As an entrepreneur for over 30 years, I keep a pretty close eye on what is happening in Washington and the economy. Entrepreneurs are affected first by the economy and government regulations.
We have to know what is happening so we can steer our businesses successfully through some very rough waters. Sometimes it seems like much of the world is trying to crash what we have built up through hard work and determination.
About four years ago, I realized that the national debt was completely unsustainable. No matter who was in office, it continued to rise with no thought about how it was going to be handled. With the possible exception of Ron Paul, it seems like no one was even paying any attention to it.
Government Debt Burden
I for one feel like the economic and currency problems we are facing are huge! The national debt is over 19 trillion dollars and the unfunded liabilities of the Federal Government add at least another 100 trillion dollars. That is more than the net worth of every person in the United states!
Let me put this in perspective. Let’s say that you made $50,000 a year. But, you had a debt of 290,000 that you had to pay interest on. You also spend about $65,000 a year. You just borrow more money to cover the difference. As if that’s not bad enough, you had previous employees and other people that you promised to help support. The total support you promised them is about 1.5 million dollars.
Now, with that financial picture, do you think you could go to the bank and borrow some more money? The only way you can keep going is you have a good buddy who prints money and loans it to you at very low interest rates.
Most of our founding fathers despised public debt. James Madison said, “I go on the principle that a public debt is a public curse, and in a Republican Government a greater curse than any other.”
Very appropriately Benjamin Franklin said, “When you run in debt; you give to another power over your liberty.” We are certainly losing our liberties!
So, how did we get from dreading debt to being the greatest debtor on the face of the earth? I believe we got here gradually by expecting the federal government to do more and more for us. Our government started stepping on the constitution little by little until we hardly recognize the constitution as our guiding document for our country.
It did this by promising free ice cream for everybody. From Herbert Hoover promising a ‘chicken in every pot’ to Barrack Obama handing out free cell phones. Of course, it wasn’t only social programs that are to blame for our debt. It is very expensive to police the whole world. I am sure our founding fathers never had that in mind when they founded this country.
The problem is that many people think the government should provide an answer to every problem. I have never seen the government take on a problem yet without spending more money and creating more regulations and bureaucracy.
Another are of concern is that over the last five years, the federal reserve has nearly quintupled the base money supply. Are we to believe that all of those dollars will still be worth as much as they used to be?
We’ve had warning signs that there is a problem. We had the dot com bubble crash in 2000. Then on Sept 11, 2001, we had the infamous terrorist attack on the twin towers. The stock market really tanked then.
In 2008, the housing bubble burst and the entire banking system almost went down. If you’ve seen the movie, ‘The Big Short’, you have an idea what happened then. The government went in debt another trillion dollars to bail out the big banks.
The problem is, the banks are bigger now and even more highly leveraged. Everything in our financial system is set up to work well if everything goes according to plan. As long as there are no surprises, we will be fine.
However, life is full of surprises and not all of them are pleasant. We live in a volatile world and things can and do go wrong. Sometimes horribly wrong.
I’ve already covered how far in debt the US government is. There is also an Achilles heel with the largest banks. In 2008, they were considered too big to fail. Now they are approximately 40% bigger and we have lost a lot of smaller banks. This makes them even more essential to our financial system.
The Achilles heel of the large banks are derivatives. Derivatives are simply bets that something else will change or stay the same in price. Therefore, they are derived from underlying asset or investment.
The problem is that the five largest banks have over 200 trillion dollars of risk in derivatives. Their total assets are less than 10 trillion dollars. Now can you see why they are only fine if nothing goes wrong?
If things start to go wrong, it would take pretty much all of the wealth in the world to cover those derivatives! I am afraid that we could see a domino effect if problems arise.
Besides the government debt problems and the risky bets the big banks have taken, personal debt is too high also. One of the most alarming debts are student loans. Total student loan debt is 1.1 trillion dollars. Over 11% of these are currently delinquent.
Other Financial Problems
Kids are going to college and then unable to find high paying jobs, so they are either not working, or working at low paying service jobs. If these debts continue to go unpaid, the money will have to come from somewhere.
