How to Barter Your Way Out of the Depression

(This is the first issue of the weekly opinion letter - The Realist, published every Monday by Brett Buchanan. Subscribe for free by email).

Four years ago most Americans believed only good economic times were ahead. We were all swimming in equity. Financial markets constantly tested new highs. Being unemployed was mostly a choice. Aside from the unfortunate circumstance of war we found ourselves in - all systems were good-to-go.

Today, most Americans see only uncertain economic times ahead. No one is swimming in equity. Financial markets constantly test new lows. Unemployment lurks around every corner. And unfortunately we still find ourselves in a state of war.

What lies ahead on the economic horizon is anyone’s guess. Looking back, the path to this catastrophe began in the Clinton administration, cruised through Bush, and has now landed on Obama’s lap, who has surrounded himself with the Clinton alumni that helped set the course into our present quagmire. Our leaders in government, at the Fed, and in the private sector failed miserably in their responsibility to see this crisis coming. They were asleep at the wheel. Catatonic as the car careened off the cliff even now they would deny the crash ever happened if they could manipulate the data well enough. So if our leaders failed to see the proverbial curve in the road, what makes you think they have any clue about what lies ahead?

There exists such a vast disconnect between the power base in America and the rest of us that I don’t think too many people would disagree there are in fact two Americas - a small concentrated one that rules, and a vast subservient one that obeys. I don’t know about you, but that’s not the America I signed up for in grade school. That a small ruling class now controls our government through the strong arm of centrally planned monetary policy and finance capitalism should be apparent to anyone with a TV or Internet access. And that this ruling class now lacks the common decency to provide the public a clear picture of what our future most likely holds is not only shameful, it’s criminal.

Pundits argue that it would be irresponsible for government to warn people about the possibility of economic collapse. They would argue that it is the government’s responsibility to remain steadfast, to act as a calming force, to remain level-headed in the face of adversity so that people might not panic and demand their money from the banks or hoard food. If that’s the case, then what good is government? If they can’t warn us of a known impending catastrophe, one that they created no less, then what the hell do we need them for? To impose martial law when panic hits the streets?

So what does the future hold? Anyone with some common sense can deduce that unemployment is going to get downright scary. Shadowstats.com already has real unemployment at 20% and rising. That’s one out of every five adults without a job. Imagine one out of four, or one out of three. You know what happens to shopping malls then, they close down and their parking lots turn into flea markets and barter towns. Jobs are the backbone of social stability in the US. Take the jobs away - stability goes with them. These are the things our government should be preparing us for. And if you think I’m insane, think again. Because I guarantee you that tucked away in some corner of CIA headquarters at Langley, Virginia, in a room where five brainiacs used to conduct mock missile exchanges with the Soviet Union, those same guys are now theorizing about what would happen in American cities if unemployment hits twenty-five or thirty percent by the end of 2010. Let me tell you, they’re not thinking we’re all going to come together and hold hands in a circle around the campfire as we belt out passionate renditions of God Bless America. They’re thinking about how to round up our guns.

As unemployment climbs throughout 2009 two things will occur. One, those people still employed will spend less. Two, the newly unemployed will burn through their savings. When the savings of the newly unemployed dries up, when there are no more 401k funds to tap, when the Pee-PiP plan and all these other hair-brained schemes have transferred another trillion or ten in equity loss from the banks to the public, when your neighbor’s house is fire-selling to a carpet-bagger for half what you owe on your mortgage, when people just flat out refuse to pay interest on overpriced assets anymore, that’s when you see collapse. ARM resets are coming. The jobs situation is becoming obvious. By the end of 2009 the American economy will have deteriorated to the extent that there is no more hiding it. Our government will be talking deal on our external debt. Holders of US dollar reserves will be pissed. Think China. Dollar collapses, US debt defaults, bingo, game over. USA bankrupt.

Look at the American experiment as one big bubble. Rome was a bubble. The British Empire was a bubble. Nazi Germany, bubble. Soviet Union, bubble. USA, bubble. Here is our situation. Public debt is out of control with federal expenses going parabolic while tax revenues are plummeting. The combination of which renders the Obama administration deficit projections for fiscal year 2010 and beyond laughably incorrect. Furthermore, the bailout costs are much worse than anyone is willing to admit. Even if we did skate by without an all-out collapse when you tally up the real numbers on; mortgage write-downs, consumer credit write-downs, derivatives losses, direct bailouts and stimulus, municipal bailouts, (you know those are coming), and other bailouts and stimulus that we haven’t even imagined yet but will most definitely rear their ugly head, we’re flirting with five, seven, maybe as much as ten trillion dollars that will be added to the US Treasury’s debit column. When George W. took office the national debt was $5.7 trillion dollars. When he left office it exceeded $10 trillion. Are you ready for $20 trillion dollars of national debt? You better be, because it’s coming. You can bet your paycheck on it – Obama just did, literally, he bet your paycheck on it. My question is this. What are the Federal Reserve and US Treasury going to do when the waiter brings the final bill to the table? Pass it to us? Sorry Ben, my credit card’s tapped.

A PhD economist friend of mine, Paul Boyce, aka Doc, sent me an essay written by Dmitry Orlov titled Post-Soviet Lessons for a Post-American Century. It’s the kind of reading that sticks with you for a day or two - and not in a good way. The essay exposes similarities and differences between the pre-collapse Soviet Union and present-day America. A few things jumped off the page at me. One, those vodka-chugging Russkies sure got a lot of oil. They’re energy rich. Two, nobody got displaced from their homes when big red collapsed - they were all living in government housing to begin with. Three, the USSR’s centrally-planned cities had good public transportation that everyone simply continued using even as their world crumbled around them. And four, Russians were pretty much used to life sucking anyway. I mean let’s be honest, they never had as much stuff or as much freedom as us Ugly-Americans. The point is this. When our system collapses we don’t have any oil. We will be displaced from our homes. Our mass public transit may as well be two pregnant donkeys and a busted cart. Face it, we’re not used to life sucking. So when a collapse hits you’re going to see a lot of stunned folks walking the streets mumbling about how the Federal Reserve was supposed to maintain stable prices and economic growth. No one will understand that the Debt-Taxation-Inflation model the Fed used to perpetuate their siphon-from-the-bottom scheme was in fact the cause of all our ills.  To read the rest of this story please go to; http://itsnotrealmoney.com