What Happens if U.S. Doesn’t Cut Spending?
Greg Hunter’s USAWatchdog.com
Everybody is talking about the cuts in government spending with the $85 billion in forced spending cuts in military and social programs. $85 billion amounts to little more than a 2% cut in $3.8 trillion (or $3,800 billion) in federal spending per year. Didn’t most working Americans just suffer a 2% pay cut with the expiration of the Social Security tax holiday? How many times have we heard that thousands of government jobs will be lost to sequestration? The so-called Great Recession destroyed at least 8 million private sector jobs, and if you count the underemployed and discouraged workers, it’s easily 23 million.
Why are government employees being considered as some sort of sacred cow? What many are feeling was summed up with a recent comment on the USAWatchdog.com site from “Chuck O.” He wrote, “I’ve retired after 44 years working. Throughout the entire period, I lived through no fewer than 10 lay-offs and cut-backs. I have yet to see any appreciable lay-off or cut-back in the federal work force (EVER). I feel it is about time “they” should take a “hit.” How about a 20% cut back on ALL salaries? “They” need to share in the austerity. We all should have the same insurance benefits, too. “Their” retirement program and health insurance is way out of line; cut it back. A 20% cut would be way better than NO PAY at all. 20 % could really help lower the debt. I’m really getting KILLED by this money printing. In the 12 years I’ve been retired, my dollars have lost more than 30 % of their purchasing power. Obama’s crew hasn’t a clue. My wife and I have BOTH had to go back to work at 70 years old.”
With foreigners increasingly shunning Treasuries and the dollar, the only way to keep all those government jobs is to raise taxes on the private sector or print money. The Republicans caved on tax increases at the beginning of the year, so that option is closed. Now, we are left with the Federal Reserve’s “open-ended” money printing operation that creates $85 billion a month out of thin air. A little more than half of that amount ($45 billion) goes to buy Treasury bonds to finance the federal government. The rest ($40 billion) goes to the continued banker bailout that buys their sour (and I think fraudulent) mortgage debt. The money printing is what’s causing Chuck O’s “30%” loss in purchasing power for his retirement dollars. As the money printing continues, the buck will buy less and less.
Why doesn’t the President divert just 2 months of the $40 billion the Fed creates every month to continue the banker bailouts to stop most of the $85 billion of spending cuts? In case you haven’t noticed, the bankers are a sacred cow. The big banks have gobbled up trillions in bailouts already, and there is no end in sight. After all, the Fed action is “open-ended.” The banks are the reason why the U.S is in financial trouble, and the continuing banker bailout is why the economy will never get better. The only reason why the economy has not collapsed is the Fed can print money to buy sour debt that no one else would touch.
Because of all this money printing, the rest of the world is in the process of shunning the dollar and the U.S. Treasury. It looks like gold, or some other gold-backed currency, will facilitate global trade in the not-so-distant future. Jim Willie of GoldenJackass.com says when the world stops using the dollar, it’s game over. In a recent post, Mr. Willie wrote, “The gold trade finance concept ushers in a new alternative system long sought in order to create a more viable equitable sustainable financial structure. The banking system should serve trade, not the reverse. Hence the UST Bond will slowly vanish from the global banking system, and the US Dollar will lose its global reserve status. The end result is an unavoidable slide by the United States into the Third World.” (Click here for the complete GoldenJackass.com post.)
You want to see what an “unavoidable slide by the United States into the Third World” looks like? Behold the bankrupt city of Detroit that recently became a ward of the State of Michigan. Detroit’s bond debt alone is a whopping $14 billion. I doubt it’s worth pennies on the dollar, if that much. You are not hearing much about this in the mainstream media (MSM). Maybe it’s because this is what socialism looks like when you finally run out of other people’s money. In a recent post on the FinancialSurvivalNetwork.com, Kerry Lutz wrote, “The city’s day-to-day operations are in total meltdown. Many police calls go unanswered. Large sections of the city are dark at night because thieves have stolen the streetlights’ copper wiring for scrap. Public education is a euphemism for warehousing and babysitting the criminal youth of tomorrow. Packs of wild dogs are found throughout the city. In many areas, garbage collection is a luxury that can no longer be afforded, and street cleaning is non-existent.” (Click here for the complete FSN post.)
Do you really think Detroit can turn things around without big cuts and sacrifice? They keep telling us about how the cuts will hurt and they need to be done in a “smart way.” I’ll bet Detroit would have liked to have tackled their financial problems in a “smart way” and made all of those “smart cuts.” Every time I hear the “smart cut” argument, I think, okay, give me $85 billion in “smart cuts” this year and every year for the next 10 years. I also keep hearing that we need to fix our financial problems long term and not now during this “fragile recovery.” Haven’t the powers been telling us this for years? You can see how well it has worked.
Remember, what is going on with the $600 billion in new taxes and $1.2 trillion in spending cuts (total of $1.8 trillion) is less than half of what the bi-partisan Simpson-Bowles debt commission came up with in 2010. The Simpson-Bowles plan was around a $4 trillion combination over the next 10 years, and even that only slowed the growth of our debt. Everyone keeps asking about the pain caused by the spending cuts. They are asking the wrong question. Everyone should be asking: What happens if the U.S. doesn’t cut spending? I think the answer is Detroit.
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About the Author
Greg Hunter
Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.
Nailed it. Like the fall of the Roman Empire….the end of the powerful U.S.A. is near…I personally hope that the Republicans and Democrats cannot agree on anything. At least then spending cuts kick in as time goes on. It is when the Left and the Right agree, that we all get screwed even worse.
Thank you Scott. The U.S. needs much bigger cuts to keep from becoming a failed state.
