So what do the stories below tell us? Americans have benefited from massive government interference in the market place over a long period of time. We have come to expect government to provide a myriad of services while at the same time we have avoided paying for them. We've let money that was supposed to be set aside for social security and other government programs be replaced with I.O.U.'s so the government could offer us more programs while hiding the true cost, thus allowing politicians to buy votes with our money.
Because of this we have reached a tipping point. The Fed is all but admitting that we cannot fund our obligations and to do so will require massive new taxes or huge cuts in entitlement programs such as Social Security. Where will the taxes come from? The tax code has shifted most taxes to the wealthiest already yet they are being expected to pay more. The middle class is just about tapped out and most of the working class doesn't pay taxes and couldn't afford them anyway. Well, they don't pay federal income tax but they are caught up in the rising taxes in every other sector, siphoning off money that would otherwise go into savings or purchases which would drive growth in the economy. Now, it just gets sucked into the black hole of government waste.
Now as city and state governments begin to either go bankrupt or contract at an incredible rate services that we've already "paid" for through taxation will begin to disappear or carry a use cost. Not only will we pay for fire and police protection through our property tax but now we'll be billed if we use the service. More and more of our meager income, if we're fortunate enough to have a job, and which has fallen in real terms since the early 1970's, will be taken by government to try to maintain programs. Special interest will fight to keep these programs in place because they have become dependent on them, like crack addicts, and most politicians won't have the courage to stand up against them.
This isn't just an American problem. Greece is poised to collapse; the first of many European Union states to do so but not the last, and they will they take the E.U. with them. They are much farther down the socialist road than we are and will go first. This is going to make America the last safe haven so money will flow our way, temporarily propping us up. This, along with the trillions of dollars printed out of nothing and injected into our economy is causing the markets to rise even though consumer activity is way down and the real unemployment rate is over 20%. This false economic growth will probably get a lot of people to start to reinvest in the markets with the money they've held out because they are going to be afraid if they don't they'll miss out. This will cause further rises in the markets fueling additional investment. Because this growth is based on pure speculation, government debt and fear it will, at some point, collapse. A house built on a foundation of sand will not stand.
So what do these stories tell us. They tell us that contrary to all of the happy talk from the governments and the investor class nearly every government in the Western World, whether city, county, state or national that has traveled down the socialist path is going under. They have all reached the end of their ability to fund this Utopian dream. Most Western governments are now faced with a singular reality; contract or die. Since most won't be able to contract without massive social unrest because they have conditioned their citizens to welfare, they are going to die a violent death. And, because of the interconnectedness of the world, they will take it all down with them.
Or, maybe I'm just reading too much into it.
"A senior U.S. Federal Reserve official said on Wednesday that interest rates kept too low for too long encourage risky financial behavior and recommended raising borrowing costs to prevent another boom and bust.
"I am confident that holding rates down at artificially low levels over extended periods encourages bubbles, because it encourages debt over equity and consumption over savings," Kansas City Federal Reserve Bank President Thomas Hoenig told a group of business people.
"While we may not know where the bubble will emerge, these conditions left unchanged will invite a credit boom and, inevitably, a bust," he said."
CNBC
"Federal Reserve Chairman Ben S. Bernanke warned Wednesday that Americans may have to accept higher taxes or changes in cherished entitlements such as Medicare and Social Security if the nation is to avoid staggering budget deficits that threaten to choke off economic growth.
"These choices are difficult, and it always seems easier to put them off -- until the day they cannot be put off anymore," Bernanke said in a speech. "But unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth."
Washington Post
Mayor Antonio Villaraigosa backed down from his hardline stance over the budget crisis Wednesday, admitting he cannot shut down city services without the City Council's approval and requesting $20 million from the power utility to keep the city solvent.
The mayor's plan to shut down services that don't make money, such as parks and libraries, for two days a week starting Monday is a "plan of last resort," said his deputy chief of staff, Matt Szabo."
Yahoo
"If you get into a car accident and 911 is called, you may get billed for the emergency response. Cash-strapped communities are sending out bills to cover the costs of fire trucks responding to crashes. As CBS 2 Investigator Dave Savini reports, often times it does not matter whether you caused the accident or are the victim."
CBS 2
"About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.
...The vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local taxes on sales, income and property."
Yahoo Finance
"World markets slid Thursday amid mounting worries about a potential Greek debt default as the country's borrowing costs continue to go through the roof.
...Wall Street was also poised to open lower after sizable falls Wednesday in the wake of disappointing data showing that consumer credit in the U.S. fell by $11.5 billion in February and a suggestion from Thomas Hoenig, a rate-setter at the U.S. Federal Reserve, that borrowing costs should start rising soon - Dow futures were down 43 points, or 0.4 percent, at 10,806 while the broader Standard & Poor's 500 futures fell 5.5 points, or 0.5 percent, at 1,173.50."
AP
"Financial markets turned on Greece again on Thursday, driving up its borrowing costs to record levels on rising doubt that the EU will provide a debt rescue, and the euro plunged further.
The yield on Greece's 10-year sovereign bond soared to 7.423 percent Thursday, the highest since the country adopted the euro in 2001, amid mounting fears it might be unable to repay huge debts falling due soon."
Yahoo
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