake.
Ironically, politicians and bureaucrats have been saying there is not enough regulation. It is regulation that put the country and the world in the mess it is in today. The US Congress passed a law, the CRA, the Community Re-investment Act. For a long time it was somewhat harmless, utilized rarely. However, the Congress followed up with a law to put teeth into the regulation, dictating that people with low incomes would receive loans (mortgages) in spite of the fact they could not afford them. These instruments of debt were turned into packages of mortgage-backed securities and more regulation, not less is what caused the world wide crisis. But instead of admitting error, Congress will put your community banker into a legal and regulatory restraint jacket, all the while claiming that a lack of regulation was the problem. And, guess what? Those same politically correct mortgages that caused so much trouble – they will make a comeback. The politicians will be smiling in your face again.
wily@wilyelder.com
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