Greg
I agree with you that the banks are still a problem but i think what is really is are worst problem is the price at the gas pump this taking money out of peoples pocket they could be spending this money else where the gas need to get down below 2.00 dollars and stay there for a long time and the economy would jump start it self……
Michael H.
In a year this gas price will look cheap.
Greg
Greg, what a article, the best you have ever done and that is saying something! Detroit is marching all over America in one way or another, a blind man could see it. Frankly, disappointing as it is I don’t think there is anyway to stop it. Thanks for the wake up once again.
Art and AndyB,
Yes, I am afraid you both are correct. On the current trajectory Detroit is coming to all of America.
Greg
Greg: as more and more disappear from the ranks of the middle class, there will be many Detroits. Already there are many unreported acts of violence throughout this country perpetrated by the desperate or the innately criminal. At night, parking lots at malls and shopping centers are very dangerous places, even in supposedly “safe” suburbia. Just ask any friend you might have in local law enforcement.
This young man said it best.
http://www.youtube.com/watch?v=jeYscnFpEyA
My husband is a “government worker.” He is a firefighter for the US Forest Service. He had a 10% pay cut last year in that he lost his retention pay, and now he will be furloughed. In case you were wondering, “government employees” don’t make much, especially compared to city or county or state firefighters. We are looking at less than 50,000 for sure a year.
Cut spending? White House tours–yes, but spending? I read recently where Homeland Security is acquiring 7,000 assault rifles (w/ 30-rd magazines), 1.6 BILLION rounds of small arms ammunition, 2,717 mine-resistant armor protected vehicles, and a fleet of Predator drones. Good thing we cut out White House tours. Tourists might follow Sen. Rand Paul and Ask Attorney General Holder why he supports the right of the Administration to unilaterally use drone strikes on American on US soil.
America blew it by not electing Ross Perot for president. We were fairly warned about the “huge sucking sound of jobs going overseas”. Do we have to let our economy and country completely collapse before we scrap NAFTA, CAFTA and the rest of those lousy agreements?
Perot sucker punched the US. He quit, then came back to ensure the conservative vote would be split to guarantee Clinton’s election.
Greg,
This is a very good article and using the illustration of Detroit is quit fitting. I just recently moved from Detroit and I can say the reason has to do with the lack of leadership and management of the cities revenues or lack there of. Having been a resident of Detroit all my life I am glad that I made the move before things get worse. Keep up the good food for thought.
Mike
Mike,
Thank you for adding your real world Detroit perspective. I’ve been there several times and I have to say it was a nice city when I was there. years ago I remembering reading in the local newspapers how they were fighting over to improve the rotten dilapidated sewer system or building a new baseball stadium for the Detroit Tigers. The Tigers got their stadium. I think that says it all.
Greg
Outstanding Article! As a police officer of 27 years I can tell you its getting worse. Thieves are stealing copper wire and pipes out of occupied houses, they even cut the bronze vases from the tombstones to sell at Scrap Yards. Obamacare kicking in, Ambulance drivers being given new protocols for heart attack intervention so that not too many resources are used. Police cant get ammo for practice and qualification but Homeland Security has billions of rounds and 2700 MRAPS! Wake Up people, Listen to Greg and those like him. I am turning eveyone I know to your website Greg, in the hopes of saving a remnant! God Bless!
Mike,
Thank you for adding your police perspective!! I appreciate and respect the service you do for people.
Greg
They can’t continue to run these huge deficits. On the other hand, if they cut spending, the economy will contract and so will tax revenue, so that won’t do any good either.
The only long term solution is to restructure the debt, with all stakeholders, including foreigners, social security recipients, taxpayers, etc. all together to try to figure out the fairest way to distributue what little is left. This could be part of a second constitutional convention, where changes could be made to revert to a sound money system.
Unfortunately, those in charge of the free money printing press, the bankers, aren’t likely to give up power so easily. We will almost certainly go the route of Greece and Spain before the American people wake up to what is going on. Too bad.
Jason Emery,
Bing, bing, bing!!! You are correct sir! The only group you left out are the insolvent big banks. Everyone should be forced back to real accounting (mark to market) and be taken to receivership!! Thank you for the comment my friend!!!
Greg,Great article!
What Congress is doing to the economy is using a tourniquet on a mortal leg wound that is bleeding profusely. It keeps the patient alive…SHORT TERM! You can put all the IV fluids (money printing) you want but there are no red blood cells (wealth creation, real jobs, and manufacturing) to carry oxygen. If the under lying cause of blood loss (deficit spending) is not addressed, the patient dies.
America has very few red blood cells left and the Obama is doing his best to destroy those. May God bless America.
George,
You are in rare form my friend. Spot-on!! Thank you.
Greg
I have to disagree with you, its is a band aid compared to a tourniquet! Everything else I agree with you!
Hi Greg,
The person you quoted, Kerry Lutz, said in the last paragraph of his article that you linked to, “…Until the power of unions is broken, state and local taxes are cut to the bone and government services are pared back to their basic essentials, urban decay will continue unabated…”
This is really a shameful statement, “Until the power of the unions is broken …”
Perhaps many unions have become corrupt, just as government has, but they have been erected to protect workers from the egregious behavior of many companies. Blaming the unions is petty.
Certainly, the money printing is partially because no one in these places of control wants to live in a society that’s defunct. They want to keep all the perks and benefits of living in excess. But, Mother Earth will probably stop that herself at some point regardless of all the money printing.
🙂 Diane
Look at a GM labor and Honda in TN…labor unions are part of the problem
DroidX-G,
Public unions are what concern me. With private unions there are company profits. That’s fair game, but it your company fails you too should fail. With public unions, there are NO profits, just taxpayers to work against. Even FDR did not like or want public unions. Look at bankrupt Detroit and California that is $600 billion in debt. Thank you for your comment.
