Posts tagged spending

Pentagon ‘big winner’ in $1T omnibus bill (Defense contractors too, Taxpayers lose)

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Source: http://www.againstcronycapitalism.org

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Pentagon ‘big winner’ in $1T omnibus bill (Defense contractors too, Taxpayers lose)

 

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Everyone is dancing around up in DC today. The defense contractors, the Pentagon, the members of Congress with boondoggle weapon system projects in their districts. (Which is to say nearly every member of Congress.) Happy days are hear again! Down with the sequester say the Republicans.

Small government? Are you kidding? Look at us. We LOVE to spend the taxpayer’s money. Just as much as the Democrats. We just forced the taxpayers to buy a whole bunch of Abrams tanks. (Which happen to be made in Speaker Boehner’s district.) Abrams tanks! Can you believe it? We have no idea where we will use these tanks mind you. They make no sense at all frankly. But hey, here comes the pork America.

And guess what? This is the best part. You know who’s going to pay for these tanks engineered to fight on the plains of Poland? You’re kids! They are the ones who will pay for it! This is a sweet deal America. – I mean not for the kids, but what do they know?

Money for the military is how the GOP plays the same games it accuses the Democrats of playing. The military is the vehicle by which your tax dollars are disseminated to favored groups of people. It’s how the GOP gives out goodies (payed for by you.)

The tired argument is that defense is at least an enumerated power in the Constitution, in contrast with say, food stamps. But it is DEFENSE which is enumerated, not a world wide global police and expeditionary force.

We have no business with a military as large as we have now. And I say this as the son of a military officer and one who has great respect for the military. How are we ever going to get our house in order if the supposedly small government inclined in Congress keep appropriating our tax dollars for a military which is far too large already?

The truth is anyone who says that they favor small government but cheers increased spending on the military (at this point for sure) should ask themselves if they are actually for small government at all. The Pentagon is big big big government.

The lobbyists are dancing a jig in Gucci Gulch today. Is that what you want?

(From The Hill)
 
“The big winner is the Defense Department. They should be breaking out champagne in the Pentagon,” said Gordon Adams, a defense budget expert and former Clinton official.
 
The omnibus spending bill provides about $497 billion for the Defense Department in 2014 — about the same as in 2013. But the Pentagon also received $85.2 billion in overseas contingency operations (OCO) for the war in Afghanistan, roughly $5 billion more than it requested for 2014.
 
Before last month’s budget deal that relieved $22.4 billion in sequestration cuts, the 2014 defense budget would have been around $475 billion.
 
The OCO funding, which Adams said is the “cherry on top of the dessert,”

Click here for the article.

Image credit: http://www.againstcronycapitalism.org


Nick Sorrentino
About Nick Sorrentino

Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.

 

While economic freedom declines in the US, it rises across the globe

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Source: http://www.againstcronycapitalism.org

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While economic freedom declines in the US, it rises across the globe

 

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The wealth of nations has increased by astronomical amounts over the last 2 decades. Literally billions of people have been brought out of poverty thanks to economic freedom. It is as if once the Soviet Union died, once the scourge of international socialism was utterly and completely decimated both economically and intellectually, humanity couldn’t help but lurch forward.

 

The Berlin Wall “death strip.”

The Berlin Wall “death strip.”

 

Actually that is what happened.

Sadly we have gone in the opposite direction over the last 2 decades. Instead of freeing our economy we have wrapped it ever more in welfare state red tape. We have regulations on top of regulations on top of regulations. We make it harder for businesses to start. We make it harder for businesses to hire. We promise completely unrealistic pensions to government workers which are paid for by workers and businesses and crush the finances of our great cities. We nationalize car companies. We bail out banks which should be dead. Our government picks winners and losers of all kinds in the economy (and is almost always wrong – at great cost). In short, the United States which for so long was a beacon of liberty and economic freedom has dimmed dramatically. A system of crony capitalism has taken hold. The state (often the corporate state) is ubiquitous.

We must again embrace liberty and economic freedom. This is the way to an American Renaissance. We can again lead the world. We can again be a source of hope to the world.

You know, REAL hope.

(From The Wall Street Journal)
 
It’s not hard to see why the U.S. is losing ground. Even marginal tax rates exceeding 43% cannot finance runaway government spending, which has caused the national debt to skyrocket. The Obama administration continues to shackle entire sectors of the economy with regulation, including health care, finance and energy. The intervention impedes both personal freedom and national prosperity.
 
But as the U.S. economy languishes, many countries are leaping ahead, thanks to policies that enhance economic freedom—the same ones that made the U.S. economy the most powerful in the world. Governments in 114 countries have taken steps in the past year to increase the economic freedom of their citizens. Forty-three countries, from every part of the world, have now reached their highest economic freedom ranking in the index’s history.

Click here for the article.

Image credit: http://www.againstcronycapitalism.org


Nick Sorrentino
About Nick Sorrentino

Nick Sorrentino is the co-founder and editor of AgainstCronyCapitalism.org. A political and communications consultant with clients across the political spectrum, he lives just outside of Washington DC where he can keep an eye on Leviathan.

