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I Was Right; In 1982:

By       Message Mike Folkerth     Permalink
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Good Morning Middle America, your King of Simple News is on the air.

Several alert readers have asked whether I think it is possible that our leaders really don't understand the gravity of the economic situation. The short answer is, absolutely.

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I had the opportunity many years ago to work as an outside contractor for a large communications company who shall remain nameless. I worked with the President, Vice President, Corporate Attorney and so on.

Up to that point in life, I had assumed that those people at the very top of large corporations were super humans of advanced intelligence. I had assumed wrong. It was one of the greatest awakenings of my life. These folks were plain scary as is most of corporate America.

One of the things that I remember about that particular time in my life was telling this group of executives that our monetary and credit system would eventually force us to forgive all debts and start over. They assumed that I had fallen down the stairs on my head and would eventually recover, but did consider the possibility...for about 5 seconds.

That year was 1982 and America was the largest creditor nation on earth; so I must have been nuts huh? By 2005, the U.S. was the largest debtor nation on earth. In 1980, the national debt had yet to eclipse the $1 trillion mark and had accumulated around $850 billion during the first 204 years of this republic. By 2007 or 24 years later, our debt had risen to more than $7 trillion and continues straight up.

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Back to my original predictions of dealing with debt in 1982 (a time when the U.S. possessed most of our own debt), my failing was underestimating the lengths that government was willing to go to in order not to come clean. The U.S. economy was a pyramid scheme.

Today, China alone purchases in excess of $1 billion per day of our debt. Japan owns billion and billions of U.S. debt instruments as do the Arabs and so on. But, these are reasonable countries and I believe that they would understand that we are broke and just forgive all of those billions; right after we gave them California and Yellowstone Park.

So far, I have been talking about funded debt. Unfunded debt is $99.2 trillion at current levels...and rising hourly. This is the debt that we owe to ourselves in the way of Medicare, Social Security, government retirements and so on. In other words, promises that can't be kept and so they won't. As a reminder, the unfunded debt is greater than the total wealth of all American households.

Many people want to blame one administration or another because that's easy. It isn't true, but it does make a person feel better as it soothes the economically uneducated person's fears of reality and makes recovery just one election away.

But speaking of reality, it's the system that's broke, not any one administration. In 1982, I'm sure that I wasn't the only person who saw the cracks in the foundation, and we could have fixed the problems with minimal discomfort. Today, it's far too late.

Wake up Middle America, change is coming. You can prepare today and avoid a lot of pain tomorrow.

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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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