Greg
“Perhaps many unions have become corrupt, just as government has, but they have been erected to protect workers from the egregious behavior of many companies. Blaming the unions is petty.”
This statement is ridiculous. So we should not do anything about unions because, even though they are corrupt, they have been erected to protect workers? The operative word being corrupt. This is not about being selective on which corruption to get rid of. All corruption, even your prescious union, needs to be prosecuted and the rule of law restored.
If a lifeguard is also a child molestor, do we not prosecute the lifeguard because his job is to protect people?
“But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”
― Frédéric Bastiat, The Law
Too bad these “cuts” in spending are only cuts in the growth rate of the spending. It’s all just smoke and mirrors with these politicians. None of them want to actually cut spending as that would decrease their power and they aren’t going to give it up without a fight. I wish it weren’t the case but the man’s you tube video is absolutely spot on. Arm yourselves America, another Revolution is on the way.
My personal theory is that every body pays 10% of their wages and stop the IRS yearly refunds all together. All businesses from the the bottom all the way up too the multibillion should pay 10%. Get rid of OSHA and workmans comp. That’s what insurance is for. Any and all State Reps should be paid their current States minimum wage. If they into serving us U.S. citizens for all the right reasons then the pay shouldn’t be a factor.
This Government was created by a bunch of tobacco farmers for reasons completely different moral reasons than what we have up there bleeding us all dry today.
In 1974 I developed a pinched nerve in my neck and was in serious pain in bed for two weeks. During this time I watched the movie Soylent Green and it left a lasting impression on me, not the one you may expect. The idea of using people for food sounded like a necessary yet perhaps politically incorrect solution to starvation but no big deal. The really disturbing thing about the movie was Thorns risk of losing his job. Yes that was disturbing. He had a valued job but could not get sick or injured or anything because there was a long list of other people in line waiting to take the job. Is that what our future will be with all this crazy totally bizarre ZIRP and all the other insane financial stuff that’s going on. None of it makes sense.
Greg,
The cartoon is funny and sad. I think a more appropriate cartoon should show an American with his left foot steps on a donkey’s poop (from Democrats), his right foot steps on an elephant’s poop (from Republicans), and Obama pees on his pant.
You are absolutely correct about the government employees. Why should they be treated any different from us? Many of us have lost our jobs, our retirement funds, our savings and health insurances. Some even lost their homes. Many cities and states are over burdened by the escalating government employee pensions. More and more tax money are used to pay for insufficiently funded government employee pensions rather than spending on needy services to cities and states. Government employees should be thankful for what they have because they still have their jobs.
Lay off some government employees does not mean that we should get fewer services. Stop the hourly wages and convert them to monthly salary. Forget about the bankers’ hours. Do exactly what American corporations are doing to most American workers – a lot of us are working at least 10 to 12 hours a day for 6 days a week without any overtime compensations. Instead of cutting service hours, government workers should actually work longer hours (with the same or even less pay) because there are more people in need of government services.
Here is the latest news from Detroit, “Bing will not appeal EM; residents gather to voice opposition to law” (From The Detroit News: http://www.detroitnews.com/article/20130306/METRO01/303060399/1409/metro/Bing-will-not-appeal-EM-residents-gather-voice-opposition-law)
It looks like the Michigan state will send an emergency manager to Detroit. Will they do the “smart cuts”? I seriously doubt that. Michigan state is in debt too. In fact most U.S. states except Alaska spend more than their revenues. (http://www.usdebtclock.org/state-debt-clocks/state-of-michigan-debt-clock.html) Sending an emergency manager to Detroit is like asking an obese person to teach you diet. Spending more than you earn has become an American culture since the introduction of credit cards.
By the way, sacred cows are sometimes used in sacrifice as offerings to the god or goddess in some religions. I prefer to call the bankers “holy cows” with a big exclamation.
Ambrose
Ambrose,
Thank you for adding to the content of this post with your comment and link.
Greg
Thanks Greg
I am nuts, nuts I tell you! I think that cutting some of the only descent wages left to the middle class should be cut. And even crazier is thinking this will somehow help me. I think getting back on the gold standard may happen and think this would be a good thing even knowing we were on the gold standard before landing here. I believe that if we just tweak, twist or remold old ideas we can come to a different result than a few holding all the resources, technology and money in whatever form. Nothing new under the sun until we really begin to think out of their box. I have these really crazy thoughts of building roads because they are direly needed, providing quality (not assembly line) healthcare, clean high tech transportation, education allowing a 7th grader or even younger to understand nuclear physics and a life not filled with worry about having enough money to make it to the grave. I believe in most cases our kids are on their own because most of us will have nothing to leave them.
Well let’s see. What keeps us from our good? Money in whatever form of course. We can’t get that new road because we are broke. Mom will need to be buried in the back yard by the peach tree that died because we couldn’t pay the water bill. The son may be able to go to work at manpower because even though as a high school senior he was in the top 1 percentile, college was unaffordable.
Nothing new under the sun. Especially my thoughts and ideas about what to do next.
How bout as Monty Python says? “And now for something completely different”
“Everyone keeps asking about the pain caused by the spending cuts. They are asking the wrong question. Everyone should be asking: What happens if the U.S. doesn’t cut spending? I think the answer is Detroit.”
I live in a small rural town. I don’t watch MSM, actually I don’t watch television at all. I vaguely remember hearing in recent years of Detroit Michigan’s decline into decay. But after reading you great news piece here, Greg, I decided to see what America as a whole becoming another “Detroit” envisioned. I read the hub on Detroit below. What an eye opener. The video at the bottom was especially an “reality check” for me.
http://james-a-watkins.hubpages.com/hub/Detroit-Michigan
A few years ago, a tornado struck one of our nearby small cities. I went there as a reporter to cover the event and take photos. I remember my first reaction to the devastation. I found myself continually saying, “Oh my gosh.” I was having a hard time coping with the devastation, the ruins, the upturned buses, the missing walls showing clothes still hanging in the closets or dishes in the cupboards.
