Tuesday, April 26, 2011

A Debt Default is Not the Real Problem for the US

article from: ZeroHedge.com

Many commentators are discussing the collapse of the US today. Indeed, the most common theme I see one of “it’s all over,” usually focusing on the math/ debt problems in the US.

Debt is a major problem, but it’s not always one that destroys everything.  History is replete with countries that defaulted on their debt… and the world kept chugging along regardless.

So, the idea that the US will default on its debt and we’ll somehow re-enter the stone age is false. Human ingenuity and survival skills are far better than that.  Indeed, the human race was in much worse conditions when we were hiding in caves and running from prehistoric monsters.

We somehow survived that situation and evolved to make peanut butter and jelly sandwiches and drive cars… so I’m sure we’ll figure out how to deal with the collapse of the US empire and the end of the Dollars status as world reserve currency.

So rather than freaking out about our debt problems, I think we need to address the real issue that LEAD TO our disastrous debt situation. And that issue in the the US today is that the people making the major decisions are not problem solvers but politicians.

Let’s consider this for a moment.

Problem solving requires critical analysis and flexible thinking. Anyone who’s tried to tile a bathroom or even balancing their personal finances knows that the process is not linear in nature. That is, there is no one single correct answer.

Instead, there are endless solutions and the real issue is one of picking the solution that best utilizes what’s on hand in a realistic way to create the best outcome.

This involves being able to accurately assess the situation/ problem, taking account of the resources at hand, and then coming up with creative or traditional approaches to use the latter to address the former.

In contrast, a politician has one primary goal: election.  Consider that the perceived problem in this situation is not actually a problem at all, but an issue of ego, “I must win.”

These people are not problem solvers. As we find out regularly, they often cannot organize their own personal finances (or cheat on them), their personal lives are a shambles (how many members of Congress leave their wives for lobbyists?), and in truth they don’t even understand the issues they are debating/ need to address if elected.

Instead, all of their efforts are aimed at saying the right things so they can get in office.  And once elected, the focus is on getting re-elected or preparing to run for a higher office.

Consequently, their focus never actually shifts to address or implement real change or solutions to the problems facing the country. The reason for this is:

a)    none of them have a clue how to fix these problems
b)   taking a risk with implementing a real solution could result in too much career risk

If your primary concern is getting re-elected, you’re not going to go out on a limb and implement some policy that could go wrong. Instead you’ll look for half-measures, small moves that could produce small changes, band-aids for society’s wounds rather than actual healing.

However, as bad as Congress is, the US Federal Reserve is much worse. These guys don’t even actually address reality, but are stuck in a world of models and formulas. Seriously, they can say with a straight face that inflation is contained, fill their gas tanks at the pump (with $5 gas) and not connect those dots.

You can see it in their policies. The Fed really only has one policy: printing money. Everything the Fed’s done revolves around this (interest rates, are secondary). Every time a problem surfaces, the Fed’s answer is to print more money.

Small wonder then that the US Dollar is falling off a cliff. And it’s only going to get worse. The idea that somehow these guys are going to wake up one day and think, “maybe we shouldn’t print money” is delusional. And any public comments they make about considering this as an option is just posturing by those looking for political points.

Which is why the US is set to enter a period of mega-inflation in the coming months. The Fed’s going to keep printing GUARANTEED. And we all know how this will turn out: the Dollar collapses.

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