The inflation solution

There is a situation developing that I believe is inevitable, that people should be aware of, and that the government will not tell you about. It's not a conspiracy. It's just very unpleasant, very unfair and unavoidable. They have to maintain "plausible deniability". That is, when it comes to pass, they have to be able to claim they didn't see it coming, or better yet, blame it on the other party. The good news is, as painful as it may be, it will not be the end of the world as we know it.

I'm referring to inflation. Not garden variety inflation, but hyper-inflation. The government currently owes about 8 times what it collects in revenues in a year. This year, they will spend more than twice what they take in, further adding to the debt. That's like a household that takes home $50,000/year after taxes, carrying $400,000 in debt and adding more than $50,000/year in additional debt. Such a household would eventually declare bankruptcy. The government doesn't have that option. There is no entity large enough to absorb a $12 trillion loss on our behalf. Raising taxes would result in a smaller number of people paying higher tax rates on less income. The net return to the Treasury would actually fall. That's not going to work. We could drastically cut government spending, but we already have so much mandatory spending in the form of entitlements already owed, that that's not a workable solution either. The final option, the only one left, is to devalue the currency to the point that $12 trillion is no longer a big number.

Here's how it works. Let's go back to our $50,000/year household. Now let's assume that their income keeps up with inflation and that they are able to stop or slow their accumulation of new debt. Now inflation goes ballistic; let's say 1,000% in a year. Now the household income is $5 million/year and the debt is still around $400,000. Their financial situation is much more manageable. Sure, a loaf of bread now costs about $1,000, but as a percentage of their income, it's about what it was last year. That's the government's out, although you will never hear them say it out loud. I don't know exactly when, but it's going to happen because there's no alternative.

Of course most people's income will not keep up with inflation. Therein lies the pain and the injustice. Under such a scenario, people on a fixed income and people who cannot simply demand a raise and get one, would essentially experience a cut in pay every payday until the inflation cycle is over. None of this was their fault, yet they will take the brunt of the damage. That's why you will not get "fair warning" from the government.

The good news is, hyper-inflation can come and go relatively quickly. Eventually, the government's balance sheet will become sustainable and the money supply will be brought back under control. Wages and prices will adjust and we can move forward again. It's a bit like discovering that the only way to get back to the tropical beach is by wading through a half mile of four foot deep hot tar. It's not going to be pleasant, but we'll get there, because that's where we want to be. In the meantime, we can face what's coming without fear, do everything we can to ensure everyone makes it across and it would be helpful if our elected and appointed officials would quit blowing smoke and treat us like full grown adults, capable of handling the truth.

Fuel efficiency and processing speeds - the new CAFE standards

President Obama announced new fuel efficiency standards for the American Automobile industry, suggesting that something must be done about the fact that we have not seen the kind of progress in fuel efficiency in cars that we've seen with processing speeds in computers.

That's an interesting comparison. Let's look at it more closely. The computer industry was never given government mandates on processing speeds. Computers have improved exponentially due to increasing demands from customers combined with fierce competition. Software and hardware engineers do not have a powerful union. They either continue to produce new innovations or they lose their jobs.

In the auto industry, there are a very limited number of competitors. Volumes of regulations and government mandates keep it that way. The general mindset for a union labor force is "how do we get more to do less?" That's not a commentary on the quality of the people. It's the nature of a system that makes management and employees adversaries.

Government getting ahead of the free market and declaring on the public's behalf what they want and what they shall get will never lead to better products.

Hopefully, Silicon Valley will make the whole issue obsolete at some point by coming through with technology that makes the new government targets look like child's play. That is, unless the government decides to help them too.

We Don't Need Another Hero

For years, a certain constituency of Americans has been vastly under-served and under-represented. While they may disagree on a number of issues, the members of this constituency agree on a few fundamental things. One is that massive government debt will be a severe burden on future generations and that it is immoral to attempt to improve our short-term circumstances by knowingly jeopardizing our children and grandchildren. Another, related idea is that it is not the role of government to shield us from the consequences of misfortune or poor judgment, but to uphold our rights as we sort it out ourselves. It's a constituency that believes government's role in the life of the individual should be limited, as should it's budget. Issues thus far not involved in this coalition include abortion, gay rights, global warming and other hotly contested subjects that are left for another venue and another group.

This constituency has been left asking "Who will champion our cause? Where's the next Ronald Reagan? Who will defend our position?" Well, on April 15th 2009, they stopped asking and started defending themselves.

