By Richard N. Baldwin T. /HispanicVista.com

From Mexico
February 15, 2010

By Richard N. Baldwin T. /HispanicVista.com

It Isn’t About Your Grandchildren

     We hear, repeatedly, from the conservatives, that the out of control US federal debt is putting an "unsustainable" debt on our children and grandchildren. We are hearing a lot about "unsustainable debt" lately. Much to my dismay, and in my opinion, the tipping point is coming a lot sooner than our grandchildren are. The train wreck may be only months away.

     Mr. Obama keeps telling us that he totally "inherited" this mess from the previous administration. And yes, the previous administration doubled the yearly debit level at the end of that administration. But we are asked to forget that the Obama administration is quadrupling the debit level for not only two years, but into the foreseeable future. So much for Obama economics.

     More to the point is that much of the problem has been a gradual increase in what are called the "entitlements".  These are the untouchables such as Medicare, Medicaid and Social Security. Note that Medicare increased exponentially under G. W. Bush with the new prescription drugs addition. Its impact was badly underestimated in the first place. Normal for political prognostications. These "entitlements" represent more than 40% of the federal budget now.

     But probably Social Security is the worse problem. Let's start out about the fiction of the "lock box" account to save contributions for later payouts. That lock box was picked clean and replaced by government IOUs to the tune of 13 billion dollars long ago. And the government has no means to replace the spent (stolen) money.

Previous administrations and congresses have not been able to come up with a fix on this situation. Also consider that in the beginning, there were 12 active workers contributing to the fund for every retiree. Now that number is only slightly larger than two workers supporting each retiree. And it is going to get worse rapidly when the "baby boomers" start retiring. This is right around the next curve in the tracks.

     Add to this mess is the 4,000 page Obamacare package that the president is still locked into. Obama refuses to even consider starting over from scratch, but simply demands "compromises" to further obfuscate this monstrosity. And, I should point out that the true impact of Obamacare is not in the projections of the increasing federal debt because is not law yet.

     Cap and Tax is also not on the projections either. It is getting even worse, if that is possible. We have all heard about the "climategate" scandal that was exposed in hacked E-mails concerning phony temperature gathering in the Russian arctic. Now, even NOAA is in the picture. As was done in the Russian temperature data, NOAA has cut Canadian sources of temperature data from 600 stations to 35 reporting stations with only one station above the Arctic Circle. Canada has 100 active weather stations in the Arctic but NOAA chooses to only count one of them now. In both of these cases, the climate temperature data is eliminating the colder temperature areas from their database to show that there is "global warming". Like I said before, Liars Figure. In fact, the last 10 years are actually showing a decrease of global temperatures. And Cap and Tax is going to be even more expensive than Obamacare. Personally, I think that Cap and Tax is DOA, thank goodness.

     So far, I am only speaking about what is directly happening in the US. And as the world's largest economy, it will greatly affect the global economy. But here is the scary part. This isn't only about the US. The same tax, spend and increase government size agenda is on a global scale. Consider the EU, a major part of the world economy. More and more of the EU governments are going on the same paths. Watch for what happens to the "PIIGS". (That stands for Portugal, Italy, Ireland, Greece and Spain.) Greece is teetering on default of their government debt and is closely followed by the other four. While none of these economies is large enough to have a big global effect, when you look around, you see that the perfect storm is brewing. It all adds up.

     It would appear that the big winner in the near future is China, who has a $2.4 trillion dollar foreign exchange reserve now, and is wondering where to put further investments. China has been slowly backing away from US treasury bonds, but China is in a trap. If and when the US defaults or starts paying off debt with greatly inflated dollars, it will hurt China also. But however it turns out, China is in a better position to weather the coming storm.

     I was told, years ago, that the trigger of the 1929 world crash was a failed savings bank in Austria. It did not cause the crash in itself, but was the trigger that started the avalanche. What I am seeing is another perfect storm brewing just waiting for a trigger to set it off.

     By the way, México is experiencing internal complaints about their debit level. We have reached a debit of 0.7% of GDP for this year. But we now have laws that do not permit a debit level of over 2% in a given year.

     To our American friends, we say, "Eat your hearts out". We learned our lesson in 1995.

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Richard N. Baldwin T., a HispanicVista.com (www.hispanicvista.com) contributing columnist, lives in Tlalnepantla, Edo de México. E-mail at: R1041643422@aol.com