 

Ron Paul Rewind: Defense Spending vs. Empire Spending

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Source: http://ronpaulinstitute.org

By Chris Rossini

Ron Paul Rewind: Defense Spending vs. Empire Spending

 

Last year, debate “moderators” from Fox News had a hard time understanding the difference between legitimate spending on defending the U.S. versus the wasteful spending on the military empire. Dr. Paul explained it with passion and in true smackdown form, leaving the warmongers on stage, and in the audience, speechless.

Enjoy!

 

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Video capture from the Fox presidential debate added to original post.

Propaganda Trance: 2014 NDAA Approved While Media ‘Ducks Out’

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Source: http://www.occupycorporatism.com

By Susanne Posel
Occupy Corporatism

Propaganda Trance: 2014 NDAA Approved While Media ‘Ducks Out’

 

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As if history were repeating itself, the approval of the 2014 Fiscal National Defense Authorization Act (NDAA) on Capitol Hill was over-shadowed by a trivial controversy that was hyped by media.

Two years ago, President Obama signed the first NDAA during New Year’s Eve after publically protesting the legislation and threatening to veto.

Just this week, while the public has been distracted with drama and sensational news headlines, the lawmakers presented Obama with the current approved version of police state legislation that hand over $607 billion to the Pentagon, $527 to build bases across the globe and $80 billion to finance global military operations.

Senate Minority Leader Mitch McConnell said the 2014 NDAA “is legislation that … puts muscle behind America’s most important strategic objectives around the globe.”

Senator Jay Rockefeller ensured that attached as a rider to the 2014 NDAA, proposal S 1353, there would be CISPA-like measures to maintain cybersecurity efforts with the backing and support of the federal government.

Rockefeller said his bill “creates an environment that will cultivate the public-private partnerships essential to strengthening our nation’s cybersecurity. I’ve always thought this was a great way to emphasize the critical need for a public-private approach when it comes to solving our most pressing cybersecurity issues.”

Back in April, the Cyber Information Sharing and Protection Act (CISPA) has been stalled in the Senate after being approved in the House of Representatives.

According to senators and staff members, there are additional bills being drafted that will protect cybersecurity while allowing digital information to be shared by federal agencies and private sector corporations; including internet service providers.

Should a “threat” present itself, the current incarnation of CISPA will allow corporations such as Facebook, Twitter, Google and Microsoft to hand over personal user information.

According to an anonymous member of the US Senate Committee on Commerce: “We’re not taking [CISPA] up. Staff and senators are divvying up the issues and the key provisions everyone agrees would need to be handled if we’re going to strengthen cybersecurity. They’ll be drafting separate bills.”

Ensuring that CISPA is implemented, regardless of whether it is passed into law, Deputy Defense Secretary William J. Lynn III spoke at the Center for Strategic Decision Research’s 28th International Workshop on Global Security wherein he outlined the Defense Industrial Base Cyber Pilot (DIBCP).

The DIBCP aligns the Department of Defense (DoD), the Department of Homeland Security (DHS) and “participating defense companies or internet providers” to make sure that the US government’s digital infrastructure is protected and each federal agency can communicate with private sector corporations.

Lynn said: “Our defense industrial base is critical to our military effectiveness. Their networks hold valuable information about our weapons systems and their capabilities. The theft of design data and engineering information from within these networks greatly undermines the technological edge we hold over potential adversaries.”

In April, the House of Representatives approved the Cyber Intelligence Sharing and Protection Act (CISPA) which gives the Obama administration the power to impose taxes online.

Online businesses would collect a local and state sales tax for online purchases and the tax will be decided by the state where the purchaser resides.

Just before the new version of CISPA was presented to the House, it included a provision that would empower employers to demand Facebook passwords and logins as a condition of employment to spy on their employees.

House Representative Mike Rogers, co-author of CISPA, claims that the bill does not infringe on American’s 4th Amendment rights with regard to setting up concentrated government surveillance on the internet.

Rogers said: “It does something very simple: it allows the government to share zeroes and ones with the private sector . . . a critical bipartisan first step for enabling American’s private sector to defend itself . . . improves cybersecurity without compromising our civil liberties.”

Image credit: http://www.occupycorporatism.com


About the author:

Susanne Posel Chief Editor, Investigative Journalist OccupyCorporatism.com Radio Host: The Region 10 Report, Live Thursdays 1-3PM PST on American Freedom Radio.

 

After the Taper: The Fed’s Non-Plan Is Unchanged

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Source: https://mises.org

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After the Taper: The Fed’s Non-Plan Is Unchanged

 

6621As an economist, it is getting more difficult to understand the logic underlying current monetary policy in the U.S. There are two main channels by which economists think monetary policy can influence growth and employment. The first is to lower interest rates to spur investment and consumption spending. The second is to induce inflation so real wages drop, spurring output and employment.