I had the same gut-wrenching reaction as I watched the above video and saw the utter ruin of a once great city.
To the economists who warn this could be America’s future if our Administration/Legislature does not act to get the country’s financial house in order and who warn people to prepare – I ask sincerely, how does one prepare for this?
Thank you Rebecca for the comment and the link. The video at the end was good!
Greg
Hey Greg,
Your analogy of Detroit as the forerunner of America hits close to home. I grew up in the western-most suburb of Detroit, where the busses stop on the hub-spoke of Michigan Avenue. I remember clutching my BB-gun during the 1967 Detroit riots and wondering if I could make a good shot with it. Two years later my High School took us on a bus tour, where we saw the damage of the 50 caliber rounds in the brick and stone buildings downtown- quite impressive really. That High School even rented Ford Auditorium (downtown Detroit) for our Graduation Commencement in 1971. (Now torn down)
After my Honorable military service, I returned to attend the five campus Wayne County Community College (WCCC), and attended a few advanced classes at the downtown (Detroit) campus in the early eighties. What is pertinent is having served as president of Student Government a half-term; and as the student member of a National Search Committee for a new college president (my two minutes of fame). The college had a problem of hiring presidents in that would not stay; and were paid big anyway because of their contracts. The State Board of Education stepped in and forced the college board to find someone who was qualified and would get the job done. In the middle of this – I stepped in to oppose the closure of the Office of Student Activities: which was a mistake. Each student paid a dollar in Student Activity fees upon registration, which was about $25,000.00 a semester or fifty grand a year. Despite asking, then writing, and officially petitioning for an accounting of this fund: it never came. The very ethnically oriented overseer put-off, lied, and excused herself and eventually got lost lost in the scholastic workload. I should have gone straight to the Board AND rewritten the Student Government Constitution; but classes and the short two-year curriculum shot past too fast. Even the man who we selected and recommended to head the college, who was voted in subsequently: did NOT last even half his contract. He did get the severance and compensation. So my experience was to watch the fat-cats come, and the fat-cats leave with pay; but not get anything done. And I think this modus operandi works for both the Educational or Governmental communities the same: you go for the money – but with zero accountability.
P.S. A preacher in South Carolina calls me by the nickname – “Detroit”. Small world, huh? So, yeah, I think your analogy is good.
Thank you Charles H for your colorful and insightful comment!
Greg
I wish you would post a weekly compilation of the most egregious video clips showing MSM newscasters twisting the truth or absolutely lying.
Until people UNDERSTAND they are being lied to, nothing will change.
And add a list of advertisers who are supporting these lies. Hit them where it hurts most & the truth will begin to emerge.
Thanks for being our “Watchdog”.
Gregory Davis,
It is a daunting task my friend. Thank you for your support.
Greg
And add a “Hall of Shame” for the worst of the worst offenders showing their clips for posterity.
They deserve America’s lasting derision.
Maybe they’ll think twice before twisting the truth or Lying so blatantly.
I remember as a young man I talked to Friederich Latendorf who came home from the Eastern Front, one of the few who came home. He came home to utter destruction. His home was gone, his wife was gone his only son was gone.He told me that before the war he had a beautiful apartment, and he and his wife had saved for months for a very nice wardrobe. It was all ashes. I asked him what caused all of that destruction. He gave me a one word answer. SIN. I think that America and what I see here in Austria reflect what we will soon earn. All want everything with as little sacrifice as possible. Young people are living and having children without marriage. Generations have lived here not knowing who their father is. They are rude to everyone, when a young man I would never sit on the bus when a lady was standing, today nobody cares about anyone except themselves. Yes soon the whole world will suffer 1939 all over again.
Johann,
“Sin” kind of sums it all up my friend. Thank you for this sobering comment.
Greg
You can say “sin”. But that’s the same as a person having a subjective outlook where a subjective person reckons that the world rotates around himself (or herself). Any rate, there’s more damage done in the name of good than is ever done in the name of sin.
Examples?
Greg –
You’ve really struck a nerve with your readers with this posting!
Recently caught a WAPO news item regarding the sequester issue in the US – The Obama administration’s stated intent is to selectively make any budget cuts as painful as possible for the public. In other words cutting front-line services while leaving the bloated bureaucratic hierarchy intact and unscathed.
We’ll likely see the same callous & diabolical strategy here in Alberta Canada today when the AB provincial budget is released. On a side note 95% of all recent provincial resource revenue increases went to expanding the bureaucracy. Despite this health care and education are as dysfunctional as ever.
Government rhetoric is “No New Taxes” – actually weasel words to disguise increased taxes.
It has always been thus throughout history.
Paul
Paul,
Thank you for your comment. I wonder how a few percent can send entire government agencies into shutdown mode? What is the heck are they doing with their money???
Greg
The sad true reality, they are deliberatley killing off those who have retired, living on fixed income and savings, there is “No DOUDT” at all. ZERO interest rates destroy capitol. Anyone with savings,(capitol)is getting killed. No COLA raise. It tells a Tale, The dollar is Dyeing, soon to be DEAD. Forcing you to speculate, No interest on your capitol, forcing you to look to risk.
http://xrepublic.tv/node/2429
Thanks Troy. Sen Reed has a lot of answers hes not giving. Greg, or Troy I would like to know why the stock market is doing so well this week.?
Not sure jc davis, but stocks were high before the crash of 1929
Pump and dump the bubble???
HI Greg,
Why can’t the Fed continue to buy the thrust of treasuries? Has Japan Centrel Bank not been doing this for years? Is that not the power of Fed’s printing press?
