The Second American Revolution Pt 2: The Massive Reset That We Need

In my blog post "Time For a New American Revolution: Burn Down Our Bloated, Failing Central Planning Bureaucracy," I ranted about the massive failure and waste that aptly describes the federal bureaucracy that has become a huge waste of our nation's resources. The completely incompetent, bloated Fed Govt is a huge $4 Trillion per year leech sucking all of the blood from the US economy. I suggested that much of it needs to be "burned down." (yes, I realize that 3/4 of spending is redistribution -- much of it is entitlements.)

Such a drastic outcome would never come from any elected politician. Even Donald Trump is not considering a radical downsizing of any part of the government. If I were in Trump's shoes, I'd be hiring the heads of major departments with the sole goal of dismantling, privatizing or seriously downsizing them, including Education, HUD, Commerce, Energy, Homeland Security and TSA, Fannie Mae, Freddie Mac, Sallie Mae, Defense, and the Federal Reserve as a start. Many other agencies need a complete house-cleaning including the SEC, EPA, IRS, NLRB, for example. Oh, and the Federal Reserve, which has become the root of all evil, has to go or be reformed!

Why do this?  Because the US government is ruining our economy and our society!

Stagnating incomes coupled with inflation of health care, rent, college tuition, even defense procurement costs are all the result of government spending or policy. Rising rents are caused by zero interest rates engineered by the Federal Reserve, who have created a new housing bubble that is pricing out a new generation of buyers and hurting the economy. If you can't buy, you must rent. But even the price of renting is a severe hardship to many, many people. It's really a catastrophe as record high house prices aren't sustainable at "normal" interest rates. The geniuses, the educated idiots like Bernanke and Yellen, haven't thought about what happens when rates and mortgage rates rise again with record high house prices?  No one can afford anything! "Government" is CAUSING THIS!

The government-funded tuition bubble has also priced-out the next generation. It's also loaded-up millions of young people with unsustainable debt that is already collapsing. Shame!

Meanwhile debt at all levels, and across the world continue to pile-up with no end in sight. Perhaps, like Japan, the US will be able to skate by and double our national debt (once again) in the coming decade or so.  It's possible. But peripheral countries like Nigeria, Venezuela, Italy, Portugal, Russia and many, many other countries can not sustain stagnated economies coupled with higher debts. Something will break. Sovereign debt defaults will bring down the banking system in Europe and start the end-game crisis.

Declining and zero interest rates have prolonged the debt game for 30 years, but that too is becoming exhausted. Now interest rates are rising. And it's entirely possible now that more debt hurts rather than help going forward a consequence of "debt saturation." The spike in interest rates after Trump's election has come with an expectation of much higher debt levels to be funded. Rising rates in anticipation of higher debt levels may be the mechanism where more debt hurts the economy.

The massive amount of debt written in recent decades, now totally unsustainable in a slow-growth environment, has to default to a more sustainable level. This will blow-up the entire world economy in a massive financial, economic and humanitarian crisis. In fact, analysts at Deutsche Bank said the following:

..the global financial system remains broken and extremely fragile. Secular stagnation trends are everywhere. The world has too big a debt burden for the current growth environment. We would feel far more comfortable if the world went through a huge creative destruction period where zombie, inefficient debt was allowed to default - thus 'right-sizing' the ratio between debt and GDP. However we've long accepted that this is highly unlikely to happen outside of perhaps a future break-up of the Euro.

Bottom line:  I’m afraid only financial catastrophe will force the kind of reset that is needed. With that, we need the Federal Government itself to go broke in the next financial crisis (for which, the Government will be rightly blamed). But, with the money printers still in business at the Federal Reserve, there is NO WAY the government can go broke. So, the Federal Reserve has to go. The "bureaucracy" can't be permitted to save itself at everyone else's expense.

The US government going broke is EXACTLY what is required to reset the welfare rot, toughen our ignorant, lazy, entitled population, end the money center ‘hedge fund’ banking cartels, cut down the drastically bloated government bureaucracy, and to create a massive deflation in medical, tuition, defense procurement, housing, rents and all other costs to levels that the people and the nation can afford. This becomes more clearly true when you realize that average incomes are never going to catch up with all the inflated prices if we continue our current path. Our delusional Federal Reserve head, Janet Yellen, has demanded even MORE inflation! But the reality is: Inflated prices need a drastic depression-like reduction. A government bankruptcy would pressure personal incomes too for a few years, but I think prices would drop a lot faster.

A repeal of the Revenue Act of 1913 (income tax law), passage of a balanced budget law and repeal of the Federal Reserve Act would force the radical overhaul of the Federal Bureaucracy as well. Note, in this scenario, payroll tax deductions could continue to fund Medicare and Social Security, but these taxes are only covering ~60% of actual spending in these categories, so even there cuts are required. Reduced government spending will drop all prices. A national sales tax could replace income tax for only the strictly Constitutional functions of the government.

My feeling is that only crisis will change the trend to ever bigger government. Let it burn!