Wake Up America, You’re Sinking

By David Roskoph from Seeking Alpha

America is in decline.  Our standard of living is descending to reconnect with our means and more resemble Western Europe’s.  We’ve been living on a borrowed standard of living ever since we started replacing organic growth with financial engineering, some 40 years ago. 

Although they’re becoming ubiquitous, step back and notice the warning signs of a nation losing its way;

1. unchecked illegal immigration;
2. fiat sponsored growth,
3. an impossibly unfounded social net driven mostly by a failed health care system, and
4. a financial market being reduced to little more than a battleground for hedge fund titans. 

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1. Curiously our FBI can track down one criminal but somehow we, as a nation, couldn’t stop the migration of 12 million illegal immigrants now living within our borders.  Perhaps the government’s tough talking blind eye is due to the fact that we have no other option left to shore up our unfunded mandates.  We need lots of (FICA paying) working-age adults to make that happen.  The hope is that the (eventually-granted-amnesty) immigrants can resuscitate the unfathomable ($65 trillion) deficit of our social net.  The strong-border rhetoric is merely subterfuge; the immigrants are here out of desperation – ours.  Our straits are so dire that we cannot survive economically without them at this point.  Either (means-justifying-ends) preservation of Medicare and Medicaid above our sovereignty sanctioned the exodus or we are too weak to control our borders.  Neither reality is pretty.
2. We have been going from one Federal Reserve-sponsored bubble to an ever larger one because they are providing the only medium to (simulate) growth, fiat.  The housing bubble, mother of all cheap-credit fixes, was a giant flashing billboard. It read – we are out of reserves and worse, out of organic growth so we’ve created a Ponzi scheme to maintain the façade for one more round.  That was a signpost at the end of the financial engineering road.  There is no bubble to eclipse or patch the deflating housing debacle without risking hyperinflation, thus the process of deflation begins.  Surprised?  Don’t be.  We’ve been faking it while convincing the world we’re making it to keep our credit cheap and available.  Every time growth ratcheted down, more debt was added to systematically mask the transaction.  The 40-year-old Great Society birth projections, based on the Baby Boom, were as specious as the recent earnings histories of no-doc loans; both were doomed before the ink was dry.  The music has stopped and credit destruction has begun.  US dollars will continue to gain value as they become scarcer.
3. The decades old delusion that debt equals growth has convinced us that we could afford our lofty standard of living.  Central to that standard is our health care system which, through Medicare and Medicaid, has driven our unfunded mandates into impossible deficits. We are pretending that although our health care is expensive, 1) it’s the best, 2) we deserve it and, 3) we can afford it.  The bitter irony is that, although we spend far more on health care, (double that of Europe) we are far from investing wisely.  Europe is far more right than we in distributing health care and the strength of the Euro reflects their diverging fiscal discipline.  There are only so many resources to supply a potentially unlimited demand.  Continuing to “hope” we can grow our way into our present level of health care is an insult to anyone with an IQ over 50.  The next check we receive may be the reality check of socialized medicine, one of several waiting to be issued.  The World Health Organization [WHO] ranks the U.S. health care system 37th of 190 countries, well below most of Europe, and trailing Chile and Costa Rica. The United States does even worse in the WHO rankings of performance on level of health -- a stunning 72nd. Life expectancy in the U.S. is shorter than in 27 other countries; the U.S. ties with Hungary, Malta, Poland, and Slovakia for infant mortality — ahead of only Latvia among industrialized nations. Europe has is far more right than we in distributing health care and their currency reflects their fiscal discipline. 
4. Does anyone believe a confused public is responsible for the frenetic, daily triple-digit moves driving the Dow?  Our markets are reverting to their pre-SEC status of “rich man’s playground”.  The cartels of then are being replaced by massive hedge funds who, with impunity, create enough chaos to suck in the public and winnow weaker hands at the same time.  There are no adults in the playground.  We have an SEC, desperate to look relevant, enforcing an existing naked short sale rule applicable only to institutions.  A clear sign of capitalism’s limits are when one institution must be stopped from destroying another merely because it’s profitable.  Without sufficient regulation, we will have a market ruled by feudal hedge fund lords who will become the casino and thus everyone else its customers. A history of human nature shows that no great nation thinks itself capable of decay, especially during the heady days of its zenith.  Are we blithely rationalizing the warning signs of our descent, too confused by violent markets, too bamboozled by official propaganda to think for ourselves? 

Wake up America, this is a modern depression born of hitting the limits of laissez faire capitalism (again).  The systemic deflation (5.5 – 6 trillion) is too vast to offset by fiat without felling this republic.  Like Japan of 1990, all the government can do is keep you calm.   The first stimulus checks hardly covered the loss of purchasing power from the newly minted debt known as inflation.  They’re a dividend to placate an evaporating middle class on their mandatory investment (of new dollars) made to shore up a system that is widening the chasm twixt the top 1% and everyone else. 

Disclosure – I am a seller of most things dollars buy.