Don’t Cry for Argentina, Cry for Us

All of this talk about “the fiscal cliff” sounds so sudden, so personal.  Like something that happens to you, and me, as individuals.  We fall off the cliff, like Wiley Coyote, and it hurts for a minute.  Then we are right back chasing the Road Runner.


The dirty little secret is we have screwed things up so badly for the next generation – maybe several generations – that it is beyond the point of repair.

Economics is not a mystery.  There is a ton of historical evidence about what happens when you try to goose the economy and stave off debt by printing fiat money – it’s called inflation.  Argentina wrote the book on how to create rampant inflation.

In the 1980s the inflation rate in Argentina ran in the triple digits.  When it hit 12,000% in 1989, suddenly everybody was broke – even those who worked hard, saved money, and played by the rules.  You have money?  Big deal!  It doesn’t buy anything!  All of the predictable ugly behavior occurred – stores were looted, violent protests  erupted, and politics devolved into a cesspool of corruption.

Argentina_158624432_620x350 In 2001 the IMF bailed out Argentina, preventing bloody revolution.  In exchange, there were strings attached:  you will manage your economy conservatively, and you will hold inflation to sane levels.  Twelve years later, Argentina is on the verge of being tossed out of the IMF, and perhaps the G20 for failing both dictums.  Stores are again being looted.  Argentine president Cristina Fernández de Kirchner is accused of “cooking the books” by reporting much lower inflation rates than actual.  While government reports claim inflation rates of 8% to 10%, life on the street shows a rate closer to 25%, and accelerating.

Sound familiar?

Our Federal Reserve, in cahoots with our administration, is pretending that we have no inflation in the US.  By holding interest rates to near-zero, they “think” they are stimulating the economy and tempering unemployment.  But it’s not working.  Banks, because of the risk of a rapid increase in interest rates down the road, aren’t loaning money to businesses.  Consumers who rely on interest from savings have puckered up.   And investors seeking decent returns gobble up riskier investments, building dangerous bubbles just waiting to pop.

Our government is trying the old “cook the books” strategy too.  While our administration claims success at creating jobs, our rate of labor force participation declines, and “real unemployment” takes a toll on American workers.  Last week 20,000 applicants scrambled after 1,500 available  flight attendant jobs at bankrupt American Airlines, who cut 2,200 higher-cost employees in a contract buyout.  And another 90,000 Americans chose permanent disability over the fight for jobs in December – breaking another record and holding unemployment rates conveniently and artificially low.

We are told that there is no inflation in the US.  But anyone who has been to a grocery store, a gas station, or any other destination not frequented by beltway-insiders knows better.  I freaked when I recently saw plain old hamburger at $6 a pound at a discount supermarket.

In 2001, Pat Buchanan wrote a blistering and revealing article about the debacle in Argentina.

It is a catastrophe for South America’s second economy and nation. Four years deep in recession, with unemployment at 18 percent, tax revenues vanishing and credit rating ruined, Argentina will now resort to the printing press. Fiat money – a “third currency,” the “argentino” – will be introduced in January.

“Printing money to satisfy the popular desire for spending unmatched by taxation is a recipe for chaos,” warns the Financial Times. “The new currency would then swiftly disappear into the hyper-inflationary flames.” Rely upon it. For the Peronists are less concerned with chaos than victory in the March elections.

For this disaster, Argentinians are, themselves, to blame. They have repeatedly elected demagogues and wastrels who misruled and looted their nation.

His scary prediction came true then for Argentina.  We’re next.

Who will write our epitaph?  And will our children and grandchildren forgive us?

Tom Balek – Rockin’ On the Right Side

Rockin' On the Right Side

Have I said to much?
There’s nothing more I can think of to say to you
But all you have to do
Is look at me to know
That every word is true

Don’t Cry For Me, Argentina (Evita) – Madonna

Looking For Benefits?

For some time now, President Obama and his PR department (the mainstream media) have contended that our nation’s biggest problem is inequality.  Not unemployment, not lack of GDP growth, not the national debt and deficit, not the growing number of people on food stamps and other government assistance.  The most important problem, according to them, is the gap between the rich and the poor.

Defining rich and poor is subjective and difficult.  Most often lately, “rich” has been defined as a couple who earns more than $250,000 per year.   Presumably the threshold is lower for singles.

“Poor” is almost never really quantified.   Some of us are old enough to remember the television ads showing skinny Appalachian kids leaning on stick-built porches, wearing rags and sad faces.  I’m not saying those were the good old days, but times have sure changed.  Kids on food stamps today are, as often as not, obese.   Recipients of federal disability payments has increased by 50% in the last ten years.  Since January 2009, the number of individuals on food stamps has skyrocketed from 31.9 million to the current record high 47.1 million. By comparison, in 1969 just 2.8 million Americans received food stamps.

If you are reading this, I’m pretty sure you have never seen the federal government’s “Benefits” website (see graphic above).   The banner headline is:  “Looking For Benefits?”  Apparently plenty of people are – 70% of federal spending in 2010 went to “dependence-creating” programs, compared to 28% in 1962.  Our Secretary of “Labor” (see Hilda Solis’ statement above) now promotes benefits, not labor.

According to the 2012 Index of Dependence on Government:

The great and calamitous fiscal trends of our time—dependence on government by an increasing portion of the American population, and soaring debt that threatens the financial integrity of the economy—worsened yet again in 2010 and 2011. The United States has long reached the point at which it must reverse the direction of both trends or face economic and social collapse.

Programs considered “dependency-creating” are federally paid housing, health care and welfare, retirement, federal payments for higher education, and agricultural subsidies.  One could argue that retirement is not a benefit, because it is supposedly self-funded.  Or that agricultural subsidies are not a benefit – but much of that budget is food stamps, and the rest is mainly farm subsidies to large corporations, both of which cause dependency.  I can think of other spending that creates dependency too, like corporate bailouts and other government investments in chosen industries. In any event, we are looking at the same spending categories from 1962 to 2010 – and they jumped from 28% of the budget to 70%.

We can argue until the subsidized cows come home about what is fair, or whether taking property from one American to give it to another is even constitutional.

But anyone who thinks we can continue our current spending habits, or continue to encourage the use of government benefits – regardless of how much tax is paid by the “rich” –  is dangerously ignorant.

Tom Balek – Rockin’ On the Right Side

I hope you hear inside my voice of sorrow
And that it motivates you to make a better tomorrow
This place is cruel no where could be much colder
If we don’t change the world will soon be over
Living just enough, just enough for the city.

Living For the City – Stevie Wonder