Wednesday, December 22, 2010

Path to self destruction

“I'm just a patsy”, that's what Lee Harvey Oswald said just before he was shot. I think the banks are the patsies and the culprit at the same time. All these bail outs and public debt is not because of anything other than the banks failing, but the question is why are we even bailing them out. Now, all the people who said these banks were going to fail are now saying let them fail, including the countries that are failing as well. So, where's the logic in all of this?

Let's look at the banks for just a second. The banks made all these bad loans, packaged them up and sold them to investors. This allowed the banks to give the money out while betting against people being able to pay their loans. I would love to bet both sides, but I don't go to race tracks, and the stock market is the biggest form of legalized gambling in the world. Because of federal regulation the banks were required to give out a certain percentage of bad loans. The banks got two sweeteners to do this. The banks were able to write off the bad loans on their taxes if people defaulted and the government secured the debt.

My question is did the banks do this on purpose to get richer or did they just get greedy and didn't have any consequences for their actions? I think it's a combination of both. Anyone in their right mind would go after more wealth if they could, so increasing the amount of high risk loans to get more to write off and not even really lose any money would be in their best interest. For the banks, there's no losing, so why not be reckless? The politicians made these deals so they could say they did a good thing and the banks made out like bandits.

Now the States are in trouble. I went to the and looked at my home state, Oregon, I saw that we're only at 23% debt to GDP. Thinking to myself I began to ask, was this all a scare tactic by the media? The answer is no. Let's look at New Jersey for example. New Jersey has about 17% debt to GDP. New Jersey has $8 billion in revenue, $11 billion in debt, and is short $10 billion dollars. New Jersey has started cutting services so that they've actually come out with a $400 million surplus this year according to Governor Chris Christie, so their debt to GDP is going down. The thing to see here is that if New Jersey decided to borrow money instead of cut back, their debt to GDP would go from 17% to around 34%. This doesn't give long before the state is at 100% of debt to GDP.

Most, if not all, States require that a budget be balanced every year. So, for most states you're going to have to cut services, cities too. What I find to be absolutely backward is that these states and cities are choosing to pay for pension liabilities while cutting essential services like police, fire, and rescue. A great example of this would be Detroit. Detroit is reducing coverage of 20% of its city because of budget shortfalls while not expecting any concessions from the police, fire, and rescue. Another example would be Illinois. Illinois is about 6 months behind on payments, not even local gas stations will accept state credit cards for gas. What is Illinois doing with their money, paying pensions and shorting everyone else?

These people, who I regard highly, that are asking to let these states and institutions fail aren't really looking at the unintended consequences. My favorite quote from Chris Martenson is “the next 20 years will not be like the last 20 years”. People like Peter Schiff and Bob Chapman see this as a good thing, but let's look at what will happen in the event of a collapse.

In the event of a collapse or letting states and institutions fail, there will be a giant power grab by Washington's elite, bankers, and corporations. Everyone is going to want to have a stake in the pie because they want to keep what they have. The banks want their wealth, even if it means 50 years of depression. The corporations want to make sure they stay in business because they'll be in power once everything settles. The politicians, they're just power hungry, they believe that we're their servants instead of the other way around. The one thing they forgot is that when people are oppressed enough, they will revolt, that's what started the American Revolution in 1776.

I think that what people don't realize, except the politicians in Washington, is that we've been groomed for so long to feel that we're entitled to certain things. Since the Great Depression, no one in this country has ever felt true hardship. We've become so accustomed to our lives, our trinkets, and our entitlements that we'll follow anyone who promises to keep us comfortable. In the end, I don't think freedom and inalienable rights will win out, but entitlements and complacency will win the day.

At this point it doesn't matter what you believe in, as long as you believe in something, which has been missing from this country for a long time. If you're like me, you believe in Natures God and that this is an inevitable cycle that we're going through. The Earth can only handle so many people before the people start to get crowded. With crowding comes excessive wars, famine, death, corruption, and greed. Although many people talk about global warming and our carbon footprint, they forget that Nature has it's own supernatural powers. You can only have so much of something before you have nothing then you're led down the path of self destruction, which is where we as a planet and country are heading.


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