Since 2008, the central bank has reduced interest rates to almost zero with little to show for it. You can bring a horse to water in a trough, pond, or lake, but you cannot make him drink. Most of the added liquidity has found its way into excess reserves. Banks are not lending because they have few creditworthy customers who want to borrow. The household sector is still deleveraging and has less appetite for more debt, and the business sector is careful about making future investments in a financial and economic environment on unstable footing. Businesses are keenly aware of the malinvestments never cleaned up after the last bubble and of the price distortions of current monetary policy. Why would businesses stick their necks out if they suspect a painful adjustment is around the corner?

Since the first channel has failed, only the second channel remains. Economists are generally in agreement, however, that there is no long-run trade-off between inflation and unemployment. The Keynesians and monetarists believe that there may be a short-run trade-off. If people have adaptive expectations, (based on the recent past) then monetary policy that creates inflation will reduce unemployment by lowering a worker’s real wages. Of course, once a worker realizes he has been fooled, he will demand an increase in nominal wages to bring his real wages back up to previous levels. The gain in employment is only temporary. If, instead, people base their expectations rationally and are not fooled, the neo-classical position, there is no short- or long-run trade-offs between inflation and unemployment.

In a capitalist economy, relative prices play a crucial role in sending information to producers about what society wants. When one price goes up and another goes down, these are signals that tell producers to make more of the first good and less of the second. It is a complex system of signals with price changes reflecting the urgency of the needs within the reality of the law of scarcity. The most important aspect of a price system is the information it conveys to guide production.

Inflation causes an “information extraction” problem. When all prices are going up by different degrees, it is very difficult for an entrepreneur to distinguish between a relative and an absolute price change. Is a rising price a reflection of greater demand or inflationary pressure? That is, does it reflect a society’s changing needs or simply reflects a changed measuring stick (i.e., the value of money)? The same information extraction problem holds true with the prices of resources and labor. We have different labor markets with a wage gradient established along the production process. The printing of money interferes with this wage gradient and the information it conveys about the right proportion of capital and consumption goods to produce. Overall employment may initially improve but the gain is not worth the cost from the adjustment that must occur once the printing stops.

Looking at historical evidence, inflation leads to higher, not lower, unemployment. This should not be surprising. Inflation is like a wrench thrown into the workings of a capitalist system.

If economists agree that there is no long-term trade-off between inflation and unemployment, and the current Fed strategy to lower interest rates has failed miserably to boost growth, then we must ask, why is the Fed, even after this week’s taper, in effect printing $75 billion a month? It’s likely the goal is to induce inflation for a short-term gain in employment. Things are no better if the Fed’s strategy is to raise asset prices to induce an imaginary wealth effect. Yet multiple bubbles may pop before any wealth effect takes place. The Fed should not be playing the economy as a stake in a poker game.

Through multiple bubbles, Alan Greenspan’s monetary policy was responsible for massive human suffering worldwide. Yet Greenspan is living high on the hog with a comfy government pension, spending his spare time penning op-ed articles and dispensing his expert advice on the lecture circuit. He informs us that he was only human and that no one saw the bubble coming. This is less than ingenuous. If you play with fire, and you burn down the forest, it is criminal to say “I did not realize that playing with matches was dangerous.” The sad situation is that we recently replaced him with even bigger arsonists!

One can be certain that interest rates will shoot up once inflation picks up. Since most of the U.S. debt is short term, it is going to be very difficult to inflate prices to reduce the real value of the debt. How will the U.S. government react if it has to refinance at interest rates of 12 percent or more, like in 1981? Yellen is no Volker; will she be able to tame the inflation beast as Volcker did? The independent German central bank was powerless to stop the German government from using the printing presses during 1921-23.

Napoleon and Hitler, both responsible for millions of deaths, rode to power on a wave of discontent that followed periods of excessive monetary printing. Why are we taking such risks?

 


About the Author

Frank Hollenbeck

Frank Hollenbeck teaches finance and economics at the International University of Geneva. He has previously held positions as a Senior Economist at the State Department, Chief Economist at Caterpillar Overseas, and as an Associate Director of a Swiss private bank. 

 

Image credit: https://mises.org

 

The Fed’s The Big Story, Not The Budget Deal

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Source: http://www.againstcronycapitalism.org

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The Fed’s The Big Story, Not The Budget Deal

 

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The real action is coming soon in the Senate when it votes to confirm the new Fed chairman.

 

The Budget deal is disappointing, but small beer. It’s just the same, oft-told tale: we’ll cut spending in the future if you’ll let us spend more now, along with some sneak provisions making it even harder to control spending in the future.

At least legislators have to vote on it. This has helped reveal which Congressional representatives and senators are part of today’s political corruption and which are trying to reform the system. This is useful information to have.

Nevertheless, the real vote to watch is the one coming as early as this week in the Senate: the likely confirmation of Janet Yellen as chairman of the Federal Reserve.

Senators voting for her, especially Republicans, are telling us that they are part of the problem, not the solution. The Fed is the real enabler of all the government’s deficit spending. It could not happen if the Fed refused to underwrite it. And Janet Yellen is the biggest enabler of all, even bigger than the present chairman Ben Bernanke.

