For some time I have said the following of debt based money systems as practiced by the Federal Reserve and the Bank of England:
It has never worked. It cannot work. It will never work. And it was never even intended to work. What is was intended to do is to take all the money from those of us who labor for a living and those who own small businesses and farms or work in professions. And give every last dollar, pound and euro from our savings, our pensions and our paychecks and give it to the bankers who gave unto themselves the privilege to print our money.
Substitute the word Austerity for debt based money system in the above and every last word will still ring true. The bankers know the Austerity programs they are advocating for Europe and America will not work and cannot work. What they will do is to transfer all of our remaining wealth to billionaire bankers. We are headed to The Second Great Depression which will be far worse than 1929-1939 and could be called The Greatest Starvation.
A Note: What you are about to read will be disturbing. But read on as you need to understand what is really happening so you can appreciate the solutions I promise to cover in my next essay.
Let me explain why Austerity budgets will never work in such simple terms that even a Presidential candidate will understand.
Let us begin with the definition of Gross National Product or GNP. It measures the total value of goods and services consumed in a nation. America’s GNP is a little over 14 trillion dollars. The total US public bond debt limit has been raised to just over 15 trillion dollars. If you add the government guaranteed bonds of Fannie Mae, Freddie Mac and the like, the total is 20 trillion dollars in round numbers.
First year economic students like some of those American Presidential candidates were taught that the GNP equals the total of Consumption plus Investment plus Government spending or GNP = C + I + G. By the rules of mathematics, if I subtract the same amount from both sides of the equation both sides will still equal each other. Enter the US Congress or your favorite European parliament and their Austerity measures.
The US deficit is always higher than the projected figure. I remember Obama proudly saying that the US deficit was only 1.4 trillion dollars for the previous year. But the total of bonds sold was more than 1.8 trillion dollars. Let’s be generous and assume Obama’s 2011-2012 budget deficit including a few hundred billion in Off Budger items is a mere 1.7 trillion dollars despite declining revenues, an insane stimulus program and looming Bailouts for the bankers. To balance the budget all we have to do is to cut 1.7 trillion dollars from both sides the above equation. Let’s see what happens:
GNP suddenly equals 12.4 trillion dollars. The G of C plus I plus G is cut 1.7 trillion dollars. What have we done? The gross interest on the debt is a little over 500 billion dollars. A quick glance at Wikipedia tells us that the total non-defense discretionary spending was 660 billion dollars. So let’s subtract 660 from 1,700. This means our Austerity fiends only have another one trillion and forty billion to cut. We must pay the interest on the debt so what is left. They can cut Medicare and Medicaid ($793B) by 500 billion and Social Security ($701B) by 500 billion.
Gee. You say that sounds a bit rough. Food Stamps would have to be eliminated for 48 million recipients as part of the 660 billion in discretionary spending. Food Stamps cost 65 billion dollars last year and food prices have gone up at least 39% over the past few years. But our Austerity budget must cut out the whole 65 billion despite the rapid increase in unemployment. If we use the real definition of unemployment Ronald Reagan had when he took office in 1981, the true unemployment rate is 23% for America and over 30% for California.
Let us proceed to the Social Security budget. 500 billion needs to be cut from 701 billion leaving us with a stupendous sum of 201 billion dollars. We can estimate all we need to do is to cut 5 of every 7 dollars from the average recipient’s check. Suppose a woman is receiving a check for $1,050 a month. If we cut her check by 5/7ths, she will now have a munificent sum of $300 a month. There will be no subsidized housing as that was eliminated along with Food Stamps. And utility bills are rising because Obama is a Globalist and wants to cut back on energy usage by raising fees. Of course those fees are funneled into the hands of bankers. She and most of the other 59,000,000 plus other Social Security recipients will have to move out into the streets. They will probably hang out at the library or the local McDonalds to keep warm.
Of course the fly in the ointment is the cancellation of Food Stamps and extended unemployment insurance. That will set off permanent riots from more than 50 million younger people with nothing to eat. But in America state and local police are funded by local taxpayers so the riots will not increase the federal budget outside of Washington D.C.
Now let us proceed to even bigger Austerity cuts. Chinese people have been saying they might as well just load all their exports to America into containers and dump them in the sea. It would save them on fuel and avoid the problem of trying to get rid of those Federal Reserve Notes or Bernanke Bucks. The US has bought 8 trillion dollars from overseas without giving fair value in trade or exchange since 1975.
