Ending Central Economic Planning Will Not Destroy The Country

The current US national debt is around 24.5 trillion dollars, which works out to $200,500 dollars of debt for every income-tax paying citizen in the nation.

If we throw in unfunded liabilities, such as Medicare and Socialist Security, the total rises to $1,381,045 dollars per tax payer.

Even if all US citizens were taxed 100% of their income, it would remain impossible for the US to pay off all of its debt.

The US is currently in the process of defaulting on its debts.  The God King has decided to devalue the US currency by 600 billion dollars.  Sorry citizen, but you don’t get to vote on this decision; your glorious unelected banker leaders have made this decision for you.

It is telling that if you Google “600 billion fed,”  the first site that pops up is a Chinese news agency.  China holds around 800 billion of our debt, as do the Japanese.  They are extremely concerned about being paid back in worthless dollars.

To this end, they, along with Russia, have decided to start trading oil amongst themselves outside of the dollar system.  The dollar is currently backed by oil.  In order to buy oil on the major exchanges, one must first purchase dollars, then use those dollars to purchase oil.  This ensures the US can continue to export its inflation as it forces foreign nations to hold our money.   This neat deal that allows the US to print endless money is coming to an end, and soon the US will be forced to absorb the brunt of its reckless inflationary policies all on its own.

The end of the US empire is no longer an “if” but a matter of “when” – and the “when” is unfolding right now before our very eyes.  If the US makes it another year without entering into a hyper-inflationary episode I will be extremely surprised.  We are already experiencing the early stages of hyper-inflation with commodity prices spiking well over 10% year over year.

The International Accounting Standards Board’s defines hyper-inflation as a cumulative inflation rate over three years approaching 100% (26% per annum compounded for three years in a row).    I think this is an entirely realistic scenario given that the Fed has doubled the monetary base overnight and is currently engaged in an outright devaluation of 600 billion dollars, which is roughly equal to 32% of the total M1 money supply.

Given our current debt levels, we can rest assured that the printing of money will accelerate as ever more debt is created to repay the existing debt.

Since we know that the printing of money leads to total economic chaos, it boggles my mind when people argue that liquidating the debt would result in even greater economic chaos.   As if having a non-functional currency is somehow a better state of affairs to deal with.

The purpose of this post is to highlight that liquidating debt (simply writing the debt down as a loss and discharging it from the books, as is done in a bankruptcy) will NOT result in a higher level of chaos than we will experience during an episode of hyper-inflation.

The nation must make a choice right now as to which road we will follow.  We can allow the Fed and the Congress to continue on its current path of hyper-inflationary destruction or we can put a halt to it by basically dismembering the federal government.

Since we all know what happens when there is hyper-inflation created by kleptocrats, I’m going to focus on what a legitimate default of the US could look like and its possible outcomes.  The following is a rough outline of what a legitimate government default would look like:

First we must recognize that liquidating debt does not destroy any physical resources.  The process I’m going to lay out is exactly like a corporation going bankrupt.  Think of the US government as a corporation and government workers as its employees.  Government land, buildings, national parks, computer systems, office complexes, etc.. etc.. are the “corporation’s” assets.

A legitimate default would begin by wiping out all of the unfunded liabilities, which means the Socialist Security system and Medicare would be eliminated.  The money that is currently held in trust would be returned to the tax payers using a standard metric.  So those who paid in first and those who paid in the most would get first dibs on the money currently in the trust funds.  The money would be paid out in a lump sum until there was no money left, so the younger generation would have to take the brunt of the loss, but they also have the most time to recover that loss.

Obviously along with wiping out the unfunded debt liabilities, this also eliminates the greatest tax burden on middle and lower class workers because payroll taxes would be eliminated.  This would constitute an immediate 15% increase in pay for all workers.

The next step would be to end the wars and shut down the vast majority of federal bureaucracies.   Most of the federal military itself could be folded into the state national guards and the hardware distributed amongst the states or sold off at auction to foreign nations.  The military has epic tons of hardware that has value in the private markets, and a lot of that hardware could be sold to recoup some of the losses and pay back our creditors.

