The Unfolding Debt Danger: Greece Today…America Tomorrow?

Economics / US Debt May 03, 2010 - 10:09 AM GMT

Best Financial Markets Analysis Article I have been analyzing economics and financial markets for over a quarter century and my analysis always stopped at “financial”. In other words, I do not follow trough usually past the financial theme. After all, as a certified financial planner (CFP), you usually think in terms of dollars and cents, interest rates and all sorts of financially-oriented concepts. I have always been concerned about the financial and economic impact of many different kinds of policies and events but in recent years I started thinking “outside of my own box.”

Perhaps what I find more unsettling that the financial impact of certain policies and events, is what happens afterwards. What is the social impact of bad financial/social policies?

After all, I don’t worry about the impact of good policies and good events since the impact is usually beneficial or at least not bad. However, it sunk in some years ago the following important observation:

ECONOMIC DISINTEGRATION LEADS TO SOCIAL DISINTEGRATION

When economies break down, you are left with people that have desperate needs. This was true in my former country Yugoslavia during the 1990s. It was true of the former Soviet Union during the late 1980s. It was true of almost every country throughout history.

As you watch Greece today, you see disintegration right before your eyes. In recent years, Greece’s government kept spending the country into today’s resulting chaos (think “Keynes”). The country may or may not be “bailed out” by the European Union. Of course, bailing out Greece means that other struggling countries will be forced to come up with the money to do so. What condition will those countries be in? After all, they are not in good shape today.

The next observation is also a very important one when we talk about heady topics like “economic collapse” and the resulting social disintegration:

THE #1 REASON WHY ECONOMIES COLLAPSE IS BECAUSE GOVERNMENTS
AND THEIR SPENDING (DEBT AND INFLATION) GREW OUT OF CONTROL.

That’s right…excessive and growing government is the #1 reason why economies collapse. Throughout history, various groups of people petitioned the government for money and assistance because they think that there is some endless pot of goodies called “government money”. Government does not have its own money…it only has what it can extract by force from others (taxes). In the case that it prints money, this is also not a “freebie”. Printing money leads to inflation and inflation is nothing more than an insidious stealth tax than consumers ultimately pay. Runaway inflation also leads to a currency collapse.

Throughout my life, I have always strongly called for limiting government. Yes…the main reason is that I have seen over and over again, the dangers of growing or unlimited government. Whether you call it “socialism” or some other “-ism” like communism or totalitarianism, it is still in the general realm of “statism” and this is something that must…MUST…be limited. Not only for the good of society but also ironically for the good of government itself.

The “good-hearted” among us like to see the government be there in those cases when individuals need a helping hand and this is fine. The problem is when the situation grows out of control. At that point, no one gets any help. It becomes desperate as government itself becomes a casualty of its own excesses.

Is America next? If America continues on its current path, the answer is a sad yet resounding one…YES.

For America’s sake, it needs to reign in government at all levels. It needs to drastically cut spending, reduce taxes and scale back the blizzard of regulations that are choking economic activity at all levels.

The sad truth is that the people in power now are not doing this at all. They are in fact escalating their efforts with massive trillion-dollar spending, rising taxes and producing more bureaucratic burdens for us.

Just look at the healthcare reform and the financial reform acts. These monstrosities are thousands of pages of inane, confusing and counterproductive bureaucracy with lots of economic harm and very little good.

As we face the abyss up ahead, we have an overzealous government at the driver’s seat and it is accelerating forward. Sadly, our short-sighted politicians don’t seem to care. God help us!

What we can do as individuals…

Keep up your individual efforts to accumulate physical gold and silver and get your “financial house in order”. Just because the government is pushing us toward bankruptcy and chaos, that doesn’t mean that we should do the same. Keep managing your costs, lowering your debt, etc.
As I have mentioned in prior essays, support those candidates and policies that lower the size, scope and reach of government (at all levels).
Keep building up your network of friends and allies. That will come in handy later on.

Also, take a moment to sign up for the Prosperity Alert newsletter since I will be adding more resources and strategies for coping in today’s economy. In a forthcoming issue, I will make some economic forecasts to keep you “ahead of the curve”. Take control and …take care!

Taking the right steps now will help you and your loved ones get to the other side with greater safety.

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Paul Mladjenovic, CFP is a financial seminar leader, author of Stock Investing for Dummies and the editor of the Prosperity Alert newsletter. His main website is www.SuperMoneyLinks.com and you can follow Paul at www.twitter.com/PaulMlad.

© 2010 Copyright Paul Mladjenovic - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Comments

03 May 10, 20:28

You Have To Understand The Disease To Cure It

Tnis article defines the current US economic disease as follows: "GOVERNMENTS AND THEIR SPENDING (DEBT AND INFLATION) GREW OUT OF CONTROL", and the cure is: "to drastically cut spending, reduce taxes and scale back the blizzard of regulations".

I disagree. If only it all were this simple! My opinion is that "out of control government spending' is only a symptom and only one symptom of the disease, and not the disease itself. The causes of the disease are multiple and complex. A short and by no means complete list of unordered examples follow: idiotic military spending, actions, and the military/industrial complex; special interest laws: corruption, widespread belief in bazaar economic theories; government lies, propaganda and market manipulation; a government much more responsive to money interests than to the general public; etc.. In short, the disease is that we have a badly designed, inept, inefficient, inoperational, and dishonest government. It's like a carpenter is building a house, and he breaks the handle of his hammer; we tell him what he needs to do is hold the hammer head in both hands and hit the nails harder, when really what he needs is at least a new hammer, or more probably a nailing machine.

I know that the above is somewhat vague, so I offer a concrete example. The founding fathers designed a government based on balance of powers among the three branches of government. Then someone (I give no name) invented the Federal Reserve "Bank". It is really part of the government in that it has regulatory powers over banks and can "print" money (a power reserved to the goverment by the US constitution). It is under the unsupervised control of one man, is very secretive and transparent, and is much more responsive to the banking industry that it is to the American people or their representitives. In addition, it has been a source of actions and inactions largely responsible for the current worldwide economic mess.

My solution and the first step in government reorganization and renewal--desolve the Federal Reserve "Bank".

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