Here are all the ways that the Fed supports out-of-control federal spending:

- It keeps interest rates repressed, which allows the government to borrow at virtually no cost. For most of the time since the Crash of 2008, the government has been able to borrow at a rate below the reported rate of inflation, which is itself repressed. This means the government has virtually free money at its disposal.

- You would think that free money would be enough. But the Fed has done more. It has itself bought government debt with newly created money. It has not even been deterred by a law forbidding this.

Here is how it works. The government sells a bond to Wall Street. The Fed then buys the bond back using its newly created money. With this behind the scenes maneuver, the government is not directly buying bonds from itself and is thus not directly breaking the law.

As a result of this neat trick, the Fed now owns more US government debt than either China or Japan. Indeed the amount of US debt owned by the Fed today is greater than the entire debt of the US government at the close of the Clinton administration.

This is such a neat trick, it raises a question. Since the government can just create enough new money to pay for any amount of spending, why bother to borrow at all? Why bother even to tax?

The answer is that an end to borrowing or taxing would make it too obvious what is happening. The government likes to borrow from itself in secret.

- Keeping interest rates artificially repressed and letting the government borrow from itself are enough to enable an unlimited amount of government spending. But the Fed obliges in a third way.

All the new money it creates helps to pump up economic and market bubbles. Those bubbles at least temporarily swell tax revenues.

Have you ever wondered how the Clinton administration managed to balance the federal budget as its second term ended? It was because the dot-com bubble blown up by the Fed was providing billions of dollars of unexpected and unsustainable tax revenue from businesses, individuals, and especially individuals selling stocks and reporting large taxable gains.

Is this too hard on the Fed? Didn’t the Fed’s interest rate repression and flood of newly created money just save us from plunging into a Great Depression during the dark days of 2008-9? The simple answer: no.

The Fed brought us the Crash of 2008 in the first place. It did so by repressing interest rates and flooding us with new money after the dot-com crash, which just brought us the housing bubble.

It accelerated the ensuing crash by supporting and refusing to reconsider a new bank accounting rule that made financial institutions insolvent overnight. This rule, misleadingly labeled “mark-to-market,” actually imposed “mark-to-make believe,” as Steve Forbes dryly noted at the time. The Crash of 2008 ended in March 2009, when the new rule was suspended.

The Fed’s response to the crisis was to double up on policies that got us in trouble in the first place. This is like trying to cure a hangover with more alcohol, and it has not worked any better.

Even by the Fed’s own standards, it has been a failure. As the Crash unfolded, the Fed thought that repressing interest rates would increase borrowing and spending and thus stoke economic “demand.” But depriving savers of interest income actually reduced “demand” more than the additional borrowing and spending.

There is no evidence that the Fed’s radical policies have improved the economy, and much evidence that they have held it back by, among other things, creating so much uncertainty for business owners.

What the Fed’s policies have actually produced so far are new asset class bubbles in bonds and increasingly in stocks. When those bubbles burst, all of us will have to suffer, as we did in 2008, but especially the middle class and the poor. They are the ultimate victims of the Fed’s latest failed attempt at central economic planning.

Image credit: http://www.againstcronycapitalism.org


Hunter Lewis
About Hunter Lewis

Hunter Lewis is co-founder of AgainstCronyCapitalism.org. He is the former CEO of Cambridge Associates and the author of 6 books. His most recent book is Where Keynes Went Wrong. He has served on boards and committees of fifteen not-for-profit organizations, including environmental, teaching, research, and cultural organizations, as well as the World Bank.

 

 

Wow – The Holiday Shopping Season Is Off To A Horrible Start

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Source: http://theeconomiccollapseblog.com

By Michael Snyder

Wow – The Holiday Shopping Season Is Off To A Horrible Start

 

photo1-300x300According to the National Retail Federation, Americans spent an average of 4 percent less over the four day Thanksgiving weekend than they did last year.  Overall, that means that approximately $1.7 billion less was spent at U.S. retailers compared to last year.  It had already been projected that this holiday shopping season would be the worst for retailers since 2009, but if these numbers are any indication it may be even worse than expected.  So why is this happening?  Well, basically the American consumer is tapped out.  The unemployment crisis in this country is actually getting worse, poverty is absolutely exploding and the middle class is being systematically eviscerated.  In other words, you can’t get blood out of a stone.  Many retailers are offering extreme discounts in a desperate attempt to lure more shoppers, but the money simply isn’t there.

According to Yahoo News, the decline in shopping over the four day Thanksgiving weekend was the first decline that we have seen since the last recession…

Shoppers, on average, were expected to spend $407.02 during the four days, down 3.9 percent from last year. That would be the first decline since the 2009 holiday shopping season when the economy was just coming out of the recession.

 
 
The survey underscores the challenges stores have faced since the recession began in late 2007. Retailers had to offer deeper discounts to get people to shop during the downturn, but Americans still expect those “70 percent off” signs now during the recovery.

