Obama And The Seven--Dwarves No More

The Big Eight are meeting now—amidst talk of the American stock market being overvalued and the possibility that the United States will need a second stimulus package. Even the Vice President admits the administration got it wrong in January—“we didn’t know how bad things were”.
Actually it’s a smaller meeting right now—as the Chinese delegation hurries home to confer about the increasingly nasty ethnic riots in China’s western, Muslim regions. Russia remains very likely to veto any action suggested against Iran’s nuclear development policies.
She’s angry and resentful—feeling that when the Soviet Union collapsed in the 1990s and looked to the West (especially the US) for help, guidance and some semblance of friendship, she got badly used. Russian feels her overtures were met by American missiles in her front yard and an American attempt to take over the oil fields in the newly independent, ex-Soviet Republics.
Watching video of Obama talking to Putin reminded one of a desperate chap pleading for an uninterested girl to give him a date. Whether he’s right or wrong, Putin doesn’t feel that there is or ought to be much friendship between Russia and America. I doubt if we will change his mind by pleading or murmuring sweet nothings.
France hasn’t been a real friend since the 1960s (when De Gaulle threw NATO out of Paris and went ahead and made his own atomic bombs). And the power we once had to force everyone else to paper over the divisions and smile for the camera is gone. The seven dwarves have grown up.
Even as the International Monetary Fund proclaims that the end of the recession is in sight, no one of the other Big Eight Members can be unaware that the world’s largest economy faces problems that will not go away at the end of this recession.
A few figures: right now our national debt $11.4 Trillion. (We didn’t know what a trillion was when I was a kid.) That’s $37,000 indebtedness for every man, woman and child in this nation. (That doesn’t count mortgages, school loans, credit cards, auto loans, etc.) That’s 80% of our Gross Domestic Product (GDP) just in what we’re liable for government debt.
Using that figure is actually cheating. When you factor in unlisted liabilities—what will we really owe on the toxic assets we’ve guaranteed in our banks, for instance—unfunded liabilities—pensions and Social Security payments and so forth—and health care commitments, we come to $45 MORE trillion bucks you and I owe in government debt.
Total that up and you get $56 Trillion dollars (what comes after trillion?) that we owe in national debt. That’s $184,000 per head. (You say you’re pregnant? The kid already owes the price of a house just for being conceived—and the hospital bills haven’t come in yet.)
(Some will argue that this isn’t really a problem. We took on $75 million dollars in Revolutionary War debt right after we swore in George Washington. It took us until 1834 to pay it off—1834 and 1835 being the only two years we were every debt free. But this is worse. We were growing up until recently. We could afford to take on new debt. Now we have mammoth debt, we face competition like we’ve never known and our economy is shrinking.
If you doubt it, walk along the shores of Muskegon Lake and look at the empty land where the foundries that won World War II used to stand. Those guys haven’t gone out and gotten better paying jobs, I assure you.)
Inflation has taken a savage bite out of what we think we still have. I read a figure the other day—if you had $100,000 to live on in 1970, you would have needed $175,000 to maintain the life style in 1997. Not everyone’s wages went up that much in twenty-seven years.
We’re still inflating—at about the same rate, around five percent or so. I recall that when I was a boy in the late 1940s and early 1950s, we used to compare how much our present dollar was worth in terms of a 1939 dollar.
It got down to sixty cents, fifty-five and, finally, dipped below fifty cents. At some point they simply stopped talking about the 1939 dollar—I suspect it was too embarrassing. What would it be worth today—less than a dime? Just a few pennies?
Remember when you could buy a large candy bar for a nickel? Make a phone call for a nickel? Buy a comic book for ten cents? Paperback books were a quarter and the really big, thick ones were 35 cents. A large hamburger was a quarter—a nickel extra for cheese.
In the 1960s, we called McDonalds the “fifteen cent hamburger store”. You could buy a VW for $1700; a Chevy would run you over $2000. In 1976, a friend bought a nicely tricked out Buick for $3,000. In 1980, I contracted for a house for $46,000. Twenty years before it would have been around fifteen.
Yes, that’s inflation. A sixty-nine or seventy-five cent candy bar isn’t really worth that much more than it was when it cost a five cents. No value has been added.
What concerns me is that somebody is going to figure out that inflation—hyper inflation—may be the best way for the government to handle all this debt. Desperation can make the unthinkable seem the most feasible alternative.
Imagine a scenario like that of Germany and Austria in the early 1920s. Ordinary workmen were being paid in basketfuls of billion mark notes. The currency was so debased that this would scarcely buy a week’s worth of groceries. But think how possible it would make paying off a debt that numbered in the trillions.
It is not absolutely impossible that the hugely indebted United States could reach a point like that in the next twenty years or so. Like the old Central Powers we are caught up in wars that cost and cost and never seem to end. Our national debt is spiraling out of sight. Job losses are getting serious—and no one can say for sure what kind of employment will replace the good paying industrial jobs that are disappearing. Whole industries have moved overseas.
This is something no one at the Big Eight wants to think about. Not even for a second. I’m sure they could go on and on about why such a thing could NEVER EVER possibly happen. Saying it does not necessarily make it so. This makes for a big shadow over L’Aquila, Italy.