There are other very troubling factors in our economy. One of these is government run healthcare. We all know that healthcare bills have ballooned out of proportion with the rest of our economy. How will they ever get paid when the poorest members of our society can get practically free healthcare whenever they want?
I recently broke my back and I was in the hospital for four days. The original bill would have been over $200,000. We were able to negotiate it down to a little over $50,000. Many medical bills are even higher than that! As our population ages, who is going to pay for these ridiculously high bills?
What Other People Think
There are a few other people saying that we are heading toward some serious trouble, but by and large, people expect things to continue as they have. They are planning for college, families and retirement like nothing bad will happen.
I have trouble understanding this, but I think it is because they just cannot imagine that a catastrophe could happen here. After all, aren’t we the greatest nation on earth? Many people think the whole world revolves around the United States.
I also think a lot of people are too busy living their lives and trying to make a living to pay any attention to what is really happening in our country.
However, many people that I have talked to feel like something is going to happen. They feel like things just aren’t right and there will be some type of problem. People react in various ways to this.
Some people think those in authority will figure it out and come up with a solution. The problem is that the usual solution from those in charge is to spend more money and seize more control.
The issue is, that is what created the problem in the first place! We have spent way too much money and we have way too much government control. The entire system can’t take too much more of either one.
Many other people sense there is going to be a problem, but they are so busy, they don’t really think it through. A lot of people are too busy earning a living, plus earning enough to pay their taxes to spend too much time looking at the problem.
A few other people tell me how many guns the American public has and believe we will have another American revolution. They think the public will rise up and get rid of our current form of government and create a new government.
I see a number of problems with this idea. First of all, how will they organize. The government has the ability to shut down most forms of communication. It will be real hard to organize without any phones or internet.
The next problem with this theory is who do you rebel against. Do you shoot the next police officer, or do you fight against your local courthouse, or even your neighbor who happens to work in a public office?
The last problem with rebelling is that half the country relies on the government giving them handouts. So you may find yourself fighting them also.
The last solution people give me is that they will elect someone who will fix the problem. Really? We have been trying this for the last fifty years and the problem has only gotten bigger!
It is my belief that no one who has a plan to solve the national debt could get elected. They would have to cut too many programs for too many people. They would never get enough votes to win the election.
I see no other option other than to go through a major crash. I think the only chance we have to avoid the destruction of our country as we know it, is if we have a major revival and we repent as a nation and call out to God to help us.
I honestly believe that no man can solve the problems that we as a nation are facing.
The final problem I see in America is the moral decline we have had for over 50 years. Depending on your religious views, you may discount this, but most nations in decline also go through a moral decline.
We think Hitler was a horrible person for killing over 6 million Jews. We have killed almost 10 times that many innocent unborn children just for our convenience. When I was young, it was almost unheard of to see a gay couple anywhere. Now they can be married in all 50 states.
Now I am not a homophobe and I do not condone violence to gay people in any way, but we were founded as a Christian nation and I can find no place in the Bible where God condones any homosexual behavior.
We also promote all types of immoral behavior in much of our media. Whether you watch movies, TV or go online, almost anything is available.
Now putting this all together, how do I see this going down? I suspect we will have some type of financial crisis. This could be started by debt defaults, continued weakness in the economy or by a loss of confidence in the dollar.
When the financial crisis gets bad enough, people that rely on government assistance and many others will find it difficult to provide food for their families. The only option for many of them will be to turn to crime.
As crime rises, people will feel very insecure and turn to the government for help. The only option at that point will be for martial law to be declared. People will not like losing freedoms, but as we have seen in the past, people will gladly give up freedoms for security.
Once the chaos is calmed, the government will have to feed everybody and the only way they can do it is to nationalize farms and most if not all businesses. This will be done with a promise to return them once everything is brought back to normal.
However, we all know once the government gets a foot hold on something, they almost never give it back. As the government continues to run things, productivity will drop and there will probably be shortages of many essential items.
By the way, an executive order authorizing the government to do this was signed on March 16, 2012. It is called National Defense Resources Preparedness Executive Order. You can find it on the White House website.