America Collapsing in Upon Itself

In an article that I originally authored in 2004 (with some small revisions in July 2008), I outlined my belief that our nation was going to be dismantled from within:

Feeding the Beast - Socialism Explodes Across America
All of this [the implosion of our economy resulting from a massive crash in the stock market] will be happening following a period of time wherein the size of the federal government will have grown at dramatic and unprecedented levels, thanks in part to the socialist agenda of our "conservative" President George W. Bush. The massive Beast in Washington will, more than ever before, need funds for all of the many social programs that are forced upon us by our "compassionate" government. The new Medicare "reform" alone will eat up tax dollars like a ravenous shark. Billions more will be demanded from the taxpayer to feed the numerous other unconstitutional entitlement programs that our politicians hand out like candy at Halloween to a lethargic and greedy citizenry. Further, the government will need tax revenues coming in by the bushel to pay for its worldwide “war on terror.”

At this critical time, just when our elected officials need to be reducing spending and cutting unnecessary programs, spending is skyrocketing, and the federal government is growing increasingly burdensome and intrusive. When revenues begin to dry up due to a great drop-off in spending and employment from 2011 to 2013, Bush's approach of lowering tax rates while increasing spending will ultimately fail. Higher income tax rates will become a political necessity as the federal deficit explodes beyond comprehension. As of 2008, the federal deficit reached a record $9.5 trillion. When Bush took office in 2001, the deficit was nearly half this incomprehensible number.

Government programs will solidify and funding will increase as the massive baby boom generation enters into their twilight years of life. The corrupt politicians of our sell-out two-party system will attempt to out-pander each other as they vie for the votes of the immense baby boom generation. Politicians who will be under increasing strain due to the economic collapse will make promise after promise and give handout after handout to the largest segment of our population....

At that time, I didn't foresee that an even more socialist ideologue would follow Bush, compounding his mistakes tenfold and bringing further ruin upon the people of this country. I did, however, envision much higher tax rates due to a drop-off in "spending and employment." Now, more and more people are talking about the introduction of a VAT (value-added-tax) to "save" us from the financial apocalypse that our rulers have visited upon us. (I predicted here that the financial crisis would begin in 2009-2010, when the stock market was at "full investment" and could go no higher due to a shortage of purchasing power. The most recent crash began in September-October 2008.) 

Further, I wrote:

As people become more and more dependent on the government to take care of them, I believe we will see a great expansion of the current socialist state. The federal government, in the coming Great Depression, will be seen as the solution to the perils of life, and not the problem. It will be seen as the Savior, not the Intruder. Politicians, Republican and Democrat alike, will use this great crisis as an opportunity to expand the size and scope of federal government in a way that will far exceed the socialist inroads made by FDR in the 1930's.

Just such an "expansion of the current socialist state" is occurring under the Obama administration right now. He, and his government, are indeed seen by many as our "saviors" from the current financial catastrophe and are attempting to implement programs that will destroy the financial stability of entire generations of Americans. 

I said that the State would use "this great crisis as an opportunity to expand the size and scope of the federal government in a way that will far exceed the socialist inroads made by FDR in the 1930's." Even before his inauguration, leftist publications like Time were running cover stories calling for Obama to enact a "New New Deal" that would expand upon FDRs "Old New Deal." Time even ran an altered photo of FDR in a convertible with Obama's face photoshopped in. Obama's chief of staff Rahm Emanuel went so far as to state that the current financial crisis presented an opportunity for the administration to promote its socialist agenda. In all this, it appears, and unfortunately so, that many of my predictions have come to pass. 

Since our nation appears to be committed to electing socialists that will destroy our ability to be a prosperous people, what recourse does the average, libertarian-minded person have? I would recommend continued avoidance of the stock market. I do not believe the conventional wisdom that we have put in a bottom. For the time being, I recommend holding physical silver and gold (75% silver to 25% gold), investment in commodity ETFs, investment in oil through ETFs, and investment in foreign markets (like China) through ETFs. Wait until this current macroeconomic cycle plays itself out before moving back into stocks and real estate. 

Following is an excerpt from an article in Fortune titled "The next great crisis: America's debt." The author Shawn Tully argues that chronic deficits have us headed for fiscal collapse and likens Obama's fiscal policies to Bush's on "steroids." 

...To understand why a massive tax increase, probably a VAT, is the mostly likely outcome, it's crucial to look at what's driving the long-term, widening gap between revenues and spending. Put simply, spending is following a steep upward curve, while revenues are basically fixed as a portion of GDP. Why? Because future spending is driven mostly by entitlements, which are programmed to rise far faster than national income, while revenues depend heavily on the personal income tax, which yields receipts that typically rise or fall with GDP. Under George W. Bush, the U.S. experienced a prelude to the crisis before us: Spending rose rapidly, while revenues remained reasonably flat. Bush created an expensive new entitlement, the Medicare drug benefit (cost this year: $63 billion), and let spending on domestic programs from education to veterans' benefits run wild. Over seven years the wars in Afghanistan and Iraq added a total of some $900 billion to the budget. All told, Bush raised spending from 18.5% to 21% of GDP, setting in motion a chronic budget gap by piling on new spending without paying for it.

Under Obama the Bush trend keeps going, but this time on steroids. It's important to see the Obama budget projections as two phases, the crisis period of astronomical spending in 2009 and 2010, and the normal phase, from 2011 to 2019. Most of his stimulus and other big programs are designed to give the economy a jolt in 2009 and 2010 and then largely disappear or be offset by tax increases - at least that's the plan. Then the surge in outlays comes from two forces that would wreak budget havoc for any President: the relentless rise in entitlements and the surge in debt interest.