By Thaddeus McCotter (R-MI)

We must address the clear and present threat to our economy.

Our prosperity stands on the precipice. Concerned Americans demand an explanation of how this happened and leadership that will walk us back from the cliff. But in the White House and along the campaign trail, the purported leaders fail to recognize or refuse to acknowledge the clear and present threat to our economy: the Great Deflation.

The failure to differentiate between an economic recession and this Great Deflation will cause an economically doomed generation.

But this need not happen. The strength of our economy — its capacity to generate employment, opportunity, and growth — is determined by the quality of its factories and its technology and innovation; by the depth and freedom of its marketplace; and by the ingenuity and efforts of its people. By these measures, we Americans should continue to have the strongest economy in history, and one which continues to grow.

So while our economic challenges are daunting, they can be surmounted. It is only a question of our will to take action.

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By Robert Agostinelli

The sad tale of profligate spending is clear. With an abandon and reckless disregard for common-sense economics, we have mortgaged our future. This has been the fault of both sides of the political aisle. Seemingly benign acts of largesse and the application of pork-barrel spending have numbed our national sense of responsibility and left us detached from the full implications.

This has been greatly exacerbated by the equally cowardly seduction of “entitlement.” This term embodies the height of all false utopian ideals that socialism has used to seduce its wards.

Long before our current president embarked on his course of ruin, his intellectual compatriots, Presidents Franklin D. Roosevelt and Lyndon Johnson, charted the course of our demise. They were the forerunners who, in the name of good intentions, sowed the seeds of ruin whose harvest we are reaping.

The expectation that the government has a duty and an obligation to provide entitlements is and always has been a flawed proposition. Simply put, it is a grand illusion with a vengeful ending if not corrected.

Enter President Obama, the supreme narcissistic leader of the realm, never one to “let a crisis go to waste.” His is an artful blend of Keynesian voodoo economics, increased imposition of government control, and the largest expansion of the entitlement state in our history.

The financing of Mr. Obama’s spending and expansion of government can only be sustained by way of subterfuge.

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By Dr. Jack Wheeler

Benjamin Disraeli (1804-1881), one of Victorian England’s most prominent Prime Ministers (1868/1874-1880), once commented to a friend: “There are two things that the public should never be allowed to see how they are made: sausage and the law.”

We are witnesses today of just how immortally trenchant Disraeli was back in the 19th century. For in truth, observing our politicians handling the current “debt crisis” is a far more repulsive sight than the inside of a sausage factory.

Yet if Disraeli were here now, he’d smile sardonically and remind us that (he was fluent in French) plus ça change, plus c’est la même chose – the more things change, the more they stay the same.

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By William H. Gross

That adorable skunk, Pepé Le Pew, is one of my wife Sue’s favorite cartoon characters. There’s something affable, even romantic about him as he seeks to woo his female companions with a French accent and promises of a skunk bungalow and bedrooms full of little Pepés in future years. It’s easy to love a skunk – but only on the silver screen, and if in real life – at a considerable distance.

I think of Congress that way.

Every two or six years, they dress up in full makeup, pretending to be the change, vowing to correct what hasn’t been corrected, promising discipline as opposed to profligate overspending and undertaxation, and striving to balance the budget when all others have failed. Oooh Pepé – Mon Chéri! But don’t believe them – hold your nose instead! Oh, I kid the Congress. Perhaps they don’t have black and white stripes with bushy tails. Perhaps there’s just a stink bomb that the Congressional sergeant-at-arms sets off every time they convene and the gavel falls to signify the beginning of the “people’s business.” Perhaps.

But, in all cases, citizens of America – hold your noses. You ain’t smelled nothin’ yet.

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By Jeff T. Allen

We are facing a tipping point. There will soon be a crisis affecting US citizens beyond any experienced since the Great Depression. And it may happen within the year. This past week three awful developments put a dagger into the hope for a growth-led recovery, which held promise of possibly averting a debt and currency implosion crushing the American economy.

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By Terry Coxon

It was Otto von Bismarck who explained that “politics is the art of the possible.” We can thank him for that much, but he didn’t tell the whole story. I’ll give you the rest of it. Politics is the art of the possible fictions you can get away with.

