We have all heard about the “coming” fiscal cliff. It is said that Jan. 1 of next year that Bush’s tax cuts will expire, tax rates will go up and whack the economy over the head and force us back into recession. This, is not the fiscal cliff. We have already gone OVER the fiscal cliff. Actually, we went over this cliff probably back in 2006 or ’07, let me explain.
It was back in 2006 (maybe even FAR FAR earlier) that mathematically the “end” was in sight. Governments all over the world from cities, states and sovereigns had by this point packed in and promised so much to their citizens that mathematically they could never be paid. These “budgets” assumed blue skies til the year 2112 or thereabouts. “Recessions” were a thing of the past and thought to have been abolished forever. Growth “forever” was plugged into computers with all sorts of unrealistic assumptions (remember back in 1999 it was forecast that by now, 2012, the federal debt would be paid down?). It was all wishful thinking, faulty logic and if I may say, a bad joke.
I found myself screaming at the TV the other day when a “fiscally conservative” candidate was saying that “it’s not fair to spend all this money now and have our kids burdened to pay it back”. I can’t even write the vile stuff coming out of my mouth at full volume but suffice it to say that these politicians are so full of $@%! that it’s dangerous to even be in the same room with them. What no one is saying is that it’s not the fiscal cliff that we should be worried about, it’s the actual IMPACT with the ground that’s coming.
This talk of “fiscal cliff” assumes that there is a “cure” to the problems. I assure you that mathematically under the present system, there is NO SOLUTION, period. Yes I know, some will send me flaming e-mails telling me that we can “inflate” our way out, to which I say “yes, I know, and they will try but it does not address the problem that the banking system and sovereign balance sheets are broke, busted, false and hollow.” Hyperinflation has never, nor will ever be a viable solution. So what if your Social Security check reads “$1 trillion” US Dollars if a tank of gas costs you $100 billion. Hyperinflation is the END of a failed monetary system, not the beginning nor a cure.
Think of it this way, a car only has a gas pedal or a brake. When you are already in Wile E. Coyote mode, floor the gas or stomp the brake, it doesn’t matter. The time to have used the brakes was back in the late 1980’s or 90’s. Today, “austerity” is totally out of the question. Any use of austerity will kill the economy within days if not the next day that the markets open because traders know as well as ordinary people that the system has become a crack addict that no “rehab” can cure. We are even past the point of “inflate or die” now, yes, “inflating” will prolong the death for a time (and it may not be much time at that), but the currency and banking systems will approach “zero and worthlessness” as the inflation gas pedal gets pressed harder and harder.
Confidence is THE only thing left and confidence is a very fickle animal at best. Some say that “you can’t eat Gold”, but you can exchange Gold for food. You can’t eat “confidence” either, but, while their is confidence you can exchange it for food. The problem is that confidence can, has many times in the past, and will soon again evaporate overnight. Gold on the other hand has never ever performed this trick of “evaporating” overnight.
We have taken the “greater fool theory” to another level. We have taken it to the point where people believe that since others are greater “fools” than they, it is OK to stay in the game because we are smart enough to exit in time. I say “another level” because of the length of time and heights foolishness we’ve attained. All one needs to do is look at Citigroup’s earnings and how they were created by recipe (or the credit rating of the US), …and the stock is being bought? The problem is this, there are not enough seconds in the day to allow PT Barnum’s famous saying about “fools” to work much longer. And speaking of “fools”, I think Nixon misspoke and meant to say, “We’re all fools now!”