And according to the New York Times, Americans spent a total of 1.7 billion dollars less than they did last year…

Over the course of the weekend, consumers spent about $1.7 billion less on holiday shopping than they did the year before, according to the National Retail Federation, a retail trade organization.

 
 
 

“There are some economic challenges that many Americans still face,” said Matthew Shay, the chief executive of the retail federation. “So in general terms, many are intending to be a little bit more conservative with their budgets.”

But this downturn for retailers did not just begin this past weekend.  There have been signs of trouble for quite a while now.

For example, posted below is a photo that one of my readers sent to me.  This is a photo of the Beverly Center Mall in Beverly Hills, California that was taken in the middle of the day on Tuesday, November 19th.  She said that there “wasn’t a soul in that mall and the employees were all standing, staring into space with nothing to do”…

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So where are all of the shoppers?

Why aren’t people out buying stuff?

Sadly, this is just the continuation of a trend that has been developing for more than a decade.  The truth is that Americans are simply not spending money as rapidly as they used to.

Posted below is a chart that shows that the velocity of M2 in the United States is at an all-time low.  In other words, the rate at which money circulates through our economy is frighteningly low and it continues to drop…

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As you can see from the chart above, this decline in the velocity of money has been going on since the late 1990s.  This is a sign of a very unhealthy economy.

Most Americans know that the U.S. economy is very heavily dependent on consumer spending.  But consumers have to make money first in order to spend it.  And right now we have a major employment crisis in this country.

At this point, the labor force participation rate in the United States is at a 35 year low, and an all-time record 102 million working age Americans do not have a job.

Meanwhile, the quality of our jobs continues to decline as well.  According to the U.S. Census Bureau, median household income in the United States has fallen for five years in a row, and right now the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.

So should it really be such a surprise that consumers are totally tapped out?

The money simply is not there.

After accounting for inflation, 40 percent of all U.S. workers are currently making less than what a full-time minimum wage worker made back in 1968.

A recent CNN article profiled one of these workers.  Carman Iverson is a 28-year-old mother of four that makes minimum wage at McDonald’s.  If it was not for government assistance, her and her four children would not be able to survive…

Iverson said she started working in 2012 at $7.25 an hour, and makes $7.35 an hour now after Missouri adjusted the minimum wage. She makes between $400 and $600 a month. Her rent is $650 a month.
 
When asked how she could pay her rent on those wages, she said she had a landlord who works with her. “I’m kind of on my last little leg, because I’ve been late on rent. I’m actually behind three months in rent.
 
“Sometimes I can pay it, sometimes I can’t. I get paid twice a month, and both checks go to rent and the rest of it goes to utilities to the point where I don’t have any money left to buy anything for my kids — to buy them clothes, shoes or anything they need.”
 
She said she manages to feed her four children on $543 worth of food stamps a month.

But instead of fixing things, Barack Obama continues to pursue policies that will kill millions more good jobs.  It is absolutely amazing that there are any Americans that still support this guy.  For a long list of statistics that show how badly the economy has tanked since Obama entered the White House, please see this article.

You know that things are bad when increasing the number of Americans on food stamps by 15 million is regarded as an “economic accomplishment”.  In fact, a message recently posted on the official White House website says that “SNAP is boosting the economy right now” and that high food stamp enrollment is creating lots of jobs…

“SNAP’s effect extends beyond the food on a family’s table–to the grocery stores, truck drivers, warehouses, processing plants and farmers that helped get it there.”

So why don’t we just enroll all Americans in every welfare program?

Wouldn’t that produce an extreme economic boom?

And actually under Obama we are already well on our way.  According to the U.S. Census Bureau, 49.2 percent of all Americans are currently receiving benefits from at least one government program, and the federal government has spent an astounding 3.7 trillion dollars on welfare programs over the past five years.

Yes, there will always be poor people that cannot help themselves that will need our assistance.

But most Americans are capable of working if they could just find jobs.

Unfortunately, our jobs are being killed off and wages are going down.  The middle class is being systematically destroyed and U.S. consumer spending is drying up.

The horrible start to this holiday shopping season is just the beginning.

Things are going to get much worse than this.

This article first appeared here at the Economic Collapse Blog.  Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here


Image credit: http://theeconomiccollapseblog.com

 

How to Survive a Personal Economic Collapse

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Source: http://www.theorganicprepper.ca

By Daisy Luther

How to Survive a Personal Economic Collapse

 

poverty_Daisy Luther

 

With all that is being written about the national economic collapse, people seem to be waiting for some huge event.

However, for many North Americans, the collapse is here. This isn’t relegated to only lower income neighborhoods.  As an article from a Cinncinnati new station stated, “Hunger doesn’t know a zipcode.”

For many people who were formerly financially comfortable, the economic collapse has already happened, in the form of a job loss, hours that have been cut back due to Obamacare requirements for employers, an exorbitant medical bill or other crushing debt, or simply an inflation rate that has outstripped your pay increases.  Despite all of the warnings, many people are still going to be absolutely blindsided.