Tony of CA,
The U.S. is not Japan. Japan largely used the savings of it’s own people to finance its debt. We cannot do that, and that is why $12 trillion in liquid U.S. dollar assets are held outside the country. I can’t conceive how printing money and buying our own debt will not completely debase and destroy the USD. The short answer is it can buy it’s own debt but there will be negative global reaction. Why would anyone hold our debt if we are debasing the buying power of the money we are paying off our bonds with?
Greg
Thanks Greg.
I appreciated your quick response.
Hi Greg,
How long can the Fed continue these insane policies of debase the dollar considering we are not like the Japanese situation? It doesn’t appear Bernanke is going to change course anytime soon.
Regards,
Tony of CA,
Bernanke or his possible replacement Janet Yellen. They have to know what we know so I would take conver with my USD assets.
Greg
Hi Greg,
Are you saying this can continue for several more years, or do you think the market will force a change in the Feds policy sooner?
Regards,
Tony,
This has really been going on since 2008. What they told us was $3.2 trillion to thwart the effects of the financial meltdown turned into more than $16 trillion. That total figure for the money printing for the bailout is nowt many trillions more and it is ongoing. We now have )”pen-ended” QE to go along with the accounting fraud and money laundering (HSBC) to prop up the economy and the big banks. There is going to come a point when the rest of the world is going to be in the position to call BS on the BS. When that day comes you can kiss the U.S. Treasury market and the USD good bye and along with it the phony economy. Many people PhD economists and money managers who I talk with have nearly all said they are surprised the economy hasn’t crashed already. I guess I am saying it can go on for awhile but not several more years. I think we have a major event this year. People like John Williams think we have the beginnings of hyperinflation by the end of 2014 at the outside. So that’s my bracket. We crash again anytime between now and the end of 2014 and the market will force the change.
Greg
this is not rocket science we will eventually default all the kings horses and all the kings men can never put humpty together again…banks are creating their own obsolescence if the money is worth less then all the money will be worth less especially all that they are holding people who buy houses better keep them because eventually no one will want them …i don t bank any more i spend as fast as i get it …i am trying to refi if i dont get it i am going to stop paying and despite all the rhetoric millions are doing just that i have a ten year old toyota i am going to run it into the ground not buy a new one it loses antifreeze so i put it in every week…it gets 26mpg no need to buy a new one a few rules STOP BUYING LUXURIES-buy used-private sale,, STOP DEPOSITING MONEY-use cash and credit cards PUT YOUR SOCIAL SECURITY INTO GOVT ISSUED DEBIT CARD….pay at the window LEAVE … migrate south its warmer you can rent auywhere south of the carolinas no or little heating cost stop worrying if they depend on 70% consumerism lets see how they do with 20% the us will survive we just have to show them how to live on less one last thought i dont have a degree yet i have a small business i have made money (lately not as much) and always paid my bills any one can do it even if its picking up furniture from the trash and selling it used… get it for zero sell it for $7 it adds up very little overhead its how i got started now i rent a low cost store and sell it for $10(inflation) it only takes a wagon and a pair of gloves …get with it folks everythings changing
I live in Ireland and the same issues are ongoing over here. The west has become used to a lifestyle it cannot afford. A Chinese student here revently commented ” why should china pay for western welfare benefits when elderly Chinese people take in lodgers to pay the bills?” This says it all. In the west, we expect – in the east, they earn. Keep up the good work Greg.
JIK,
The West is going to be getting one heck of an economics lesson in the next few years. Thank you for your comment from across the pond!
Greg
While I admire all the comments here and parallels to history, one thing that seems to be getting on some folks is that the fall of the Roman empire was a process and not a single event. It happened over a long period of time. Similarly the decline of the US has been a long process. Cuts are too late, austerity is too late, and there are too many other entrenched obstacles that simply are not reversible. The US has spent its “wad” on military imperialism. Even they shutdown hundreds of bases starting now, the money has been already spent and the debts have piled up beyond repayment. The same thing exists with entitlements established long ago. No matter what anyone says or does here, there is no possible way for the debt to be under $25 trillion by 2025, and still growing.
The government employees could be cut in half that are based here in the US, and all pensions and health care for them eliminated starting today, and that wouldn’t be enough coupled with the aforementioned slashing of the military. Obamacare in and of itself will simply decimate US GDP. Then there is the interest rates.
The only thing people can do now, is look for ways to protect themselves. Financially,physically, emotionally, mentally, and spiritually. About the only thing you can say now is that we are witnessing the most profound and misleading propaganda campaign ever in the history of this planet, to attempt to reassure us everything is ok. I was layed off recently for the second time in 27 years. Trust me I was thankful. The company would have sucked me down with it, had I stayed. It’s vulture capital money, and the investors are being ripped off big time. This is going on in company after company folks, and it’s the same with shareholders of publicly owned firms. People are numb and just doing what they can politically to keep their jobs. Backstabbing constantly, repeated stealing of others ideas or work, taking credit for work done by others. People take it, only because they fear being let go, and never being able to get a job elsewhere. I’ve had grown 50 year old ladies call me crying who had never been laid off. They don’t know what to do.
I’m prepared and know what to do, and perfectly fine being independent or working at another company again. But more of my focus is for the longer term, my family, teaching my kids and wife resiliance, and educating others when appropriate. A paying job is a small part of my life, and takes little of my energy. If this whole country blows up tomorrow it wouldn’t phase me a bit. Life is a journey, and I’m enjoying it. Hopefully you all will and can too !
Bravo, Mike D., bravo!!!