Politics is mostly dissembling, and the dissembling is mostly about dodging personal responsibility for the messes governments make. It works out that way because making messes is most of what governments do. So when we ponder how the U.S. government will go about defaulting on its debts, a good way to approach the question is to consider how a default might be presented.

At this point there is no room for doubting that the government will renege on the commitments it has made to give people money. The $9.2 trillion in Treasury securities held by the public is just the tip of the iceberg. Estimates differ, but if you add in the unfunded obligations for Social Security and Medicare, it’s hard to avoid getting a total that exceeds $80 trillion. That works out to $260,000 for every man, woman, and child in the country, including the two-year olds. It can’t be paid, so it won’t be paid.

But don’t expect any clarity about the matter. Whatever happens, you can count on it not being called a default. No one in the U.S. government is going to say, “Tough luck, Treasury bond investors. We’re not going to pay you another dime. Go pound sand.” And no politician is going to tell the 51 million Americans on Social Security, “If you’re fit enough to pump that rocker, you’re fit enough to work.” It will all be done far more diplomatically.

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By Expected Returns

There is a human fear of standing apart from the crowd that is at times necessary, but at other times debilitating. We are taught to conform in school and just memorize the facts our teachers give us like good students. I was always the type of student that “did my own thing”, which of course got me in a lot of trouble. Even in college, I considered my reading assignments an utter waste of time and instead spent all my free time reading books I found stimulating. I am not one to follow the crowd because I have complete faith in my ability to think critically. I would rather be wrong once in awhile thinking for myself than to be a mindless robot swayed by the wind.

You would think that in Wall Street, herd behavior would be eliminated since the incentives are huge against this irrational behavior. Yet Wall Street serves as perhaps the best confirmation of herd behavior. The industry is obsessed with diversification and the idea that risk is determined by volatility. Money managers are rewarded for diversifying and being average. Those who can be average while attaining lower levels of volatility are the stars. To me, this is a big farce. The whole idea of diversification is ludicrous; it serves as a protection against ignorance. If I bought government bonds to diversify my clients’ portfolios, I would be doing them a great disservice. If I blindly bought government bonds for Boomers, I would be doing them an even greater disservice since they need to protect their assets for retirement. All these pension funds stuffing their portfolios with “risk-free” Treasuries are making a huge mistake. Why the unjustified fear of stocks? Historically, it is the bond market that always wipes out capital, not the stock market!

Those who stand apart from the crowd are mocked, until of course, they are proven right.

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By The Expected Returns Blog

I have warned that a debt crisis of a magnitude we have never experienced before is approaching. States and municipalities are going bankrupt along with the Federal government. Economists foolishly applaud sub-3% growth in GDP when it took a $1 trillion budget deficit to produce. There is some serious misunderstanding of the fundamentals of our economy right now, and this is going to create some crazy volatility.

States are in horrible shape; suffice it to say that they are going to encounter a major crisis soon. What people don’t realize is that states received billions of dollars in aid as part of the American Recovery and Reinvestment Act of 2009. The influx of government money encouraged states to ignore structural debt issues. In fact, expenditures in states grew in 2009 and 2010 while general fund spending was down both years. In other words, states revenues have still not recovered to pre-recession levels, which means states have been relying very heavily on Uncle Sam. States have also increasingly turned to the bond market (up over 20% from 2009) to fund their budget gaps. These are nothing more than delay tactics.

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By Moses Kim

One of the hardest things to do as a grown, “educated” adult is to learn from others. The inability to learn from others is what guarantees you will have a very childish perspective of the world. If the only books you’ve read were forced on you by the public education system, then your perspective is skewed. It was only when I expanded my realm of knowledge that I saw the world in a whole new way. I realized that there are recurring themes in history that humans consistently ignore because fundamentally, human nature never changes. No matter how much you warn people about the disaster that’s coming, they won’t listen. Call it what you may- naivete, ignorance, or outright arrogance- but this is just my experience. By definition you must be humble to learn.

There is a psychological phenomenon that explains the human tendency towards disbelief and inaction: the normalcy bias. If people haven’t directly experienced an extreme event before, they are prone to believe that it can’t happen. The normalcy bias explains why people refused to evacuate their homes when Katrina was clearly going to leave a swath of destruction. The normalcy bias explains why most people get destroyed by hyperinflationary events. And the normalcy bias explains why people refuse to get out of their dollars and buy gold. Most people alive never experienced a gold standard or a bond default; hence most people will be caught totally off-guard by the events of the future. However, people really shouldn’t be caught off-guard because governments historically never pay off their debts! They always default in some form.