For many families, personal finances have reached a catastrophic level – they are left to make terrible choices:

  • Which utility can I live without?
  • Should I walk away from my mortgage?
  • Should I eat something so I can work harder or should I skip meals so my kids have food?
  • Should I use the grocery money to take my child to the doctor or should I wait and hope he/she improves without medical intervention?
  • Do I risk the IRS-enforced penalties by forgoing enrollment in Obamacare or should I skip that whole grocery shopping thing so I can pay the monthly premiums and enormous deductibles in order to stay in the government’s good graces?

These are the kind of decisions that people across the nation are grappling with every day.

I’m talking about good people, hardworking men and women who have always been employed and paid their bills. A personal financial crisis does not just strike those stereotypical “welfare queens” with the long manicured nails, Gucci knock-off purse, and a grocery cart full of EBT-funded lobster.

I’m talking about the person next door, who seems to have it all together. I’m talking about that quiet family that sits two rows in front of you at church. I’m talking about that two-income family with two children and a car in the driveway that takes them to work and school 5 days a week. I’m talking about people just like you and me.

What is a personal economic collapse?

A personal economic collapse is a little different than the major crises you see all over Europe right now, where huge segments of the population can’t feed their children or stay employed. It is a crisis that just hits your family due to a given set of circumstances.  (In actuality North Americans are on the brink of the kind of collapse that is occurring in Europe, but because of easy access to credit and a buy-now, pay-later society, many of us still have the appearance of prosperity.)

Here are some signs that you may be in the midst of a personal economic collapse:

  • You can only afford to pay the minimum payment on most of your bills.
  • The same dollar amount you used to spend on groceries doesn’t buy enough food to feed your family for the week.
  • You can’t afford to go to the doctor when you’re sick.
  • You are taking dangerous steps to “stretch” needed medications because you can’t afford the prescriptions.
  • Your utility bills are past due and your power is in danger of being cut off.
  • You skip meals in order to save money or to have enough food for your kids.
  • You’ve lost your job or had your hours cut.
  • You have lost property due to foreclosure or repossession (such as your home or your vehicle).

Surviving the crisis

Times are tough but you can survive this.

1.) First you have to see exactly where you are.

It’s time for a brutally honest assessment of your finances.  If you use your debit card or credit card for most expenditures, you’ll easily be able to see what you’re spending and bringing in.

Print off your bank account statements for the past 2 months.  On a piece of paper, track where your money is going.  List the following

  • Rent/Mortgage
  • Utilities
  • Car payments
  • Vehicle operating expenses (fuel, repairs)
  • Insurances
  • Credit card and other debt payments
  • Telephone/Cell phone
  • Cable/Satellite
  • Internet
  • Extracurricular activities for the kids
  • Extracurricular activities for the adults
  • Dining out
  • Groceries
  • School expenses
  • Clothing
  • Recreational spending
  • Gifts
  • Miscellaneous (anything that doesn’t fall into the above categories gets it’s own category or goes here)

Don’t say to yourself, “Well, I usually don’t spend $400 on clothing so that isn’t realistic.”  If you spent it, then it’s realistic.  You are averaging together two months, which should account for those less common expenses.  Brutal honesty isn’t fun, but it’s vital for this exercise.

So….what do you see when you look at your piece of paper with your average monthly expenditures for the past two months?  Are there any surprises?  Did you actually realize how much you’ve been spending?   Most of us will immediately see places that we can trim the budget.  Those $1-$5 purchases can really add up.  Reining them in may just allow you to take care of an important need that you thought you could not meet.

It can’t continue like this.  The economy will not withstand it.  Step one is to see where you can cut things out right now from the above expenditures.  Can you reduce your grocery bill?  Slash meals out?  Budget more carefully for gift-giving and school clothes?

2.) Rethink necessities.

If your finances are out of control, the best possible reality check is a stark look at what necessities really are.  It is not necessary to life to have an iPhone, a vehicle in both stalls of your two-car garage, or for your children to all have separate bedrooms.  People in Southern and Eastern Europe right now will tell you, as they scramble for food, basic over the counter medications like aspirin, and shelter, that necessities are those things essential to life:

  • Water
  • Food (and the ability to cook it)
  • Medicine and medical supplies
  • Basic hygiene supplies
  • Shelter (including sanitation, lights, heat)
  • Simple tools
  • Seeds
  • Defense Items

Absolutely everything above those basic necessities is a luxury.

So, by this definition, what luxuries do you have?

3.) Reduce your monthly output

Reduce your monthly payments by cutting frivolous expenses. Look at every single monthly payment that comes out of your bank account and slash relentlessly.  Consider cutting the following:

  • Cable
  • Cell phones
  • Home phones
  • Gym memberships
  • Restaurant meals
  • Unnecessary driving
  • Entertainment such as trips to the movies, the skating rink, or the mall

4.) Waste not, want not.

We live in a disposable society.  Food comes in throw-away containers.  People replace things instead of repairing them.  If you throw out more than a couple of bags of garbage each week, that’s a very good sign that you may be wasting resources.

Before throwing anything away, pause and think about how it might be able to be reused.

