19 May 2011

Mad hatter bumps into ceiling at tea party

Whatever toxins may come along with it, the Tea Party movement has been a wonderful example of grass roots democracy in action in the flagship democracy. Citizens holding their overlords in government to account for their sense of entitlement and profligacy with the taxpayers' dime, is an empowering and encouraging prospect.  The Democrats former (and in many cases continuing) moral righteousness about Guantanamo, Global Warming, Iraq, Afghanistan and the well-being of workers, has not been met in office with any actions materially different from the previous Republican administration, even when the Dems controlled both the House and the Senate. Obamacare, the one possible legislative success of Obama's first 2 years, at the moment just looks like an even more gigantic bureaucratic fiscal snafu than usual, at a time when the US can least afford it.

And America seems to have gone morally backwards in many areas under Obama, in spite of all the hope: more wars, more unemployed, more drone killings, gloating over state sponsored assassinations, and continuing glacially paced military trials for enemy combatant detainees in Guantanamo Bay, Cuba.

If, on the other hand, one sensibly sets aside such glib media-packaged morality shtick and concentrates on the hard nosed business of advances in delivering prosperity to and for the people, then the magnitude of the US Federal and State debt problem does look like the serious blockage to meaningful progress. Whatever else may be said about them, the Tea Party seems to have got that part of it pretty much right. Witness the US federal government now bumping up against its previously unimaginably high debt-ceiling of $14 trillion.  Increasing taxes can't reverse the vortex of perpetual hole digging in a blackhole of that magnitude. Tax hikes would only impede the economic growth required to raise enough revenue to just pay the bills. Drastic, painful, socially dislocating spending cuts by a severely overstretched government seem essential if the US is not to become broke. People of responsibility will have to risk being unpopular in the populist republic and be given power by the people, if the US is to have any real chance of prospering again. The EU or China won't bail them out and the IMF is now on remand in Manhattan without bail.

In the meantime the A$ climbs to US$1.06 and more. The commentariat is now even talking here about the US$ halving in value in the early part of this century. My meagre mind goes numb with pain just trying to roughly game out such a scenario for the world's economy. And though Australia's prosperity is now inextricable linked to China's seemingly unquenchable thirst for its primary resources, we need the US to start growing vigorously again for the world to prosper. A return to high inflation now looks almost inevitable in the next decade in the US under current FED monetary settings. This might help ameliorate the debt problems, but the other consequences could be dire. Yes, interesting times. Buy gold?

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