Tis Only My Opinion

January 2001 - Volume 21, Number 1

Living beyond our Means

There is no Budget Surplus

President Clinton informs the American populace that the Federal government has a surplus. What nonsense. If the budget is running at a surplus, why does the national debt increase. As reported by the Bureau of Public Debt, the federal deficit increased by $17,907,000,000 during the last fiscal year.

Projections for a $1.3 trillion surplus during the next 10 years are not fact, and probably just a bad dream. The politicians will find a way to spend any surplus either in new programs or in tax cuts. Since the beginning of the last depression in 1929, the US federal government debt has increased from almost $0 to over $5.7 trillion today.

federal-ddeb-dollars.gif

Moreover, is there any economist alive that can actually predict the tax and spending results of Congressional bodies next month, let alone 10 years in the misty future. Less than six months ago, our government forecasters were saying how great the economy was and very few, if any, were cautioning about the possibility of a mild downturn, let alone a recession.

The Balance of Payments is going to get worse!

While our politicians attention is directed elsewhere, the Balance of Payments problem is getting worse. During the Clinton administration, the Balance of Payments problem has deteriorated greatly.

The figures for 2000 are through October 2000 and it is expected that the deficit for both November and December 2000 will add another $130 billion to the deficit bringing the total to almost $500 billion for the year. If deficits of these magnitudes continue, the only result will be a massive devaluation of the American dollar as foreigners decide to cash in their holdings of American paper dollars which are backed by nothing more than the "full faith and credit of the US" and that may not be worth much to the holders.

In a 30 year span, the US has gone from being the world's largest creditor nation to its largest debtor. And the trend has accelerated during the Clinton administration.

Robert A. Blecker in his July 1999 article stated the obvious:

"In fact, the U.S. economy’s current prosperity rests on the fragile foundations of a consumer spending boom based on a domestic stock market bubble, combined with foreign bankrolling of the U.S. trade deficit. If present trends continue, the growth in U.S. international debt will not be sustainable in the long run. No country can continue to borrow so much from abroad without eventually triggering a depreciation of its currency and a contraction of its economy. The rising trade deficit and mushrooming foreign debt are thus warning signals of underlying problems that—if not corrected—could bring the U.S. economic boom crashing to a halt in the not-too-distant future."

 

What is Paper Money Worth?

The Germans found out in 1920 to 1922. It was worthless and could be used instead of toilet paper since it had so little value. I shudder to think what might happen if those holding our paper overseas decided that our financial policies were not in their best interests. During the past eight years, our gold reserves have continued to decrease and only through the manipulation of the Federal Reserve and the Gold gang has the price of gold stayed under $300. The central banks all want to have fiat money because that enables them to continue to debase the currency. Let us hope that the citizens don't wake up soon. It could get ugly when they find out that a $1,000 Fed Reserve note won't buy a role of toilet paper.

Steps the Bush Administration should take to solve the crisis and prevent being blamed for it.

  • The new administration must stop the gold/price manipulation policies of the Clinton/Rubin/Summers group.
  • Despite massive increase in M-3 during the past two months, the stock market has not risen appreciably and most stocks are under distribution pressure. The Fed Reserve should cut interest rates at least another .5% in January.
  • Take steps to strengthen our export markets for agricultural and manufactured products.
  • Insist that American funded organizations like the Import/Export Bank don't fund overseas operations like the railroads in Brazil which threaten American markets. Buy American needs to become a belief system for everything even if it costs more because we need those jobs.
  • Get an immediate handle on the credit problems of the major banks from derivatives to bad loans. Put into place through the Fed Reserve or the U.S. Treasury mechanisms to stop the panic when major companies start declaring bankruptcy.
  • Bring the troops home from Bosnia and any other nation where we don't truly have national security interests and/or the host nations are unwilling to pay for our presence.
  • Reduce foreign aid for any military hardware and look closely at foreign aid projects that could hurt American industry and potential exports.

Why?

Because the sand in the hour-glass is running out, and every little bit that can be done to stop the slide must be done immediately. Else, the Republicans will be blamed for a mess they did not create and the Democrats will regain control in 2002.

And for those of you who weren't around in 1929 - 1932, the following chart might be of interest.

Perhaps, history is repeating itself.

But then - 'Tis Only My Opinion!

Fred Richards
January 2001

Corruptisima republica plurimae leges. [The more corrupt a republic, the more laws.] -- Tacitus, Annals III 27

This issue of 'Tis Only My Opinion was copyrighted by Adrich Corporation in December 2000.
All rights reserved. Quotation with attribution is encouraged.
Tis Only My Opinion is intended to provoke thinking, then dialogue among our readers.

 

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