Spring is just around the corner and the sequestration has just begun. Here's the way I see things. The return of Social Security tax rates to prior mandated levels, combined with rising gasoline prices is an effective policy to slow the economy. Blah, blah, blah, take home pay for those that pay taxes has been reduced. Consumers (and we are all consumers) discretionary income clearly has declined. If you don't believe me, just look at your paycheck. One does not need a degree in economics to figure this out. Thirdly, take a look at the prices in the supermarket, and the size of the products you buy. I remember when a pound of coffee was actually sixteen ounces. Now I think it is about 11.5 ounces. In a nutshell, we have less money in our pockets and have to pay higher prices. And for good measure add the Obama tax increases and you have a textbook example of how to slow the economy.
Now let's look at what I call the Great Conundrum. Low interest rates are fantastic for anyone financing a major purchase like a house or a vehicle. But, if you are older and looking towards retirement or are already retired, CD rates at the bank are ridiculously low. The rate of return is lower than inflation. Living solely on Social Security is impossible even if your house if paid for in full. Property taxes and household expenses will eat that Social Security check up even before you get to the supermarket.
On top of all this gloomy microeconomic stuff that affects us all as individuals, we have all the bullshit coming out of Washington. Now before I begin my normal rant, let me state quite clearly that I am registered to vote as "unaffiliated". I am neither a Democrat or Republican. But let me have another drink of my favorite beverage, Crown Royal Black. In the situation today we have a government that is addicted to spending. Thus, John Boehner, Republican speaker of the house of representatives, has it correct when he stated that this is a spending problem and not a tax problem. Government spending is out of control!!! They are spendaholics and their recklessness and total irresponsibility will have the result of a collapse of our economy and a lower standard of living. The skyrocketing government debt will eventually wreck havoc on our nation. The scary part is that there is no good outcome. We are surely screwed. It is only a matter of time. Just like the sands of an hourglass.
And whom do we have leading us down this path of disaster? A lawyer with absolutely no business experience whatsoever, and no knowledge of economics. Obama never ran a business, never had to make payroll, or comply with government regulations. Unfortunately he is an economic disaster for America. He has increased the national debt more than any other President in history. Compounding this nightmare is the incompetent former President Bush. He and his gang should be jailed for starting the Iraq War. That son of a bitch lied about the supposed nuclear weapons during his State of the Union speech. And let's not forget the mental genius who first initiated these huge deficits, Ronald Reagan. The creator of Voodoo economics.
Ok, enough ranting and raving. Time for another drink. Now we come to everyone's favorite topic: predicting the future. As I have always stated, it is easy for me to predict the future; being accurate is the hard part. So here goes. The economy, with all the aforementioned headwinds will surely decline into a recession. I believe this presently occurring. In fact, on a per capita basis we are already in recession. When the population growth exceeds the growth rate, we have a recession. The government definition of a recession is worthless. As the recession worsens, this will reduce government revenue and produce greater outlays for "give away" programs. Thus the National debt will increase. And this is after a tax increase and sequestration. With out bloated budget and huge debt, this will set the stage for destructive inflation.
At this point, an inflation rate of 8-10% would be devastating. Just think what that would do to mortgages. A $250,000 mortgage would cost about $2,000 a month just in interest. Add ever increasing property taxes and principle payments , and that would propel the cost of housing out of reach for a great majority of people. Government interest payments on fourteen trillion dollars of debt at 8% would translate to annual interest payments of over one trillion dollars.
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