WAR - I mean 500,000+ American troops, the draft, massive war protests
WAR in 12-24 months seems to me pretty much assured. And when I say "war", I mean a much wider war than that which currently exists in South Asia. I mean 500,000+ American troops on the ground, the activation of the Selective Service draft, massive war protests in D.C....the whole 9 yards, so to speak.
The only way---and I believe that our leaders know this---the only way that the U.S. will not ultimately experience a full-on economic and systemic collapse in the near term is to substantially increase its tax revenues. AND, the only way to increase tax revenues by the necessary TRILLION+ dollars (35+%!!) is to be able to actually raise those monies. (Tautological I admit, but I have a point here.)
U.S. GDP in 2008 was roughly $14.2 Trillion. Of that amount, over 70%---or roughly $10.1 Trillion---was based upon consumption (And much of that debt-based consumption). In the current financial crisis, we are experiencing a significant DECREASE in both consumer spending and in business investment. And as these components of GDP continue to crash, the government KNOWS that it has to make up the difference through GE, or government expenditure. What this means is an increase in GE from $2.8 Trillion, or about 20% of GDP, to $8.5 Trillion, or 60% of GDP. The reason for this should be clear: Without these additional expenditures by the government, GDP contracts significantly and the nation experiences the deflationary depression that our leaders---via the Faustian Bargain of QE and monetary policy---have assured us will not happen. But our leaders ALSO must realize that increasing the GE portion of GDP to some $8.5 Trillion means more printing and more borrowing, and eventually (sooner rather than later) the bond market collapses as our creditors tell us to take a hike. So the only solution....TAXES!!
So how does the government increase tax revenues from 2008's $2.5 Trillion to $3.5 Trillion without creating a nullification crisis of 19th century proportions? Wave that flag!!! I believe that the only way that U.S. citizens will willingly pay these absolutely necessary additional, massive taxes---money that citizens will be handing over to a government that has repeatedly bailed out the billionaires and the fraudsters whilst leaving the middle class out to dry---the only way that this will happen is if the government adroitly and masterfully manipulates our sense of national pride and patriotic identity. And they will.
That's the Obama trump card! The Bully Pulpit!!!
Now please understand that I'm not saying that war grows the economy. I'm not saying we are heading for a wider-war because we can create a bomb-building society like we did some 70 years ago. And, unlike Gerald Celente, I am not saying that we are heading for war because it is the so-called logical next step. I am saying that, simply put, increasing TAX revenues in the short term provides the government with a stay of execution from systemic collapse. And that is the best that they can do. I mean look: It's either a 35% contraction and a deflationary depression now (In other words, pulling the plug on the Keynesian bailout insanity and essentially disavowing ourselves of our 38 years of belief and adherence to a regime of irredeemable fiat currency), or it's a hyper-inflationary collapse on a massive scale years down the road because eventually our experiment with QE explodes like the metaphorical dirigible that it is. Unless....
Unless our leaders can figure out a way to convince the public that giving the government an additional TRILLION dollars (minimum!!) in tax revenues is somehow a good idea. And we know that any attempt to simply raise taxes (such as a 20% VAT) wouold be met with cries of nullification and no taxation without representation and it would be a mess. A total mess! And that mess would be here, at home. And our leaders have already shown us that they simply refuse to let things get ugly---really ugly---here at home. In Peshawar or Islamabad or Pyong Yang? That's another story altogether.
We continue to inch closer, everyday, to financial systemic collapse. From tens of trillions in Derivatives & CDS UN-capitalized counterparty risk, to the soon-to-be cataclysmic bubble-mortgage reset explosion, to a job-market (real estate and banking) that will NEVER rebound because those jobs were bubble jobs and they will NEVER come back, to an imminent bond market dislocation, to the FED's continued insane attempts to get 'lending and credit' flowing again for consumers who are already $2.5 TRILLION in debt, to a pension & retirement fund implosion that will leave 10 million ADDITIONAL baby-boomers broke and unemployed.
In this utterly disastrous economic environment---an environment in which our creditors, and all of those nations that hold the U.S. dollar in reserve, are getting ready to pull the proverbial plug because our IOU's are increasing not worth the paper upon which they're written, and in an environment in which productive capital continues to be destroyed, and in an environment in which our government can't even service the interest on our 14 TRILLION dollar debt without printing more monopoly money or without borrowing more money from other countries---in this environment, how does the government stave off systemic collapse?
And finally, add this quintessential question to the mix: How does the United States of America deal with the FACT that there exists an ever-encroaching and ever-growing element around the globe that is decidedly (a) anti-American, that is (b) capable of securing nuclear weapons (if they haven't already done so) and that (c) is bent upon "relieving" the USA of its station as the primary international geopolitical and economic hegemon?
And so now you tell me...
How does the government delay the arrival of all-out systemic collapse, "grow" GDP by 3.5% in 2009 (Obama's promise, not mine), find something useful to do with the growing numbers of terminally unemployed, keep the Taliban from getting a hold of nukes, keep the "red" states from jumping ship when taxes are increased by some 35% (which they MUST, lest our creditors all jump ship on U.S. debt), and continue to tout claims of green shoots and incipient recovery?