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By Duane Stoffel
I Don’t Feel Sorry for Californians Anymore.
I used to feel sorry for Californians, myself included. I felt sorry for them because, with the exception of a couple of years in the early eighties, our beautiful state had been hijacked by the brain-dead Democrats who had been running things in Sacramento [...]

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By Porter Stansbury

Our current total debt is now close to $14 trillion. The number is so large it’s meaningless. No one can comprehend how much money $14 trillion really is. A better way to think about it is that each American taxpayer owes $125,000. That’s like a whole additional mortgage for most people.

I want to be clear about this: These debts are real. These debts are money we owe today. They must be financed (we have to pay interest on them). And they DO NOT include any future promised payments.

And the money Congress officially owes fails to include other significant debts. Regardless, Congress is likely to end up repaying these debts. Debt at the state level now totals $1.1 trillion, and local government debt is another $1.6 trillion. Investors have long assumed Congress effectively guarantees these debts (Investors trusted the federal government would step in to prevent state and local governments from defaulting).

In addition to these debts, Congress has guaranteed the assets of Fannie Mae and Freddie Mac on an unlimited basis. Losses at these two companies, by my estimate (which was once thought ludicrously large and is now a mainstream prediction), total $800 billion. And then there’s a slew of TARP-related investment and guarantees, the costs of which are unknown. If you throw on an extra $3 trillion, that brings the total debt package up to much more than 100% of GDP.

Adding up all the numbers and applying a market-based rate of interest (6%) to these debts, you’ll find that the real (i.e. not manipulated by the Federal Reserve) cost of servicing these $17 trillion in debts would be a little more than $1 trillion. Total annual federal revenue from income taxes and corporate taxes over the last year was $1.1 trillion.

These are all real numbers. You can verify all of them. What they tell me is… absent the Federal Reserve’s intervention in the Treasury bond market… and absent the myth of “off balance sheet” obligations… our federal government would already be bankrupt.

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By Matthew Brown

Investors will face defaults on government bonds given the burden of aging populations and the difficulty of securing more tax revenue, according to Morgan Stanley.

“Governments will impose a loss on some of their stakeholders,” Arnaud Mares, an executive director at Morgan Stanley in London, wrote in a research report today. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.” The sovereign-debt crisis is global “and it is not over,” the report said.

Mares said debt as a percentage of gross domestic product is a false indicator of an economy’s health given it doesn’t reflect governments’ available revenue and is “backward- looking.” While the U.S. government’s debt is 53 percent of GDP, one of the lowest ratios among developed nations, its debt as a percentage of revenue is 358 percent, one of the highest, the report said.

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The United States by every measure is hanging on by a thread to its First World status. Saddled by debt, engaged in wars on multiple fronts with a rising police state at home, declining economic productivity, and wild currency fluctuations all threaten America’s future.

The general designations of the ranking system for world status date back to the 1950s, and have included countries at various stages of economic development. Since the Cold War, the definition has come to be synonymous with repressive countries where a wealthy class of ruling elites segment society into the haves and have-nots, many times capitalizing on the conditions that follow an economic crisis or war.

While much of the world is still mired in poverty, the reduced cost of innovative tools such as computing and connectivity ironically puts traditional Third World countries at the forefront of a new lean-and-mean economy that is based on ideas of empowerment for the disenfranchised. For better or worse, the world is leveling due to Globalism. However, America and other over-leveraged countries face this re-balancing of the globe at a time when they have dwindling resources. We can speculate about who and what is to blame for America’s fantastic fall, but for the purposes of this article we shall focus on the obvious signs that the United States is beginning to resemble a Third World country.

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By Doug Hornig

Bud Conrad, chief economist at Casey Research, has been predicting (rather correctly) the dire economic consequences that will result from our mushrooming national debt. Of particular concern is the debacle yet to come, from the future’s unfunded liabilities.

Now, however, he is going to have to pass his Mr. Gloom hat to another contender. Namely, Boston University economics professor Laurence Kotlikoff.

