Current Affairs
In our previous section we took a brief walk throughout history to illustrate the mistakes made and the heavy prices paid for such mistakes by the largest and most powerful nations ever to exist.
In this section we're going to try to point out that as it stands we are facing the same challenges as those fallen before us, high priced wars and social programs, that are literally breaking the bank. And that at least for now (as the following charts and reports will prove) we are falling into the same fiscal trap that brought down those once mighty nations which leads us to fear that history might just repeat itself again.
"Pennies On The Dollar"
One of the hardest things for most people to understand is that it's not that the value of a given product that fluctuates up or down in price. What is really fluctuating is the value of the dollar used to purchase the item NOT THE ITEM.
When our Grandparent's tell the story about what the price of gas or a loaf of bread was back in the day, it wasn't that the gas or the wheat used to make the bread was cheaper than it is today. It's the fact that the dollar used to purchase the goods back then was much closer to being worth a dollar than it is today. What has perpetuated the slide in our dollars value?
To keep up with our governments spending of money they don't have, the Federal Reserve lends them money that they don't have…or at least didn't have until the paper rolled off of the printing presses.Dollar Chart Image In effect each new dollar (or should we now say billions and trillions of new dollars) created ultimately finds its way into the system therefore diluting the value of the old ones and causing the same products of years ago to seemingly go up in price when in reality it was only the value of the dollar that went down.
What's even harder to explain to most is the fact that even when things go up in price making those invested feel wealthier (like recent rallies in the stock market and real estate) the reality is their investments didn't go up in value at all. It's estimated that the Dow would have had to have hit 25,000 in order for it to have the same value it would have had at the turn of the century!!! How is that possible? Because the value of a dollar dropped more as a percentage than the gain of a stock or piece of property went up in value. Point is we all felt richer even though we were actually poorer. Economists refer to this phenomenon as an "invisible crash".
Think the Federal Reserve isn't concerned about this issue or you knowing what they're doing? In a convenient move in 2006 the Fed stopped reporting on the currency supply (the M3 report) for the first time since 1959. With the printing presses on high speed it is estimated that our current supply of currency has now reached 14 trillion dollars and rising at an astronomical rate of 18% per year (that's 2.52 trillion new dollars a year folks) and no one knows what the bailouts will add on top of all of this! Can anyone claim to know what's going to happen from here? Of course not but look back at actions similar to these in 1970 and you'll see the last time we expanded our currency supply (at a fraction of this pace we're on now) we saw the beginning a huge bull run in the precious metal markets…
"Rich Country Poor Country"
In relative terms of time it wasn't that long ago that America's factories and workforce was alive and well causing people around the world to cross the waters in search for a better life. So what changed so quickly? How could the slope have become so slippery? The beginning of the end came when we switched, as a country, from being proud producers to big fat consumers. When we were producing the goods that not only we as Americans purchased but the rest of the world bought as well the money the government took in from taxes and trade was much closer as a percentage to what it needed to pay out(not exactly the balanced budget we enjoyed while on the gold standard but better none the less). Once corporate America realized they could show higher profits to please Wall St. by moving jobs overseas our taxable revenues fell while our trade deficit grew. Not a problem as long as the amount of money the Government spent fell at the same pace (fat chance). Tank Image Our government has grown from approximately 3% of the economy to 50% once you add in state and local government and it's appetite for spending is off the charts. Our bar tab has now in the neighborhood of 10 trillion dollars and that's just for what we've racked up in previous spending! As worried as we should be about paying off (or at least down) that credit card we should be even more concerned about how we're going to pay for what's on the horizon.
While lawmakers are trying their best to come up with hundreds of billions if not trillions of dollars in bailout money for today's failed system just wait till they get a load of what the price tag for services such as Social Security and Medicare will grow to be in the not so distant future.Fannie Mae As the largest sector of our population, the baby boomers, work their way through the system they will have gone from net producer of taxable income for the government to a gargantuan liability. When the S.S. system was first put in place in 1935 there were 42 workers producing revenue for every one worker drawing a check. Today's estimates have close to 4 workers to 1 retiree and the numbers only get worse from here at least until they pass (literally) through the system which won't be anytime soon barring a nuclear war. Stock Market Image Again, not a problem since all those workers paid money into the system throughout the years but UNFORTUNATELY it seems the government needed to borrow some of the money in the cookie jar to pay for those crazy wars and bailouts. Add it all up and the borrowed money we've already spent is in the 10 trillion dollar range and the money we've already promised to pay for services in the future is estimated to be over 50 trillion (wonder whose picture is going on the 1 million dollar bill?).
So fill our children's backpacks with as much weight as possible and feed them well because their going to need to grow up big and strong to carry around all of that debt we're about to dump on their shoulders…
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