Greg,
Great article!! Unfortunately I don’t think that we will come to our senses in the near future. I think we will keep printing until that stops working. Once rates have to move back up causing banks to collapse, I am pretty sure that we will start World War III to divert attention away, allow for price controls, allow for rationing and allow for martial law on U.S. soil. I cannot see the banks, corporations or politicians allowing the blame to fall upon themselves.
They will find a way to make money off of the war just as they are doing now while we are collapsing. I can’t even watch the news. I feel like I am in Bizarro world. There are economists actually saying that we are in recovery now because the stock market is at all time highs and because unemployment has edged down. The economists and the media are totally ignoring the money printing as though the Fed action has nothing at all to do with any of it. I don’t get it!
With a $16.7 trillion National debt that grows by $1.2 trillion every year and an unfunded debt close to $211 trillion, the US is broke but does not know it according to Professor Lawrence Kotlikoff of Boston University.
Its time for the US to bring the troops home and close all the 1000+ military and supply bases across the world and stop pretending it has a military empire, which cost the US a ridiculous $650 billion a year, when 45 million Americans depend on food stamps just to survive and 89 million Americans are out of the work force.
Sure the FED can print and throw dollars out of a helicopter but that will only hurt Americans more as the purchasing power of the dollar plummets and food and fuel price inflation hits the roof. America has lived far beyond its means for far too long and its time to call a spade a spade and cut spending to the bare bone. Anything less will see the US plunge into another Great Depression.
Rob,
Yes the U.S. will never pay its debts in anything resembling the buying power of today’s dollars. It’s impossible.
Greg
Hi Greg,
I heard everything you had to say on Coast To Coast tonight and aside from the finite numbers you laid out to us none of this is a surprise to me; I do not consider myself a conspiracy theorists by any means but I totally concur with ALL you had to say because it was based on fact and stellar work on your part. And although I can’t prove that 9/11 was a government orchestrated event that smacks of the Hegelian Dialectic it achieved its purpose of fear AND the need for the creation of the Department of Homeland Security; the SAME agency that is as you averred to stockpiling VAST amounts of ammunition and weapons that would suggest a civil war is on our doorstep. Let’s add the FEMA camps to the mix too shall we? What most of the populace here doesn’t seem to understand is that if the sovereignty of the United States were EVER to be compromised NATO troops would be here instantaneously to USE all that ammo and the AR15s they go with. Funny that a SITTING PRESIDENT is on staff at the UN…that alone smacks of an impeachable offense. Woodrow Wilson did this country in when he signed The Federal Reserve Act; an act that was signed when most of Congress was at home for Christmas. I remember when John F. Kennedy suggested abolishing the FED…that real step for this nation ended when all the bullets where drilled into his brain in Dallas. The government we see before us now is gutless and don’t have a clue; or maybe they fear for their lives if they speak up. I concur on your opinion on poor people; I sir am a disabled person on a limited income that would be crushed in a hurry if my heating fuel were to skyrocket or gas rose to double-digits per gallon. But I don’t fear as much for myself as I do my children and my grandchildren. I remember a time when selling America was an easy proposition; I in fact served this country, and did it with great pride. What I see now sickens me to the very core; I have very real fears of even people with money waking up one day and all of their accounts will have been seized by the government. Fascism seems to be alive and well, and I see a very real chance of a dictatorship looming in our countries future. As for the 2nd Amendment, before IT gets changed or repealed expect to see alot of dead people with their firearms in their hands. As for your scenario of China taking some of our states as payment for a debt we can repay them? It’s scary as hell but not beyond the realm of possibility…they and Russia stockpiling gold and silver? It makes total sense. The fact that the FED can’t be audited pretty much tells you all you need to know. I remember quite distinctly Alan Greenspan doing an interview where he say the FED doesn’t have to answer to ANYONE…and they haven’t. This consortium of bankers wants wars; they have done quite well financing both sides of all the major wars in the past. This country and the people in it need to wake up!!! Our founding fathers warned quite vehemently of what would happen if our money supply was to fall into the hands of rogue bankers…we are seeing the very worse of what IS happening right now…and it is only going to get worse.
Thank you Bob Merc. You are correct. It will get much worse.
Greg
sticks and stones can break my bones but words will never hurt me.
thats a saying we had in gradeschool. THATS ALSO WASHINGTON DC. THEY KNOW THAT AS LONG AS WE ALL TALK, WE WON’T BE SHOOTING. have you ever thought, that maybe we can talk a subject to death?
John,
Not when it is the implosion of the country and everybody is being told go back to sleep. Everything is going to be fine.
Greg
Hi!, Patrons Of USAWatchdog.com Et Al:
Some great posts here regards the general malaise of OUR Country’s economy but no comments regards OUR currency being fiat which reflects OUR transformationary downward trend towards becoming a socialistic 3rd world status country living the unrealistic goals of a Socialist State. Nither Socialism nor Capitalism are without their inherent flaws. The only realitic, ideal economic transformation there has ever been in all of Human history is not to be found in the mere efforts that humans can perform but were performed through them as found in Acts 11 of OUR New Testiment guidelines whereby the acts were under the ifluence of the Holy Spirit period. There can nevr be any other solutions to the human condition can there?
RUSS SMITH, CA. (One Of Our Broke Fiat Money Stats)
[email protected]
Greg,
Information toxicity syndrome (ITS) is a disease we’re all exposed to.
The murky waters of disinformation provide a minefield of rabbit holes
to choose from.
I’ve spent 25 years steadily navigating through uncharted waters,
often losing my bearing and running aground.
There was a time when I didn’t trust your site due to no visible
source of financing, but after watching for about a year now,
I’ve reversed course on that.
For those who really want to explore the roots of this problem,
I offer a 1967 2 hour video link that answers all the questions
in one sitting.
Evil eventually destroys itself.When the dollar dies, dollar
worshipers will cannibalize each other, we already see this at
the Vatican… the lights are one , the cockroaches are scurrying.
