Posted by: Randall Niles | June 1, 2010

The Debt Crisis – Economic REBOOT!

“Do not accustom yourself to consider debt only as an inconvenience; you will find it a calamity.” (Samuel Johnson, 18th century English author)

Sorry, but here’s the tough truth…

We’re all lemmings sprinting toward the cliff. Although a few of us have squealed in protest from time to time, the destiny of the herd is certain…

We’re all going off the cliff!

The collective momentum is irreversible.

It is no longer a matter of IF, but WHEN…

The U.S. National Debt Clock just clicked past $13 trillion, on its way to $20 trillion, with no end in sight. If we account for unfunded liabilities such as Medicare, Social Security, etc., the total figure now surpasses $120 trillion! If we study the debt crisis facing many other nations, we quickly realize that it’s a global house of cards. We’re all playing with funny money.

I’m not a prophet. I’m a pragmatist.

If I run my household into the ground, living on credit way beyond my means, I will ultimately go bankrupt. My mortgage lender and credit card companies will force me to hit REBOOT on my family’s life.

If I run my small business into the ground, living on credit way beyond my company’s reasonable projections, my small business will be forced into bankruptcy. My creditors, vendors, and suppliers will force me to hit REBOOT on my small business.

With our families and businesses, we are held accountable by reasonable market forces. Ultimately, we must pay the piper. We might deny the reality of the numbers for a season, but they always catch-up with us.

Solvency is maintained by means of a national debt, on the principle, ‘If you will not lend me the money, how can I pay you?’” (Ralph Waldo Emerson)

For some odd reason, we’ve all bought the lie that federal, state, and local governments are immune from the financial realities of a global market economy. With a national debt that just shot past 13 trillion dollars, the numbers don’t mean anything anymore. In fact, the numbers have made us NUMB!

Contrary to what we’ll be told, this is not a failure of capitalism. The Free Market is the greatest economic system on earth, where people are rewarded for ingenuity, innovation, and hard work when competing in a fair, open, and efficient marketplace. Capitalism has always ebbed and flowed in economic cycles of recession and expansion. This is natural and expected in true, market-driven economics. However, after nine significant cycles since the Great Depression, we “monkeyed” with the system. The simple truth is that we didn’t let the Free Market go through its natural correction. It seems we couldn’t handle the “downs” anymore, so we created the fiction of continual, artificial “ups.”

We all want to delay the pain. Therefore, we borrow more “numbers” or print more “numbers”. The politicians, financial executives, union leaders – whoever — are just trying to keep the party rolling, stay comfortable, maintain power, and numb the pain where necessary.

When it comes to our families and small businesses, we try similar reality-numbing techniques, but the system is set-up so that REAL reality hits us a bit earlier. It seems that “We the people” run out of gimmicks and games before the politicians, big businesses, et al.

However, the games and gimmicks will soon run out for all of us – That’s the nature of economics. Yes, the world is facing a REBOOT. While the gamesmanship can continue and our “luck” can hold for awhile, at some point, economic reality will force us to hit Control-Alt-Delete on the entire economic system.

Still Thinking,

Randall Niles

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