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Meltdown: or How I learned To Stop Worrying and Embrace the Debt

ar-logo1America is in debt because it wants to be. Unlike any other country in the world, America has believed for a generation that its Debt was the fountainhead of its power, the source of its wealth and excess. America has deliberately and with full intent run deficits and financed them through debt, a veritable ATM of cash with which it buys its Economic Hegemony, and makes payments on its future. It’s hard to solve a problem that isn’t one, to the blind that will not see.

The Nations books are kept on an annual basis, and once a year buildings full of civil servants add it all up, and produce all the totals. If the Government is short – spent more than it took in – a “Deficit” occurs. If the government takes in more than it spends, then it is called a “Surplus”. It takes a lot of spending to become the United States of America, and not all of it is bad. World War II is rightfully remembered as the most pitiful folly mankind has ever bumbled into, but what is not so well known is the staggering bill in dollars that “event” charged up. In the US, war production and maimed international markets produced a witches brew of deficits, every one of which was absolutely necessary at the time. Accepting, of course, that one finds war necessary. The real issue, then, becomes what to do with that massive shortfall once the bill arrives?

In the US, the decision has always been made to borrow the shortage, and pay it back whenever. Deficits not paid turn into Debts owed at the stroke of midnight, every October 1. The Debt sits on the books until next year, when the same civil servants in the same buildings total all the same columns and learn to their utter surprise – again – that the government spent more than it took in. Another Deficit, stroke of midnight, added to the Debt from last year, Civil Servants, Buildings, Total,…and do it all over again. Good work if you can get it.

On January 1, 1791, the first full year of accounting for the newly minted United States of America, the National Public Debt (that’s what the wonks call it) stood at a whopping $75,463,476.52 (In those days, I would guess 52 cents meant something). That was the shortfall from the Revolutionary War, and sundry costs to set up shop on a new continent. This is what the Founders spent beyond what they had, and I suppose as the first actual shortfall on the first day of business, it was both Debt and Deficit, right as the clock chimed midnight, for the very first time. Those were nothing if not quaint old times, and in those days of yore real attempts were made to repay those loans. France, (who had financed the war and donated a very cool statue that they didn’t want in Egypt) was paid back, and the people of the new America helped out as well, lending their own hard sweat and blood and receiving Government Bonds in return. The steady hands of Valley Forge were paid back 100 fold for their investment, in loan repayment, opportunity, and freedom. The new Government struggled with its Deficits in the early years, but honest hard work and common cause brought the young Nation to its greatest day never celebrated, an anniversary absent from the calendar. January 8, 1835. Andrew Jackson had tamed the beast and done the impossible when the National Public Debt hit zero, at the stroke of midnight. Nothing. Nada. Zilch. Debt free.

The next day it was off again, never to return.

Sixty five Million when Lincoln took office. One Billion when Picket charged at Gettysburg. 2.7 Billion at the last shot of the war in Ford’s Theatre. 26 Billion when Gatsby gazed at that light across the bay, and 43 Billion as the Panzers clawed across the Meuse. When Wally and Beaver trotted off to school – 260 Billion; John, Paul, George, and Ringo… 300 Billion USD. One small step for man, one giant leap to 400 Billion. Ronald Regan, Uber Conservative, One Trillion Dollars in National Public Debt. George Bush Jr., in – 5 Trillion Dollars, George Bush Jr., out – 13 Trillion Dollars. Barack Obama, in……

Of course, with Debt comes credit card payments. In addition to any other budgetary shortfalls – stuff the government couldn’t pay for – there is also paid the interest owed to all the folks owed money. $214,145,028,847.73 paid in interest in 1988. Twenty years later, in addition to every other expense a struggling Country has, The United States paid $451,154,049,950.63 in interest payments alone. In the single month of December, 2009, nearly $100,000,000,000.00 US Dollars. A single month. Thirteen zero’s. No one – and I mean no one – does this kind of thing by mistake.