In an article published on Bloomberg.com, Kotlikoff writes, “Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.”

This is not a news flash. Former U.S. Comptroller General David Walker has been barnstorming the country for the past several years: appearing on every television show that will have him, delivering the same message, trying to educate the American people about the seriousness of our plight.

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By Ernest S. Christian and Gary A. Robbins

The Internet is a large-scale version of the “Committees of Correspondence” that led to the first American Revolution — and with Washington’s failings now so obvious and awful, it may lead to another.

People are asking, “Is the government doing us more harm than good? Should we change what it does and the way it does it?”

Pruning the power of government begins with the imperial presidency.

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By Mark Alexander

Fact: Despite all of the claims by Barack Hussein Obama and his cadre of Socialists about “creating or saving” jobs through their so-called “stimulus plan,” their taxing revenue out of the private sector (from this and future generations) does NOT “stimulate” private sector job growth — quite the contrary. (Nor is there any expressed authority in our Constitution for such redistribution of wealth — but who pays attention to that venerable old parchment?)

Late last Friday, after the White House press corpse had departed for weekend resorts, Obama released his administration’s “Mid-Session Budget Review,” which analyzed the results of his effort to “fundamentally transform the United States of America” with his “stimulus” plan. From almost any vantage point, the report is tantamount to an admission of failure, but Obama’s rhetorical smokescreen continues to imply otherwise.

That plan, officially known as the American Recovery and Reinvestment Act but more accurately known as the American Socialization and Redistribution Act, is Obama’s ruse to confiscate from taxpayers — and borrow primarily from the Red Chinese — almost a trillion dollars, then redistribute it to his constituents through government-controlled conduits.

As George Bernard Shaw wrote, “A government which robs Peter to pay Paul can always depend on the support of Paul.”

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By Tyler Durden

The U.S. will default at least on the unfunded liabilities of Social Security and Medicare at some point in the foreseeable future.

Nothing would spook the markets more than for Paul Krugman’s advice to be accepted by the Obama administration. That might well be the trigger.

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By Robert J. Samuelson

What we’re seeing in Greece is the death spiral of the welfare state. This isn’t Greece’s problem alone, and that’s why its crisis has rattled global stock markets and threatens economic recovery. Virtually every advanced nation, including the United States, faces the same prospect. Aging populations have been promised huge health and retirement benefits, which countries haven’t fully covered with taxes.The reckoning has arrived in Greece, but it awaits most wealthy societies.

Americans dislike the term “welfare state” and substitute the bland word “entitlements.” Vocabulary doesn’t alter the reality. Countries cannot overspend and overborrow forever. By delaying hard decisions about spending and taxes, governments maneuver themselves into a cul-de-sac. To be sure, Greece’s plight is usually described as a European crisis — especially for the euro, the common money used by 16 countries — and this is true. But only to a point.

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By The Daily Bell Staff

Big business pleads for loopholes in financial regulatory reform … Here’s a simple explanation for the financial crisis: Too much cheap credit was extended to households, businesses and even sovereign governments that couldn’t afford to carry that debt or pay it back. The obvious implication is that, going forward, credit and other financial risks should be made more expensive and harder to get.

Now, however, as we close in on the endgame for financial regulatory reform legislation, special interests are crawling out of the political woodwork demanding loopholes and exemptions. And if you strip away their end-of-the-world-as-we-know-it rhetoric, their basic complaint is that the reform bill would make credit and other financial risks more expensive and harder to get – in other words, the bill is doing exactly what it is supposed to.

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By Bill Bonner

Let us look back. What has been the major trend of the entire past 50 or so years? Government has played a larger and larger role in the US and most western democracies. Only in the formerly (and for many, still) communist countries has government been rolled back.

The communists learned their lessons. They proved that government spending does not make people rich. But now…what’s this…? The US and other countries are greatly increasing the percentage of GDP spent by the government.

The communists proved that central planning didn’t work. But again, the US and others are now planning their economies more than ever – managing interest rates, directing capital to one industry while denying it to others, raising taxes on this…subsidizing that…regulating everything that moves…

The communists also proved that state ownership of industry was a bad idea. But the US and others now own banks, insurance companies, almost the entire mortgage business, and one of the world’s largest automakers.

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