The unused federal bureaucratic offices and hardware would also be sold at auction to the private sector.  The money collected would go to paying back our creditors.

The national parks would be sold at auction.  The sale of park land for resource development or private park providers would provide a large source of revenue to pay down existing debts.

The goal of liquidating all of the debt, selling most of the federal government’s assets, and eliminating vast amounts of federal bureaucracies would be to get our federal spending levels well below what the government collects in tax revenues.  When tax revenues are once again above what the government spends, we can say the nation is in a state of fiscal solvency.  The sale of assets would allow us to payback our creditors without resorting to increasing taxes.

Further, the tax revenues themselves must be reduced in order to generate a strong recovery.  It is not enough to discharge the debt, liquidate assets, and reduce spending below tax revenue – the cuts must be deeper in order to entice private enterprise to once again begin re-capitalizing America.   The tax code itself must also be revamped in order to cut down on costly accounting costs and regulatory overhead.  If there must be a violently enforced federal tax, it should be flat and simple – no more than one page of legal text.

The last step in this process is to solidify the currency by once again locking it to a fixed weight of gold.  A bank should be nothing more than a warehouse for people’s money.  It should not be a source of debt financed inflation; and it certainly should not be administered as a financial cartel by a bunch of kleptocrats.  Locking the currency to a commodity will ensure our creditors that we will not devalue the debts we owe to them – which means they will continue to engage us in trade instead of economically isolating us.

As this is being accomplished, there will be vast amounts of people laid off from government jobs.  Unemployment would shoot to epic proportions during this period of re-adjustment.  Government currently employs around 1/6th of the entire US workforce, the goal should be to get that number down to around 1/100th.

If we look at major US industries that have gone out of business, the above scenario is typically how they go about doing it.  They lay off the workforce and sell the remaining usable assets on the market at discounted rates, the sale of those assets goes to pay back their creditors.

When a major US industry goes out of business, there is short period of readjustment, typically only a few months, before those workers and assets are once again put to productive use by profitable businesses.  The same would be true for the government’s workers and assets.   In a matter of months, foreign and domestic buyers would begin utilizing the labor and resources currently used by government in the production of private goods.

The workers, resources, and other capital goods that the government currently uses ARE NOT DESTROYED in a bankruptcy, they simply change ownership and they are put to a different use by a different owner. – A PRODUCTIVE OWNER THAT ACTUALLY PRODUCES STUFF PEOPLE WANT TO BUY.

The market is radically efficient at reallocating resources to the most productive use.   So we could expect to see an explosion in productive economic growth as private industry takes control of the government’s currently wasted resources of land, labor, and capital.

The huge reductions in taxes and regulations would make it far easier for those people with accumulated capital savings to begin building new industries – AND – they would not have to compete with government spending for resources so their operating costs would be radically reduced all around.  Ultra low tax rates, ultra low resource costs, and ultra low startup costs would be the result of the above mentioned cuts in government.

Foreign capital would once again flow into America as international industries opened up new factories and mines to access America’s abundant natural resources.

People would be put back to work in short order, but the six month to year long adjustment period during all of this would be fairly brutal.  - but I argue not nearly as brutal the economic destruction that would be unleashed from the destruction of the currency.

People must remember that the current government hordes VAST amounts of natural resources.  It employs VAST amounts of highly skilled people.  It utilizes VAST amounts of capital goods. – ALL of those people, resources, and capital are engaged in non-productive activity.

Government produces nothing that the average consumer wants to buy.  The production of “stuff” is what makes countries rich.  When a country produces lots and lots of stuff, people can buy lots and lots of stuff for cheap and this improves their standard of living.  This is precisely how America came to be an economic super-power in the first place.

Our nation was a nation of producers and our currency was backed by a commodity.  Our government was small and limited and our industry was large and productive.

This is THE ONLY WAY a nation can improve the daily lives of its citizens.   Since government produces nothing, it can only take from those who produce and give to those who do not produce.  This activity of redistributing wealth at gunpoint generates absolutely NO wealth.

Wealth is STUFF – not money.

We are going to learn that lesson the hard way if the people do not quickly put a stop to the criminal government’s actions.