  • Food: Many times small amounts of leftovers can be recycled into a brand new meal. Meat bones can be used to make broth or stock.  Small amounts of veggies or grains can be frozen and added to a future soup or casserole. Leftovers can be frozen in meal-sized portions to take to work for a brown-bag lunch. (Learn more about repurposing leftovers HERE.)
  • Clothing: Clothing that is torn or damaged can often be repaired with only rudimentary sewing skills. If it has been outgrown or cannot be repaired, often the fabric or yarn can be reused for other purposes, from cleaning rags to fashionable accessories like scarves and headbands, or home items like throw pillows, potholders or rag rugs.  When all else fails, the fabric can be used for cleaning rags or patches to repair other items. Keep jars full of buttons, elastic, and other notions that can easily be removed before you throw  a clothing item away or relegate it to the rag bag.
  • Electronics: Obviously, initially you should attempt to repair (or have repaired) electronic items that are not working. If this is not feasible, are there components of the item that can be reused, either now or in the future? What about hardware such as screws or fasteners?
  • Containers:  Most food comes in a container of some sort.  Before throwing the container away, consider whether or not it might be useful. Glass jars, plastic tubs, and plastic bags can often be reused to store food in your refrigerator or to contain food in brown bag lunches.  Clean aluminum cans can hold all manner of items, from hardware and tools in a workshop to sewing and craft supplies. Use your imagination.

5.) Take control of your food budget.

The price of food is skyrocketing.  Who hasn’t been to the grocery store recently and been shocked at the high price of that cart full of groceries or at the mysterious shrinking food packages that are the same price as yesterday’s larger ones?

  • Stockpile:  Create a stockpile of nutritious, healthy staples at today’s prices to enjoy when the cost goes even higher tomorrow.  (Learn how to create a frugal food stockpile HERE.)
  • Preserve: Learn to preserve food yourself when you come across a windfall.  Pressure canning, waterbath canningfreezing, and dehydrating can allow you to take advantage of great sales or end-of-season scores.
  • Eat less:  This suggestion isn’t for everyone, but many of us could stand to shed a few pounds.  Perhaps now would be a good time to cut back a little and shrink both your waistline and your weekly food bill.  Lots of people eat for the sheer entertainment of it or out of habit.  Next time you’re watching TV, grab some mending or a crossword puzzle instead of a bag of potato chips. Dish out slightly smaller servings at dinnertime to leave enough to stretch the leftovers for a brown bag meal the next day.
  • Drink water:  Skip the beverages and drink water instead. At less than $1 per gallon for purchased water you simply can’t beat the price.  It’s better for you, also, than sugar-y drinks.  If you are lucky enough to have well water or access to spring water, your drinks don’t have to cost you a penny.
  • Focus on nutrition instead of convenience:  Buy the best quality of food you can,  and skip the processed, nutritionless convenience foods.
  • Grow your own.  In the summer, grow the biggest garden you can. In the winter, or if you are an apartment dweller, put some sprouts and greens in a sunny windowsill to add some fresh produce for pennies.

6.) Reduce your dependence on utilities.

Energy rates are skyrocketing. As the prices begin to rise, more and more people will be unable to pay their bills and eventually their power will be shut off.  Check your bill each month and as prices increase, use less power. Try some of these ideas to reduce your reliance and drop your bills.

  • Hand wash your clothing
  • Hang clothes to dry
  • Cook on a woodstove or outdoor grill
  • Can foods to preserve them instead of relying on a large chest freezer
  • Turn the heat down a few degrees and use non-grid methods to keep warm
  • Use rain barrels to collect water
  • Direct the gray water from your washing machines to reservoirs
  • Turn off the lights and open the blinds
  • Use solar lighting whenever possible

How do you intend to weather the storm?

There are bleak days ahead.  Have you planned for this?  What strategies do you intend to use to weather the financial crisis that is coming for all of us?

About the author:

Daisy Luther is a freelance writer and editor.  Her website, The Organic Prepper, offers information on healthy prepping, including premium nutritional choices, general wellness and non-tech solutions. You can follow Daisy on Facebook and Twitter, and you can email her at daisy@theorganicprepper.ca

Image credit: http://www.theorganicprepper.ca

Hello Tennessee – Vote now in the 2013 Lump of Coal Award poll

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Source: http://www.beacontn.org

Vote now in the 2013 Lump of Coal Award poll

 

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Santa’s making his list, and we’re making ours. Over the past year, a number of government and other entities have been very naughty. In response, the Beacon Center is giving you the opportunity to send them a lump of coal for their misdeeds. Below are our staff picks for the four finalists for the not-so-coveted 2013 Lump of Coal Award.

Between now and Monday, December 16th, cast your vote for the finalist who has been the biggest Scrooge to Tennessee taxpayers over the past year. Once voting is complete on the 16th, we will announce the winner and send them a big fat lump of coal for bahumbugging the principles of individual liberty and limited government.

