Economic disasters are inevitable
Late-night musings
By  Jim Surber 

Many of us like to have money without effort and like to avoid dealing with debts. It is simple human nature. We know that this attitude can never be sustained, but that knowledge is never strong enough to quash the allure and desire. 

That is why pyramid schemes, chain letters, and Bernie Madoff-type investments come and go throughout our history. It is always fascinating how so many people continue to become suckers until a key fact is recognized: They know that the promised returns or profits cannot be made honestly, but they participate because they believe that they are the perpetrators, not the victims, of the scams. They ultimately are cheated by their own greed. 

A recent writing contained a thought-provoking statement, “We’ve become our own three-card monte dealer.” Could it be possible that we continually scam ourselves by believing any enticing spiel, and that we think we’ll be better off while those behind us will be the losers? 

Was it ever possible to work at a job for thirty years, saving five per cent of your income, and then spend the next thirty years in very comfortable retirement? What financial vehicle could have ever made this possible? A few thousand dollars invested in stocks or a mutual fund would soon grow into a fortune large enough for one to retire in leisure? Many believed it to be true.

The promises of the recent housing bubble were the best yet, because you didn’t even have to put any money into savings. Everyone could enjoy their whirlpool baths, granite countertops and home theater systems, secure in the knowledge that while sipping wine (or beer) on their new deck, the house was continually increasing their retirement fund. It had to be true, since lenders were always willing to refinance at a greater value. Those dreams have now all vanished, replaced by the new descriptive term “underwater.” 

Over the past three decades, the advent of the global economy has brought many things that continue to evolve. Our nation’s economy is continually more dependent upon services, not on making products and goods, and so more emphasis is placed on personality, glibness, and charisma than on hard skills. 

Salesmen are now needed much more than workers. Arguably, the change having the most impact is the lowering of the American standard of living which must continue to meet the leavening nature of world trade. 

We live in a society where the con is generally the norm. You see it in the picture of the deliciously-looking garnished hamburger that is actually a thrown-together mess when you lift the lid. You see it in that sharp looking car with the advertised price (or rather the monthly payment) of the stripped-down model. You see it in our politicians’ solutions to the nation’s debt crisis (assuming that you believe there really is one). 

Today the annual deficit of $1.3 trillion equals the entire national debt at the beginning of Reagan’s presidency. The Gipper presided over the tripling of the debt in eight years, and after another twenty-three years (eleven of Democrat and twelve of Republican Presidents); it is now over $16 trillion. Forget economics, the multiple is not good. 

This autumn, we will pick between two methods to deal with the debt. We can either vote to further cut taxes, increase military spending and cut a few social programs. Or we can vote to increase taxes on the most wealthy by restoring former marginal rates. The fact that neither of these options has ever worked (or can make it through Congress) cannot shake the faith of proponents and pundits on both sides. 

Is a person’s preference (or ardent demand) for either method a solution, or simply an excuse to not accept the harsh measures required to diminish huge federal deficits? Is this a problem that can never be solved anyway, so why worry about it? 

We have all watched the Congress kick the debt can on down the road each time it reappears. Today, Congressional approval is now about 10%, for what are very good reasons. (But everyone loves HIS particular representative, and over 95% of incumbents are re-elected.) We certainly continue to deal those three, bent, little cards to ourselves here. 

Like the Congress, do we hope to temporarily skate by, leaving increasing problems for future generations? Are we given only these two choices because we have proven that we love to be conned?   

Could nothing make any significant difference? During his prosecution, Bernie Madoff was heard to say, “The whole system is a Ponzi scheme.” Since the essence of this scheme is paying temporary gains from the principal, and considering our system of fractional reserve banking, it becomes difficult to dispute his statement.         

For most liberals, as long as taxes can be raised, we can continue the deficit spending ad nausea.  For conservatives, the mantra is continued deficit spending with lower taxes now, and to hell with the future. 

Like earthquakes, economic disasters are hard to predict, but they are inevitable. Like the end of the world, financial crisis or depression is always feared, but hasn’t materialized yet. Maybe we aren’t dealing a rigged game to ourselves. My own concerns will evaporate just as soon as I finally win that next powerball drawing.