Sign up now!
Click here to receive free updates on headline news from John T. Reed

View Cart

 Bookmark and Share

Featured Products

Succeeding
1 year Subscription to Real Estate Investor's Monthly
Distressed Real Estate Times
How to Get Started in Real Estate
How to Buy Real Estate for at Least 20% Below Market Value

Checkout
How to Order

Copyright by John T. Reed

There is a worldwide financial crisis. It was caused by borrowing and spending too much and saving too little. (Borrowing too much is the flip side of lending too much. It takes two.)

The real solution is to borrow and spend less and save more. The American people and the people of the world—having far more common sense and sense of responsibility than their governments—have done exactly that. Borrowing and spending are down significantly in the last six months. Saving is up significantly.

Those changes in behavior patterns will atomatically fix the problem, in time, without government interference. Prior to the 1930s, there were lots of recessions and even panics, but they all fixed themselves. In the 1930s, politicians figured out they could get elected by claiming to be the solution, thereby causing our first prolonged depression. Now they are going to repeat that mistake.

The problem is government is not interested in solutions that work. They only want “solutions” that put them center stage. Keynseianism doesn’t work. That was established in the 1970s and early 1980s. In one Congressional hearing back then, a congressman jokingly asked a witness, “Are you now, or have you ever been, a Keynesian?” a take off on the “Are you now or have you ever been a Communist?” question that was asked of congressional witnesses during the McCarthy Era.

But politicians love Keynseianism because it puts them center stage. Socialism, which is Keynseianism gone wild, really puts politicians center stage. The free market, that is the people, will fix the problem, but then politicians cannot take credit (not that they won’t try).

Now, governments all over the world, led by the U.S. are going to “solve” the problem by borrowing record, unprecedented amounts of money (from whom is a whole other question) and spend it on stuff we don’t need. This is the equivalent of a morbidly obese man who eats way too much and exercises way too little deciding that his solution is to go on an eating binge like never before. He tried diet and exercise, but they were no fun. Pass the pork.

The U.S., led by its Community Organizer in Chief*, and the world are committing credit suicide. Of course, Obama and the politicians will not feel the pain. We will.

Neither the American people nor the people of the rest of the world will ever tax themselves enough to pay off, or even pay the interest on, their new, much higher national debts. That means they will either default on their bonds, or they will use inflation to reduce the real value of them. Both will cause such huge disruptions that revolution might be in store. Hyperinflation in Germany in the 1920s contributed to Hitler being elected president. The hyperinflation in U.S. history was during the Revolutionary War and in the Confederacy toward the end of the Civil War. In both U.S. cases, hyperinflation was accompanied by the goverment responsible being replaced by a new form of government.

Default might be a good idea. The voters will never wise up enough to stop returning these irresponsible, sociopathic clowns to Congress. Their “credit cards” (deficit spending) need to be cut up. The way you do that is to default on U.S. government bonds. Then no one will buy them anymore. Then we will have—wonder of wonders—a balanced budget! Because we will have no choice.

* phase coined by Andrew Gabel

I appreciate informed, well-thought-out constructive criticism and suggestions. If there are any errors or omissions in my facts or logic, please tell me about them. If you are correct, I will fix the item in question. If you wish, I will give you credit. Where appropriate, I will apologize for the error. To date, I have been surprised at how few such corrections I have had to make.