Unfortunately, there are many dollar worshipers who wont be enlightened, millions are not going to survive this.
Please sit down and listen to Myron C.Fagan lay it all out.
Mat- Mpls.
P.S. UNtil I heard this tape, I didn’t know that JFK handed our miltary over to the UN in 1961.
http://www.fromthetrenchesworldreport.com/the-illuminati-and-the-council-on-foreign-relations-by-myron-fagan-1967/37296/
It’s not so much the spending as it is the misallocation of funds.. If government spends on something that produces wealth..like non-porkbarrel infrastructure, necessary services and capital projects… then wealth is created. If on the other hand most of the money is spent overseas on wasteful wars and domestically on grandiose military hardware or rewarding banker failure… the national wealth is impaired, albeit unequally.
The big pie shrinks by the amount of debt incurred, but worse, all the incentives are misaligned in this centrally planned economy. Savers and investers are penalized, corruption of the legal and economic system is rewarded. It is of course irreversible because the sheeple themselves are corrupt.. expecting something for nothing and fighting each other over the trickle down crumbs.
We have an appointment with economic realty looming.
Dear Greg: When will all this QE, corruption and, voodo economics cause a full collapse of the USD and Detroit becomes a model city for the rest of Amerika? If you can give me a ball park guess as to what year this may happen. I plan to move to southern Mexico the year before and start a farm there. Want to grow coffee, grapes for wine, and your invited of course.
Steve,
I have no crystal ball but economist John Williams says hyperinflation can start to take off anytime from now until the end of 2014 at the outside.
Greg
Why is the government not cutting, because the facade would be so much more transparent. This economy is not moving yet the only signs of live is due primary to government workers in the state and federal government. If these people no longer had a paycheck who would be buying goods?
It is my belief that “they” created this fictions middle class. As many jobs started to go overseas government workers increased and filled in the gap left my many of the displaced wadge earners. Let’s face it, for an economy to reach to the top it must have a viable middle class. The new middle and upper class representatives shifted from manufacturing and small business owners to government workers.
Now if you cut these jobs what will happen – well it is not pretty. These are our consumers! They know that eventually the truth is going to come out so what are they waiting for?
IMO this has been in the making for a long time so I ask, what in the hell has our politicians been doing – and I am talking about both parties! Well, many of these career scumbags have increased their net worth over their LONG careers.
This is not about “A” bubble this is about business as usually as we did not get here over night or during one or two administrations – this is being orchestrated. How many heads had to been turned as this was being done???? to many to be a mistake….
Ask, what are they waiting for …. something is coming and the average Joe is going to take it in the shorts….
Angie,
This is what you asked about government workers: “If these people no longer had a paycheck who would be buying goods?” My question back to you is “Where do you think we get the money to pay government workers?” We have to borrow it, tax it or print it. Right now we are doing a whole lot of printing and that kills the currency and causes inflation. Taxes just take productive assets and bows it on government that does not produce a product. Borrowing the money creates a giant ponzi scheme such as we have with China and the rest of the world where $12 trillion liquid U.S. assets are held outside the country. If these folks who hold the $12 trillion sell? We are finished. That simple. So my next question is how can we not cut government? Yes, the average Joe is going to take a big hit. You are correct!!
Greg
Where is the money coming from – not the taxpayer as outflow far exceeds what is coming in. We cannot tax our way out of this so we have to grow our way out and that is not happening. There are far too many issues here that would need to be addressed to grow this economy. I would even argue that what has been done with respect to trade and economic growth represents everything NOT to do.
IMO the USD life expectancy is less than 2 years. Unofficially the USD has lost its standing as the reserve currency as China, Russia and India using gold and other non USD exchanges. The only reason we have not felt much of the inevitable pains of inflation is we enjoyed having the reserved currency. As a consumer nation,that is about to come to an end.
BTW, in responding “who the consumers are” I was trying to make the point of keeping the game going by pretending that there were consumers. This is all being perpetuated with borrowed money that cannot be paid back ..
Angie,
I think your 2 year USD call is spot on. Others I talk to see the same time frame.
Greg
Your wrong about Federal Workers, at least in the DOD. In the 90’s they cut the services nearly in half that includes both military and civilian.Many times the Civil service has an overhead of open slots with less actual bodies and when there is a RIF or cut they can meet goals by cutting the currently unfilled slots and thereby achieve the same number goals without actually laying somebody off. The DOD has a unqiue problem in that uniformed military are transferred frequently and the civilians are in place to provide critical experience continuity. TO lay off significant numbers of civilians would disable an agency more than the numbers would indicate.
Your irrecusable obligation must be honored for using private credit. (federal reserve notes) There is a growing movement in the country, that is refusing private credit, and demanding lawful money-United States Notes per 12USC411. By doing so you are paying off the national debt. Only by doing your own research, will you throw off your slavery chains to the banking elite.
I live in China and it sounds a lot better than Detroit… or a lot of places in America. A lot of my students want to come to America to study, which I think is a good idea, because there are some great universities in America, but I make sure to inform them where not to go. Its sad that America is declining so fast though, there is so much potential.
MasterLuke,
Happy you are doing well in China. Are you ever coming back to the States? Thank you for your real world reporting from China.
Your friend,
Greg
So the original question from Greg is:
What Happens if U.S. Doesn’t Cut Spending?
Without going into a veritable ‘laundry list’ of what might or will happen, let us observe something that already IS happening, and that is likely in preparation for what ‘might or will’ happen in the not-so-distant future as a Direct Result of our inability to ‘cut spending’…
– Government contracts for hollow-point ammunition that now approach (2) Billion rounds.