 

FULL STORY

Image credit: http://www.beacontn.org

 

Today’s Wealth Destruction Is Hidden by Government Debt

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Source: https://www.mises.org

By

Today’s Wealth Destruction Is Hidden by Government Debt

 

6593Still unnoticed by a large part of the population is that we have been living through a period of relative impoverishment. Money has been squandered in welfare spending, bailing out banks or even — as in Europe — of fellow governments. But many people still do not feel the pain.

However, malinvestments have destroyed an immense amount of real wealth. Government spending for welfare programs and military ventures has caused increasing public debts and deficits in the Western world. These debts will never be paid back in real terms.

The welfare-warfare state is the biggest malinvestment today. It does not satisfy the preferences of freely interacting individuals and would be liquidated immediately if it were not continuously propped up by taxpayer money collected under the threat of violence.

Another source of malinvestment has been the business cycle triggered by the credit expansion of the semi-public fractional reserve banking system. After the financial crisis of 2008, malinvestments were only partially liquidated. The investors that had financed the malinvestments such as overextended car producers and mortgage lenders were bailed out by governments; be it directly through capital infusions or indirectly through subsidies and public works. The bursting of the housing bubble caused losses for the banking system, but the banking system did not assume these losses in full because it was bailed out by governments worldwide. Consequently, bad debts were shifted from the private to the public sector, but they did not disappear. In time, new bad debts were created through an increase in public welfare spending such as unemployment benefits and a myriad of “stimulus” programs. Government debt exploded.

In other words, the losses resulting from the malinvestments of the past cycle have been shifted to an important degree onto the balance sheets of governments and their central banks. Neither the original investors, nor bank shareholders, nor bank creditors, nor holders of public debt have assumed these losses. Shifting bad debts around cannot recreate the lost wealth, however, and the debt remains.

To illustrate, let us consider Robinson Crusoe and the younger Friday on their island. Robinson works hard for decades and saves for retirement. He invests in bonds issued by Friday. Friday invests in a project. He starts constructing a fishing boat that will produce enough fish to feed both of them when Robinson retires and stops working.

At retirement Robinson wants to start consuming his capital. He wants to sell his bonds and buy goods (the fish) that Friday produces. But the plan will not work if the capital has been squandered in malinvestments. Friday may be unable to pay back the bonds in real terms, because he simply has consumed Robinson’s savings without working or because the investment project financed with Robinson’s savings has failed.

For instance, imagine that the boat is constructed badly and sinks; or that Friday never builds the boat because he prefers partying. The wealth that Robinson thought to own is simply not there. Of course, for some time Robinson may maintain the illusion that he is wealthy. In fact, he still owns the bonds.

Let us imagine that there is a government with its central bank on the island. To “fix” the situation, the island’s government buys and nationalizes Friday’s failed company (and the sunken boat). Or the government could bail Friday out by transferring money to him through the issuance of new government debt that is bought by the central bank. Friday may then pay back Robinson with newly printed money. Alternatively the central banks may also just print paper money to buy the bonds directly from Robinson. The bad assets (represented by the bonds) are shifted onto the balance sheet of the central bank or the government.

As a consequence, Robinson Crusoe may have the illusion that he is still rich because he owns government bonds, paper money, or the bonds issued by a nationalized or subsidized company. In a similar way, people feel rich today because they own savings accounts, government bonds, mutual funds, or a life insurance policy (with the banks, the funds, and the life insurance companies being heavily invested in government bonds). However, the wealth destruction (the sinking of the boat) cannot be undone. At the end of the day, Robinson cannot eat the bonds, paper, or other entitlements he owns. There is simply no real wealth backing them. No one is actually catching fish, so there will simply not be enough fishes to feed both Robinson and Friday.

Something similar is true today. Many people believe they own real wealth that does not exist. Their capital has been squandered by government malinvestments directly and indirectly. Governments have spent resources in welfare programs and have issued promises for public pension schemes; they have bailed out companies by creating artificial markets, through subsidies or capital injections. Government debt has exploded.

Many people believe the paper wealth they own in the form of government bonds, investment funds, insurance policies, bank deposits, and entitlements will provide them with nice sunset years. However, at retirement they will only be able to consume what is produced by the real economy. But the economy’s real production capacity has been severely distorted and reduced by government intervention. The paper wealth is backed to a great extent by hot air. The ongoing transfer of bad debts onto the balance sheets of governments and central banks cannot undo the destruction of wealth. Savers and pensioners will at some point find out that the real value of their wealth is much less than they expected. In which way, exactly, the illusion will be destroyed remains to be seen.


PhilippBagusPhilipp Bagus is an associate professor at Universidad Rey Juan Carlos. He is an associate scholar of the Ludwig von Mises Institute and was awarded the 2011 O.P. Alford III Prize in Libertarian Scholarship. He is the author of The Tragedy of the Euro and coauthor of Deep Freeze: Iceland’s Economic CollapseThe Tragedy of the Euro has so far been translated and published in GermanFrenchSlovakPolishItalianRomanianFinnishSpanishPortugueseBritish EnglishDutchBrazilian PortugueseBulgarian, and Chinese. See his website.

Image credit: https://www.mises.org

 

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