THE SOCIALIST STATES OF AMERICA?
By Kip Herriage
The US is becoming Europe, and Europe is becoming China, and China is becoming the Russia of old. Socialism is back with a vengeance, and whether we are talking about the US, Canada, Norway, Australia or just about any other country on the planet – government employment has replaced free market capitalism in the workplace. Not so long ago, an excellent article by Stephen Moore in the Wall Street Journal pointed out that more Americans now work for the government than work in manufacturing, farming, fishing, forestry, mining and utilities combined. And no, this is not a good thing – instead, it’s a sign of the Greater Depression.
In the 1930′s FDR used countless new government programs in a failed attempt to end the Great Depression. Of course we now know that it was WWII that actually ended the depression, but my question is, what’s going to happen during the next GD? With more people already working for governments around the globe than ever before, how are governments going to continue to expand to an even larger degree when the real crash happens? The answer? They will not be able to. Massive government cutbacks at both the state and federal level are already on the way due to forced austerity programs, which of course is due to our already bankrupt, entitlement minded welfare system that can no longer continue to sell new debt to the public.
The government’s approach to reporting unemployment numbers only serves to prove the point. “Officially” the unemployment rate in the US has been as “low” as 8.3% recently, but a look behind the numbers tells the real story. In the first quarter of this year, the Labor Force Participation Rate, or the percentage of the US population actually in the workplace as reported by the Bureau of Labor Statistics, has already fallen below last year’s 25 year low of 64%. That means that fewer than 64% of this country’s eligible workers are even attempting to find a job. At the depth of the first Great Depression, unemployment was around 25%, and we’re already well past that point when you factor in all the people that have fallen out of the tracking system because they’ve been unable to find adequate full time work or simply gave up looking.
Finally, to get a complete picture of where we really are, we must face the reality that in the US, and in a number of other developed economies around the world, we no longer really produce anything. I go into more detail about this in my book Crashproof Prosperity, but basically, we’ve shifted from creating value to being a consumer culture. Our debt-to-GDP ratio has long since passed the 100% level, we now have more than $15 trillion in actual government debt (with another $100 trillion in obligations), we have lost our AAA credit rating (with many more cuts to come), and each year we run a $1.3 trillion-plus deficit. We will be forced to continue to do so into the foreseeable future, or, more accurately, for as long as the worlds credit markets will allow. The US must roll over a combined $10 trillion in debt (federal, state and local governments, plus bank and pension debts). Where is this money going to come from? You guessed it. More printing and more currency inflation.
If it were not for the FED’s money printing over the last decade-plus (but especially over the last 5 years), our Ponzi scheme of an economic way of life would look MUCH different than it does today. Warren Buffet has been famously quoted for recommending that “we should buy our winter coats in the summer.” In this scenario, with the end result of a completely manipulated system close at hand, buying your winter coats today means preparing for the day when additional money printing by central banks of the world ceases to work. Because guess what? There won’t be millions of new government jobs to save people this time around.