May 10, 2007
by John Galt
As we move into the new era where 90% of the masses believe that the business cycle has been declared null and void, the 4% of the nation that is unemployed are just unemployable, and illegal aliens are a necessary part of the work force, there is a new economic morality which has accepted the worse possible premise:
Debt is a good thing and default is impossible because of our government.
In the last 25 years, we have seen a complete 180 degree turn in our attitude as a people and this turning is so dangerous, so misplaced, that I fear the consequences of our actions will result in a nullification of the very Constitution that so many people claim is their life blood. It used to be an accepted fact that debt, whether national or personal, was a bad item to continue and carry in one's life and that this debt should be paid off in a timely manner to insure that when the bad times hit, a person would not end up living on the streets as a victim of their own selfishness. Unfortunately, not only has the perception faded into history, the moral code which supported that idea has also been subverted not just in the mind of the debtor, but that of the creditor also.
As America faced an economic recession in 1991, after a brief recovery from the 1987 liquidity crunch due to the stock market crash, the greed and avarice of the banksters caught up to the U.S. again with the S&L crisis, which was aided by another bout of political intervention to cover their tracks. My how our world has changed. There was an extreme amount of suffering because of this S&L crisis, yet everyone forgets this little fact and one of the ringleaders in that circus is running for President again. What's next? We release Charles Manson to become director of Health and Human Services? By ignoring our own moral codes, by blessing this kind of misbehavior, and by failing to prosecute all parties involved in the illegal activities of that era we laid the moral basis for the dilemma we are in today.
The United States promotes and sells it's "Full Faith and Credit" as part of the reason our dollar, our bonds and our economy is so strong. But what happens when the people ignore the activities of the leaders and adopt the concepts that not only are the Founding Father's moral code no longer worthy, that's right "Faith" as in our religious origins, but that Credit is a device or tool to be used to grow an economy and lifestyle instead of a short term stop gap until real money is created? You have the crisis we face today.
The New Economic Morality has taught a generation over the last fifteen years, debt is good, debt service is not as important as lifestyle, and the government will always pick up the tab if you fail. Failure is no longer considered a badge of shame but just a part of the cost of doing business. I once owned a few businesses and while one was successful, another was an abject failure and to this day, I still am very embarrassed by that failure and finally have made good on most of the debts that I incurred as a result. I promised everyone that I would eventually pay them all back, and that faith, in me, was renewed as some of the monies loaned were paid back to the friends who gave me the seed money to start the business. Now, in our current mindset, the entire system is predicated on never having to pay your bills. The government grows itself beyond all imaginable reason or capacity to service the debts incurred in the future, so what do they do? Debase the currency to continue the party leaving those that purchased our debt instruments holding garbage paper. This lesson has not escaped the general public nor the bankster community. The banksters make ill-advised if not absurd loans to citizens and non-citizens alike knowing that they own that poor soul for a life time should they default and if the debtor is able to escape the throes of their situation via the bankruptcy route, they know the taxpayers are there for them to milk to protect their interests. What a great racket they have as they can never lose money. If the debtors start to slip up, the government creates more money for them to play with by lowering interest rates or allocating monies by creating new laws, such as those allowing banks to invest in the stock market or create and play with derivative instruments without declaring those activities on their public financial reports. As the individual citizen sees these things, it's no wonder we are living way beyond our means. The thought that "it can't happen to me" or "I'll just let the government bail me out" has become the New Economic Morality.
Too bad this new morality has a severe catch built into it. What happens when the government, banksters and world are no longer able to control the wild animals they have created in the financial world and it starts to destroy this new morality and system they have built?
That question has yet to be answered. But the piercing of the housing bubble, the institutionalized fraud being given a wink and a nod by the regulators, and lack of the concept of "personal responsibility" means that once it fails, as all Ponzi schemes eventually do, the repercussions will be far worse than 1929. It's a shame that our parents and their parents are passing on now. Their moral lessons that many are ignoring were what saved our bacon in World War II.
In this New Economic Morality, the bacon will have to be saved again. Perhaps by adding some melamine from China to the bacon, that taste will not be so bitter.