The false prosperity we have been experiencing for the last 30 years has come to an abrupt conclusion in the last 18 months. The amount of wealth destroyed is beyond comprehension. Household net worth has declined by $12 trillion in a matter of months. It will take years for average Americans to restore their wealth to 2007 levels. If your investment portfolio has declined by 50%, it will need to increase by 100% to break even.
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According to the Wall Street shills on CNBC, it should take at least three months. An honest financial advisor would tell you 10 to 15 years. Americans have no choice but to substantially increase their rate of savings. Think back to yesteryear in 1981 when the savings rate was 12%. Back then, Americans accept as a truth that hard work and a saving ethic led to long-term success. I can't look at this chart without questioning why this happened. It always brings me back to the dreaded Baby Boomers. Their delusional belief that somehow they could borrow and spend today with real estate wealth funding their retirement came crashing down around them in the last 18 months. The bailing out of these delusional boomers with tax dollars has generated incredible anger in the country. Those who followed the rules are being compelled by the authorities to pay for the sins of those who didn't follow the rules.
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The stupendous fabric of the country is straining and in danger of yielding to the immense pressure building up in our society. I believe the actions taken by politicians and Washington bureaucrats in the last year have marked a point of no return. If we continue on the chosen path, time or accident will ultimately result in the demise of the Great American Experiment.
I'm irate at the government for choosing to bailout excessive risk takers at my expense. There are millions of other Americans who feel the same way. This is why tea parties are taking place across the nation. I truly believe that every American has the right to make his or her own financial decisions. While I do not judge individuals on how they live their lives, I feel entitled to pass judgment on clusters of people whose individual decisions have negatively impacted my life. With the support of Congress, the Treasury and the Federal Reserve, these individuals are seizing my tax dollars as compensation for their idiotic behavior.
Don't Feel Like Satan
There's colors on the street
Red, white and blue
People shufflin' their feet
People sleepin' in their shoes
But there's a warnin' sign
on the road ahead
There's a lot of people sayin'
we'd be better off dead
Don't feel like Satan,
but I am to them
So I try to forget it,
any way I can.
Keep on rockin' in the free world,
Keep on rockin' in the free world
Keep on rockin' in the free world,
Keep on rockin' in the free world.
Neil Young Rockin in the Free World
Neil Young wrote the song Keep on Rockin in the Free World in 1989. It is an angry song and I believe its lyrics are more relevant today. Neil and a member of his band, Pancho Sampedro, were glancing at newspaper photographs of the funeral of Ayatollah Khomeini in Iran as the angry mob set American flags on fire and chanted death to America. These Iranians thought America was the great Satan. Sampedro commented, "Whatever we do, we shouldn't go near the Mideast. It's probably better we just keep on rockin' in the free world." I wish we had made this guy our Secretary of State.
When Iraq invaded Kuwait in 1991, President George Bush decided it was America's responsibility to protect Saudi Arabia's oil fields and liberate Kuwait from the clutches of the dictator we had previously supported. The American military crushed Sadaam Hussein's Republican Guard and liberated Kuwait. After the Gulf War, the U.S. left 4,000 American troops in Saudi Arabia, eventually growing to 7,000 troops. These troops became a rallying point for Muslim fundamentalists, who charged the U.S. was trying to increase its influence over the Saudi royal family and the nation's oil reserves. "The presence of the U.S. forces gave a lot of fuel to the virulent, anti-American Islamic forces that certainly commanded an audience in Saudi, and in the broader Arab world," said Jamil Khoury, an Arab specialist and business consultant who teaches at the University of Chicago.
The U.S. has spent $7 trillion on Defense since 1991. Most of these funds were used to develop offensive weapons, not defensive weapons. The Heritage Foundation will argue that military spending as a percentage of GDP was only 4% in 2007, well below the 45 year average of 5.5%. This period includes the Cold War, Korean War, and Vietnam War. The 2010 budget spending will increase it to at least 5.6% of GDP.
The real question isn't what percentage of GDP is proper it is whether $7 trillion could have been spent more intelligently. Would $4 trillion have been sufficient to defend the country? The military launched approximately 1,000 cruise missiles during the Iraq War at a cost of $1 million per missile. This was a choice to spend $1 billion blowing up bridges, water plants, and electrical facilities in Iraq rather than spending it repairing our 156,000 structurally deficient bridges, replacing our decaying water pipes, and upgrading our electrical grid. Would the $7 trillion have been better spent by private individuals? Could it have been better spent jump starting efforts to wean ourselves off Middle East oil? I don't know the answer. But, I do know that the vast majority of the $7 trillion was borrowed from China, Japan and my grandchildren.
Kinder, Gentler, Machine Gun Hand