The problem with putting your fate in the hands of a political party is that they are really not sets of ideas, they are infrastructures for accomplishing a task; winning elections. As a party, they don't promote a limited scope of ideas or single issues, they adopt a number of issues and positions based partly on commonly held beliefs and partly on political expediency.

The Republican Party has spoken up for limited government and fiscal discipline, but has not lived up to the hype. Also, people who believe in capitalism, limited government and fiscal restraint, but don't tow the party line on other issues are ostracized. The same dynamic takes place in the Democrat party. You have to buy the whole package.

Whether you're liberal or conservative; capitalist, socialist or communist, you have to admire a group that refused to give up when a leader failed to emerge. The followers have become the leaders. This is in clear evidence as conservative politicians and pundits are now falling all over themselves trying to connect themselves to this movement.

I would caution members of this coalition not to allow it to get hijacked by a political party or to try to expand it to cover more issues. This is a unique movement of individuals promoting a specific set of ideas upon which they agree. At stake is whether future generations will work for the state or the state will work for them. Other issues can wait for another day, another rally, a different coalition, a different movement. No one who believes in ensuring the freedom of our descendants need be excluded because they also believe in something else. If we protect and respect each others individuality, we can work everything else out in time.

An economic highway to hell?

Will big government snuff out the recovery?

There have been small signs that the economy is ready to turn the corner on the downward part of the current economic cycle. Banks are talking about repaying TARP funds, the growth in unemployment has at least leveled off. Home sales, while still dismal, actually rose last month. One would expect the next leg to be increased lending by the banks as they come out of defensive mode and get back to competing for profits.

However, in the name of saving the economy the government is installing some huge circuit breakers on any up cycle in the economy. The deficit is nearly $2 trillion dollars. The stimulus package contained massive amounts of new, permanent spending. Much of the aid that was given to states and municipalities is covered by the federal government in the first years, but requires them to continue the spending in later years on their own. Increasing taxes can be politically tough. Expect to see higher fees, surcharges, licensing requirements and other forms of revenue collection by governments on all levels. Businesses could be forced to lay off workers or even go out of business due to their requirement to subsidize the unemployed.

Even as more and more scientists around the world warm up to the notion that the Earth's climate is far more dependent on the activity or lack of it, on the Sun than on man-made carbon emissions, and that we are far more likely to experience the ravages of global cooling in the coming decades than global warming it's full steam ahead for global warming advocates. The government is proposing a "cap and trade" system to regulate carbon emissions. Going over your carbon limit will necessitate that you buy "carbon credits" perhaps from companies that come in under their limit. Whether companies pay through the nose for the credits, spend more on technology to reduce their emissions, move overseas, or just close their doors, the cost of producing just about everything in this country is going to go up if this is enacted. There is nothing stimulating about it. Even if it worked exactly as intended and we go to a completely carbon free energy environment, the government will have received countless billions of dollars from carbon credits which may become obsolete. Do you think they're just going to shrug off all that revenue? They will tax the sun if that what it takes to keep the cash flow going.

Some kind of nationalized health care system may soon be coming our way, as well as increased government control over large businesses, the risks they take, the salaries the pay out, the investments they make. I've worked with civil servants. They're fine human beings. But among the rank and file, the bragging that goes on around the water cooler is about who gets paid the most to do the least. Those are the heros. Those are the one's the others look up to. That's what you shoot for. It's a bit different for celebrity civil servants of course, but they come and go. Most of the work is done by career folks with zero profit incentive. The path to advancement is based mainly on how many people you supervise and how big a budget you oversee. The incentives are to get more people in your department spending as much as possible. It doesn't really matter what they spend it on or how they spend their day, so long as it looks good on paper.

Even government leaders in Switzerland, France and England are now publicly voicing concern over runaway government spending in the U.S. Why do they care? Because if we go down, they go down. They know that big government is not the answer, it's a poison. We have been subsidizing big governments in Europe for decades. They don't want to see that cash cow disappear. The Czech premier got it right when he said that trying to spend our way out of recession puts us on the Highway to Hell, which, as you know is paved with good intentions. He actually said "way to hell" but later stated his comments were inspired by an AC/DC concert he had recently attended.

We all want a better country, a better world, but we're going the wrong way.

