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U.S. Economy; A House of Cards:

By       Message Mike Folkerth     Permalink
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View Ratings | Rate It Headlined to H3 7/30/08

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Good Morning Middle America, your King of Simple News is on the air.

U.S. NEWS: Yesterday, July 28, 2008, the Whitehouse announced that our annual budget deficit would exceed $500 Billon and at the same time downgraded the economic outlook through 2009.

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Our ceiling for the National Debt is now $10.6 Trillion and government will need it all to get through the next year. In my opinion, it won’t be enough.

When you run a business that began with a mathematically flawed business plan, the day comes that it is impossible to go on. So what does that have to do with the National Debt? Government is nothing more than a big business whose income is derived from fleecing the peons, formerly referred to as the Middle Class citizens.

Let’s look at government with a little Mikeronomics today. The sizeable National Debt of the United States is justified by comparing it to the GDP (Gross Domestic Product). Last count was that our debt was approximately 37% of GDP, which according to the residents at the state mental hospital, is an acceptable level.

Of course, there is the unfunded debt of such things as Medicaid, Medicare, Social Security and other promises, which adds another $59 Trillion and raises the debt level to 61% of our GDP. The vote was split on the acceptability of this figure, with the criminally insane unit approving.

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General Motors had the same sort of plan as our federal government, so long as the income for auto sales was somewhat higher than the cost of doing business, no one was sweating the small stuff. Of course, no one was considering the present snafu when auto sales would dip somewhere below the cost of doing business, in fact, $8.6 Billion below the cost of doing business in 2006 alone and still counting.

The problem is that the debt doesn’t go down when business slows up, unless of course, you are a homeowner that is being bailed out by Congress in which the laws of consequences are being reversed; bad behavior is rewarded, good behavior is punished.

GDP measures all output of goods and services for a given year, including all government spending! Uh-oh. So tax collection to our government is the same as vehicle sales to GM and with unemployment continuing to climb, tax collection could be an issue for some years to come. Yet the National Debt continues to climb at a record rate.

Our government’s plan was for growth in GDP (and population) to remain constant for at least long enough for those currently involved in their unselfish service to their country to retire. The plan for growth of the magnitude necessary to service the debt was never mathematically possible.

America has operated on the false footings of ever expanding credit, inflation, and the expansion of phantom monetary capital for 35 years and we are about to pay the piper handsomely for all of the free music. Or should I say, that our children are about to pay the piper?

In my book, “The Biggest Lie Ever Believed,” I wrote that most baby boomers thought that they were going to get out with all of their trappings by passing the debt batons to their children. And I agreed that temporarily, that certainly appeared to be true.

“Appeared” was the key word in the above statement. If you are a boomer, suit up, you’re going in the game. There is only one possibility left for our government to artificially increase GDP and that is with inflation. For those in or near retirement, additional inflation is pure poison.

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The only other option for government is to tell the truth. Tell our citizens that our system of exponential growth in a finite world is impossible. And that inflating our money supply and increasing credit and debt is only exacerbating the problem. But Ron Paul tried to tell us that and was branded a kook.

David Walker, the former Chief Comptroller General of the United States, and a personal hero for me, also tried to tell us the same thing and recently resigned his position in frustration.

The majority of Americans will follow the flawed party line politics that have brought us to this juncture to the bitter end. The good news is, we can pack light; it won’t be a long trip.


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Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics. The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, (more...)

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