– The manufacture and/or retrofit of, ~3000 APC MRAP units from the Defense Department for use on American soil as ’emergency support vehicles’.
‘Alex Jones’ that all you like, but you still have to deal with the fact that the purchases are going through and the benevolent reasoning behind them is flimsy.
Hi Greg!
Excellent site! I just made a donation and will check back every day!! Keep up the good fight!!
Regards,
Larry
Thank you Larry for your donation to the site and for your support!!!!
Greg
I don’t expect that you’ll allow a dissenting view to get past your moderation, but here goes:
What comprises GDP?
One of the equations for GDP is GDP = C + I + G + X – M, which says that ‘gross domestic product is equal to personal consumption expenditures plus gross private investment plus government spending plus net exports.’
Cutting government spending, by definition, reduces GDP; in fact, it’s actually cutting the deficit that does it, because the ‘potential’ C & I are both reduced by taxation (T, in other equations).
The United States Federal Government is monetarily sovereign, which means that it issues its own currency. A currency issuer, by definition, has no budget constraint, can never run out of the currency it issues, can never become insolvent (although deliberate default is possible, though *never* necessary, as long as all of the government’s debts are denominated in the currency it issues), and thus can literally NEVER be said to have ‘unsustainable government debt.’ If you issue the currency that is owed, your debt is NEVER a burden, and can NEVER constrain your spending or your economic growth. These facts are indisputable, and it only requires basic common sense to see that they are true. If you issue dollars, you can never run out of dollars, and you can afford *anything* and *everything* that is for sale in dollars, and *any* level of debt that is denominated exclusively in dollars.
The idea that the US Federal debt is or could ever become ‘unsustainable’ is a LIE. The idea that ‘bond vigilantes’ could ever force interest rates to skyrocket by boycotting Federal debt auctions is a LIE (the Fed *controls* the overnight interest rate, and is capable of *controlling* the entire yield curve for Treasury securities, if it ever chose to exercise this capacity). The idea that cutting spending in a barely-growing, barely-out-of-deflation economy is necessary, or even at all wise, is a LIE. The idea that a government which issues its own currency must tax or borrow that currency *before* it can spend it is a LIE.
The funds to pay taxes and buy government bonds COMES FROM PRIOR GOVERNMENT SPENDING. The government must spend money into existence BEFORE it can tax any back out, thus spending always precedes taxation, not vice versa.
There is another GDP equation, GDP = C + S + T, which says that ‘gross domestic product is equal to personal consumption expenditures plus gross private saving plus gross tax revenue.’
Setting both equations equal to each other (since they are both equal to the same value- GDP), yields-
C + I + G + X – M = C + S + T
drop the Cs from both sides-
I + G + X – M = S + T
pair up associated terms for the government & foreign sectors-
(G – T) + (X – M) = (S – I)
which says that the ‘government deficit plus net exports is equal to private domestic net saving.’ Literally, deficit spending, less net imports (trade deficit, as we have in the US), equals private (aggregate) net saving. The corollary being that gross federal debt is equal to private domestic net saving*s*, as the Federal debt is the sum of accumulated deficits to date.
Deficit spending creates private net financial assets. It is the ONLY way to create private net financial assets, or net financial wealth.
The Federal has been balanced or in surplus six times in the history of the US: from 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, 1920-30 and 1998-2001, and there have been six depressions in US history, as well, in 1819, 1837, 1857, 1873, 1893 and 1929. The Global Financial Crisis (GFC) was very nearly a depression, as well. The only reason it didn’t occur sooner was that the growth of the housing bubble extended the private ‘credit binge’ by several years, bridging the liquidity gap otherwise left by the Clinton surpluses.
Now, correlation is not causation, but this correlation certainly does validate the causation I explained above.
So, Mr. Hunter, your thesis is EXACTLY BACKWARDS. What you recommend- as well as your partisan & conservative brethren- is the exact recipe for the exact thing you claim to wish to prevent. Cutting the Federal debt will force an explosion of private debt, which will ultimately and always result in a *private* debt crisis, default epidemic, and very large recessions. Monetarily sovereign governments are impervious to any and all issues related to solvency or financing, as they can supply their own, without limit.
Listen “Mike” You want to come on and call me things like “partisan,” man-up and use a real name. Second, enough with the BS. You are fighting over the deck chairs as the ship of state is sinking. You say “The idea that the US Federal debt is or could ever become ‘unsustainable’ is a LIE.” This little social fascist Ponzi scheme of yours works right up until the currency is no longer accepted on the global stage. That’s where we are headed. I don’t have anything “backwards.” You are a fool to believe the phony “Left”, “Right” paradigm that is the real “Lie” we are told on a continuing basis. You are a fool to think the rest of the world will lap up our debt based currency as it grows far beyond the $17.5 trillion cash annual deficit with total commitments north of $200 trillion. This $200 trillion number comes from BU professor Laurence Kotlikoff and 10 Nobel winners in economics. The government is arming up, and the 2 billion rounds it has bought or ordered is for ALL Americans. Comment again, and I will require a verifiable real name not “Mike.”
Greg
Greg, as one of your followers, do you have any specific comments to Mike’s claim and use of these equations? I did a little research after reading that and there seems to be at least some elements of truth to what he is saying. Please advise how to handle these questions from others. I am average at math so perhaps if I had the correct equations I can defend our position.
Bruce
Bruce,
I am not an economist or mathematician. That said I think it is safe to say inflation is much higher than the “official” government numbers. I am not saying Mike is wrong, I just don’t know how to quantify the inflation. I will say the it monetary situation is very dicey right now and there are plenty of folks that say the path we are on is unsustainable.
Greg
Mike,
This is Greg Hunter. Real verifiable name to post here. I am not going to post false and claims and condescending comments about me either. REAL NAME. Man up and own your words.
Greg