Our next equation starts with the definition of GDP or Gross Domestic Product. You remember GNP is the total of goods and services consumed. If we subtract Imports M and add Exports X, we get GDP or Gross Domestic Product which tells us how much we are actually producing rather than consuming. That is written as GDP = GNP + X – M.
Enter Dr Michael Hudson, an economist, who is staunchly anti-war and anti-Wall Street. (Aren’t they the same?) Hudson wanted to accuse Obama of the worst thing imaginable so he called him a Republican. He also said Obama’s solution to the unemployment problem (23%) and our trade deficit (373 billion dollars so far in 2011) is to cut wages 30%. This will most likely be done by raising prices of imported goods like oil, clothes, food and consumer goods.
Let us see what happens to the average American worker. The median hourly wage for an American is $16.27. The median is defined as the 51st man in a group of 101 ranked by income. This gives us a better idea of what real people are earning than would the average income. Suppose you included a Goldman Sachs employee whose average pay is $750,000 a year in that group of 101 people. The resulting average income figure would not tell us what challenges the other 100 were facing.
Our average man’s after tax wage discounted for inflation has been declining steadily since 1970. Depending on his age, his parents or certainly his grandparents have been kicked out into the streets from the Social Security cuts. He might have a sister who is divorced, has two children and used to receive Food Stamps. Now they are all at his house asking for help with shelter, utility bills, food and medicine. Remember that medical care to the poor and to the elderly was savagely cut. Now prices are raised sufficiently to cut his gross $16.27 hourly rate down to $11.39 without cutting the total amount of taxes withheld from his check. His paycheck will in the common American parlance really suck. Now that Globalist plan to double his utility bill does not sound so good. And the increase in prices for food, energy and clothing combined with cuts to medical care has even further exacerbated his situation with poor relatives who will quite literally soon be dying of starvation.
And do not forget his sister whose pay was also cut 30% while simultaneously losing maybe $400 a month in Food Stamps. That is why I deliberately chose the words The Great Starvation to better describe The Second Great Depression. Needless to say, any business selling anything including food to Americans will fail. Corner grocery stores will be robbed blind by more than a hundred million hungry Americans. Americans must have at least 300,000,000 guns and way more than 10 billion bullets so the policy of having the police shoot the poor won’t last long.
We have not reached the end of our Austerity cut woes. Enter Steve Keen, the Australian economist, who has something really important to say about debts and Austerity cuts. Keen points out the obvious fact that if you stack debts into one pile and incomes into another pile, cutting wages will only make the burden on the average tax payer-worker relatively bigger so we will never pay off our debts. I might add that in the previous step when Obama’s banker buddies successfully cut your wages by at least 30%, they did that by devaluing the dollar. When they devalued the dollar, they will have to offer US Treasury bondholders substantially higher interest rates. That means the 500 billion dollars a year in gross interest payments of the federal debt will easily go to a trillion and then within 2 years to 2 trillion dollars or more. I do not think you will like the second and more savage round of tax increases and Austerity cuts on top of the above. An additional two trillion dollars in cuts and tax increases will destroy what was left of western civilization.
Congratulations. You are now ready for the final step. You must conclude that these debts were created to reduce us all to slavery. Let that fact sink in. There is no combination of tax increases and Austerity cuts that will solve our problems. Now you are ready accept this:
The Fundamental Fact of Your Existence as a modern man or woman is that the bankers of New York and London want to reduce you to debt slavery.
Accept that fact and move on to the solution.
You should ponder the fact that I have said we could call this Second Great Depression the Great Starvation. I have previously said that the bankers have a solution to the problems of mass starvation, grinding poverty, daily food riots and rebellions by the poor. They plan to release a series of plagues that will kill billions of people. Any rioters seeking vengeance on those bankers in Manhattan, the City of London or elsewhere will flee from the sight of other people as soon as they see tens of thousands of people falling over dead from some new kind of fatal flu.
I might also repeat my warning that they can use DNA to target specific races who cause too many problems or have natural resources like oil, water, gold, silver, food and other commodities they would want to take away from you.
You live in a land ruled by bankers. You must learn to think like a banker to understand what is really happening. Bankers see assets and liabilities where you see your friends, your family and your neighbors.
Do not despair. There are solutions. You need to understand the world as it is before you have sufficient motivation and understanding to change things for the better.
I will write of the solutions in my next essay which I will post in a couple of days.
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