While Debt remains a four letter word to those with a tabloid understanding of Macro Economics and Monetary Policy, most sober economic thinkers favour the judicious use of deficits, and tolerable levels of debt. To a certain point, all agree it’s all good. However, there then diverges real opinion on just what “judicious” and “tolerable” mean, where one Economists feast is another’s famine, where, exactly, good turns into bad. For American economic policy makers, the opinion since Richard Nixon changed the world forever – on August 15, 1971 –  has been, who cares? Since the end of World War II, the victorious world had “fixed” the Earths economy, by binding it together through, essentially, linking most progressive national  currencies to the US Greenback, and anchoring those currencies to gold. However with a disastrous money shredder in Viet Nam, and American consumers – for the first time – buying more crap from the world than they were returning  (in manufactured goods anyway), the gold anchor that underlay the Planets financial Architecture became a millstone around the neck of American hubris. In the teeth of a financial gale, Nixon cut the line to the skidding gold anchor, and set the world adrift. The international financial architecture of the planet was tied to the fortunes of the US Dollar, which itself was tied to nothing but good will.

Everything trades in American Dollars between nations, and America supplies the dollars. When other nations need Dollars to trade with, they must earn them by selling more of their stuff than they buy. Since the caustic summer of 1971, when America needs money for any reason, America simply prints it.

And so was born the deficit cash machine of the Baby Boom generation, the mother of all American Express Cards, the ultimate no “preset spending limit” plastic bling. By either issuing bonds to cover the Deficit, or by directly slapping the ink on the presses, the God of the system created loaves from fishes, money from nothing with which it flooded the world. The Boomers now ensconced in financial buildings around Washington found that although the creation of money from thin air fuelled inflation –  which caused the price of the stuff they were buying to rise – they could simply create more money to pay the cost of the inflation that creating money causes. In this way, a small suburban home in Potterville could be bought for $5,000.00 in 1957, and abandoned at $500,000.00 in 2007 – without much more than a few new coats of paint and driveway sealer. As long as everybody was happy, and the “value” of stuff kept going up to cover the costs of stuff going up, Debt became a gift – a gift that keeps on giving.

Clearly then, the US national Debt has been far from a problem and , in fact, has been the solution for histories most powerful national economy, as it pursues a religious quest for Economic Manifest Destiny, spreading truth, justice, and the American way around the globe. However, like all things just too good to be true, there was a catch. A small, indiscernible, caveat buried in bold red print on the front page; “Warning: Not Applicable When The Value Of Stuff Goes Down”. The most schooled generation of minds in history missed it, buried as they were in righteous cars, clothing, coke, and junk from every corner of the globe. The National Public Debt, at 13 Trillion Dollars, and rising by 1 Trillion Dollars every month – was never, ever, meant to be repaid. The staggering interest costs that piled on each American every year like one hundred tons of feathers, always had to be paid by the creation of more money, which depended entirely on the stable rise of all the stuff a million miles below. Like a house of cards in a gathering storm, when the inevitable happened in the summer of 2007, the falling price of the American Dream blew the cards away. On the other side of the world, staring blankly at computer screens awash in red,  a worried clutch of foreign faces wondered  – wonder – in a thousand foreign thoughts; ” Ummmm….are we gonna get paid?” And for their sins, the answer is no.

As long as the United States of America is committed to defending a way of life measured entirely by gain, the National Public Debt is the sole remaining weapon, the last bullet in the chamber left with which to defend the good Fortress of  America. And as the last, faint hope, no Patriot wants to screw with that. The only option available to the besieged and beleaguered Alamo, is to flood the planet with absolute rivers of more American Debt – “Stimulus” – in the vain hope that Americans will return to buying stuff at record pace in order to force the value of the falling junk to rise again, thereby returning the world to its proper axis, moving mirthlessly amongst the stars and galaxies, drifting further into outer space.

Embrace the Debt America, it is the only chance you have.

Main Site: ScreamBucket.com




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