The Tea Party mentality

Tea Parties are popping up across the country. People see the government getting bigger, deficits ballooning. They're worried. They're angry. They're frustrated. Perhaps you're among them. If you think the country is moving in the wrong direction and you want to effectively communicate that, you first have to understand why. You have to have a firm grasp of the fundamental principals your seeking to promote. So what are they?

This is not about Republican or Democrat. This is about capitalism, free markets and free people.

Leaders in both major political parties have advanced the notion that capitalism is a necessary evil, evil being the key word. We're taught that selfishness is bad; that one should always serve a cause "higher than yourself". All of this is dead wrong.

Capitalism is not primarily about money. It's about making your self your top priority. Advancing your agenda. Setting your own priorities. Big government proponents want you to serve a purpose "higher than yourself". They don't even really care what that purpose is. The key is to convince you that you should subjegate yourself to something else; society, country, others. Others, by definition, is everyone except you. Once I've convinced you that you are not worthy of your own efforts and attention, I can set myself up as a representative of the higher, more worthy cause. Now I can use your own guilt to take your time, your labor, your intelligence and direct them toward my agenda. After all, working for me makes you a better person.

The truth is that when you take care of yourself, I don't have to. Your neighbors don't have to, your family and friends don't have to. You become an asset rather than a burden. If you regard yourself as a good person, capable of determining right from wrong and pursuing right, why would you not trust in your own priorities? Three hundred million individuals all focused on being the best person, by their own yardstick, that they can be is what will uplift this nation. Three hundred million people looking for direction from self-annointed leaders will not.

Support whatever cause you please. Help anyone you want. But you determine the who, what, where, why, when and for how long. Be your own cause and keep in mind that there is no cause higher than your self. Your integrity is your greatest asset. Your agenda matters. You matter. Know who you are. Know what you believe. Believe what you know. Take care of yourself.

We all want a better country; a better world. The basic conflict is whether you get there by empowering your self or surrendering your self. I submit that surrender is not the answer.

The hope from audacity

If government spending and increasing fees and taxes have you scared, take heart. It seems even some liberal democrats are experiencing sticker shock. Senator Fiengold is among those who can't digest the amount of pork in the omnibus spending bill. The 9,000 earmarks have been excused by the administration and members of Congress because it was written last year. I guess if the robbery was planned in advance, it's okay.

But it's not flying with all members of Congress or the American public and the bill could well be headed for failure. This could be a hopeful sign that the general public is ready to get angry. Angry voters scare politicians and sometimes even force them to do the right thing. "Tea parties" are cropping up all over the country and some wealthier Americans are "going Galt". That's a reference to a character in Ayn Rand's 'Atlas Shrugged' who called a general strike among top producers. In real life, people are intentionally reducing their income to avoid becoming targets of a starving government spending monster.

It's not all about the money. People generally don't like being manipulated and they don't like the idea of working their tails off for "others" (others, by definition being anyone but you).

It may seem like the government is a runaway train when it comes to driving us deeper into debt and recession, but there is still hope. This country has the capacity to turn on a dime. The question is, are people willing to face some pain now, or would they risk putting future generations in an impossible fiscal situation in a pathetic attempt to soften the blow?

Give the people what they want

Perhaps we have to lose everything before we can begin to get it back.

I have been frustrated over the years by the fact that capitalists have not done much to defend or communicate their beliefs. Maybe they don't understand them themselves. Capitalism is not all about money. It's about freedom and creativity and an economic system that compliments human nature rather than trying to suppress it.

However, I'm beginning to believe that there might be some wisdom in standing down and letting the people have what they think they want. What they think they want is security. They want to be fed, housed and cared for. They don't want to have to stress and worry about how to take care of themselves and their families. They believe that the government can make this happen.

The fact is, the more the government takes over the functions of the free market, the worse our economic situation is going to get. Incentives for producers are rapidly disappearing. The level of government debt is getting so enormous that any sector, industry, company or individual that has a degree of success better than average is going to be targeted a revenue source. Eventually, we may indeed all be more equal. We will be equally poor. We will have a Soviet style society where toilet paper is a hot commodity. Health care will be free, and dangerous. You will be employed, but the government will tell you where you'll work, what you'll produce and to what specifications. This will come about as more and more industries are "temporarily" nationalized for the public good.

But, enough with the dire predictions. There's nothing left to do now but watch it play out. This is what the people demanded. I believe we will find out fairly quickly if what they thought they wanted was what they really wanted. You can have all the security you asked for. All it will cost you is your self.