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Monday, February 20, 2012


     Years ago there was a phrase used to describe the nuclear arms race.  It was MAD or Mutually Assured Destruction.  It dealt with the issue of mutual annihilation that would happen if a nuclear war ever started.  Well today with a little history study I have found out that the two party system in American is headed towards and Economic MAD scenario.  All the problems happening in the United States economy right now are the result of incompetent leadership.  Leadership passed laws years ago that have pushed us into this situation.  They failed to follow the "Eight P's Program."  When I was in the Army we had a saying that if you followed the Eight P's everything would turn out right.  What were the Eight P's, simply put Professional and Proper, Prior Planning, Prevents Piss Poor Performance.  The problems in America today are happening because both parties failed to look at the long term consequences of their actions.  The situation we find ourselves in was caused by the efforts of both parties working together. The real sad part is that one of the key players and planners that caused this whole fiasco is presently running for President of the United States.
    When you read or listen to a lot of the political and financial commentary you would think all the problems we have in America have just come into being in the last few days or months.  The reality is much of what is going on today was created and set in place clear back in the mid 90's.  Yes clear back when Bill Clinton was President and fighting a Republican controlled Congress headed by none other than Speaker Newt Gingrich.  They pushed through compromises and made some deals that were not at all well thought out.  They sounded good at the time, sort of like having a spur of the moment affair with some good looking Bimbo.  It sounded good at the time and was probably fun at the time.  However several years down the road when you are dying of Aids, in hindsight it might not seem like the best decision you could have made.  The irony of the situation is that both parties were distracted from what they should have been doing by their weak moral characters.  They were both lacking in principles and made bad decisions.

     The sad part is America is paying for them taking their eye off the ball.  Either they did not really think out the legislation that they worked together to pass. Or they intentionally stuck it to the American people. The Republicans, much like now were narrowly focused on cutting and balancing the budget and defeating an incumbent Democrat President.  They convinced President Clinton that passing a balanced budget was possible but each side wanted some minor concessions.  The Republicans to make a point shut down the Federal government and refused to pass legislation till they got a balanced budget.  They also wanted a couple of other concessions.  The Republicans wanted a concession on the capital gains taxes. They passed the largest capital gains tax cut in history with 389 members of the house voting for the measure. This in essence reduced the national income, but they made no cuts in spending to offset what they did, which has had the effect of raising the debt to unprecedented levels. They also argued that dividend, investment and capital gains should not be taxed.  The Tax Payer Relief Act of 1997 sowed the seeds of the problems we face today.
    The other legislation that sowed seeds to the problems we have today are more easily seen.  They passed legislation to make it easier for low income families to purchase their own homes.  We all know where that went.  It caused the housing bubble.  It was not an accident.  It was regulation that was not at all well thought out.  If you can’t afford a house, you simply can’t afford it.  When the energy crisis hit a few years later as the housing programs gathered steam.  Suddenly people who were living on the edge were forced over the edge.  However it was the perfect storm about to happen.

      The three years of balanced budgets started to hit the economy.  The market was having problems before 9/11 but those events pushed things to the breaking point.  Suddenly we were at war and needed all that money that the Republicans had given away in the form of tax cuts for the rich.   The national debt started to sky rocket and not all because of the wars.  In the short eight years Bush was in office the national debt doubled.

     The wars absorbed our attention and things started to get better but it was short lived.  Shortly after 9/11 gas prices started a slow creep up.  The earlier Enron scandal created a bump in the markets in 1999-2000 along with the technology bubble bursting.  These was aggravated by 9/11 and the two wars going on.  The heads of the Enron scandal had been arrested and sentenced, but that did not fix things.  The traders were still loose and started pushing energy prices up again.  The energy problem really started taking its toll from mid-2006 to mid-2007 as people started having to make choices between which bills to pay.  When it came to eating, keeping the wheels and letting the house go.  The house went.  It was the big money eater. 
     The government programs that had encouraged lending to low income and marginally qualified started taking a toll.  The speculators that had played fast and loose with the mortgage market started bailing.  As the mortgage bubble burst the energy speculators scrambled for safety.  Capital gains were being scraped off the top and socked away.  They started trying to protect themselves.  The market took a major hit as the rats scrambled for safety.  It all came to a head in October2008.  Suddenly everything started shutting down.  Jobs just disappeared as people could no longer invest.  The markets collapsed, so did many people's safety net.  Retirement accounts lost as much as 50% of their value.  I know this to be a fact as my wife happened to retire during this time period.  Businesses scaled back.  We got through all that but just barely.  It is still ongoing almost four years later.

     What most people do not realize is that the second wave is headed our way.  As Congress and the President have not a clue which way to turn.  Gas prices are starting to go up.  They are predicted to hit $4 a gallon by May.  AGAIN.  The millions of unemployed can barely get by now as it is.  However unemployment is running out for many.  Many that had been holding on by their fingertips are going to be forced into the financial abyss.  Foreclosures will start a gradual climb up as the gas prices increase.  Layoffs will start again.  I do not like to forecast gloom and doom but the writing is on the wall.  The only good thing is that most of the rest of the world is in the same boat as the United States.  If they do start getting better financially it could be bad for the U.S.  Should they decide to quit investing in America, as they are getting nothing for their money.  As the saying goes, you ain't seen nothing yet.

    The thing is, it is something that is addressable. However the politicians are too busy fighting each other to see what is coming.  They are in denial.  That is obvious as they are doing nothing to reduce the debt.  It is dragging the whole nation down.  They are so busy pointing fingers at each other they fail to realize there are four pointing back at them.  They created this mess, but none are smart enough to fix it.  I sent a letter to President Obama with a possible and functional solution to at least get the ball headed in the right direction.  I do not expect to hear from him.  However I am going to post it next.  I encourage you to send it to the president, your congressman and your local power plant operator.  Also to your friends and have them send it in.  Or you can sit on your hands and do nothing and say later," How did I get into this situation."

   I am sixty five and I am not that smart, but I have spent most of my life studying history.  As they say history does repeat itself.  My career was spent in logistics in the military and transportation in civilian life.  My goal at my job was to find better ways to do things.  I have enough knowledge of the Great Depression to know that America right now is like a man with one foot off the cliff over an abyss.  The next step will determine what happens and if they make the wrong decision and do nothing.  The cliff is going to give way and it is a long, long hard way to the bottom.

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