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Updated 31 July 2010

If you hold a typical mortgage of $180,000 on your home and perhaps $20,000 in all other credits due, then the personal indebtedness for a household of four, is on the order of $200,000 See average mortgage balance and US population for the numbers. Total personal debt per citizen in fact works out to about $54,000. Each citizen is also liable for the National debt as well. That liability works out to about $42,000. Perspective comes by comparing this debt to our savings per citizen of about $1,600. see USA Debt Clock for the details in your time frame.

To gain and retain high office, politicians have also piled on liabilities, such as Social Security which they promptly stole from to fund other programs. Adding Prescription Drugs and Medicare to Social Security brings our per-citizen liability to an astronomical $350,000. Our personal and national liabilities now add up to over $400,000 for each of us. Clearly, something will give.

When and how, remains to be seen. There is a cliff out there--somewhere. Hopefully it is some years away. One way we might know when that moment has arrived is when European and Asian currencies become more common in settling international accounts than the dollar. Another obvious harbinger would be when other nations sell off their US Treasury notes. That event could trigger inflation with consequences more serious than the and housing bubbles combined.

Our individual share of the total national debt is about $165,000 per household. So the typical household of four today owes about $365,000 altogether. For an average total-household income of $80,000, that seems a bit out of reach. Nevertheless, these numbers are getting worse by the minute.

Moreover, some thirty million of us are unemployed, under-employed, or are otherwise idle when we need not be. The problem is not one of accounting in and of itself, but of our failures in knowing ourselves, our selfish selves, whether reading or reporting financial data. Few of us are equipped to make sense of balance sheets, sources of funds accounts, and proformas necessary to appraise where we are. We may be even less prepared to understand retirement accounts, mutual funds and derivatives. Who among us can recognize a modern Ponzi schemer clothed in immaculate suit and tie?

Citizens of the world and Americans as well deserve better than Ponzi Schemes. Yet we--and not just the man/woman on the street--blindly accept the most "attractive" lines, however superficial, with little or no serious research into the true situation. We put our personal assets in the hands of others whose understandings may be little better than our own. It may be exciting to play craps in Las Vegas, but if you play long enough, the house will wind up with your entire stake. Typically in Las Vegas, for every two wins, you lose three. Play long enough and your stake disappears. Why do you think the casinos have house limits?

Most of us want to pull our own weight in this world. But can we afford all this right now? Possibly. Nevertheless consider this: A mere ten years ago, the above expenses were fractions of today's number. Continuing our present course will break down the US economy, and each of us with it by 2020. Well before then, if we sill exist in our present form, the dollar will be worth only a fraction of its present value with the Euro or Yuan threatening to become the leading international currency.

We can hope this is a pessimists pipe dream. But what if it isn't? Could it be even worse? Easily. Consider the gaming system Goldman Sachs practiced. They intentionally created a group of toxic assets, disguised their true value and sold them to other banks, some foreign. Then they bet on their decline and made a bundle. Goldman Sachs was not alone in the practice. It is a huge mistake to confuse gaming profits with capital creation in any event. The next bubble could pale the housing bubble almost into non-existence.

Tax cuts are advocated by conservatives as the best way to stimulate the economy. But since when has that worked? On top of that, the Republicans in Congress balked when Obama asked Congress to create a bi-partisan deficit reduction commission. So Obama had to resort to an executive order with less promise for effect. Evidently, the Republicans believe Obama will be forced to make an unpopular decision and suffer at the poles in consequence. They, better than most of us, know that the steamroller Bush released on a downhill plunge may not be stoppable, in which case Obama takes the blame for the mess Bush (and Clinton too) got us into. Adroit politics? For sure. At the same time, and in retrospect, we feel that Obama has been too timid. That he stood up to Israel upon taking office, to Congress on the health bill, in accusing Goldman Sachs of fraud, and by holding the BP CEO's feet to the fire, shows what he can do when he wants to. That is the kind of leadership it will take to start a recovery. We haven't seen it yet.

Obama needs to address financial system reform with at least equal vigor. Our monetary system is on life support and will be for a good long while, even if the worst of the offenders are broken up and the regulatory laws necessary to prevent extravagance are reinstated. Capitalism is not capitalism if the private sector cannot survive. Left to itself, as in the 1920s and the 2000s, it has twice proved that very point. One Reason why China is coming on so fast is that their form of capitalism is tightly regulated at the same time it is funded and encouraged to grow. Relative to the rest of the world, America has begun to fade, and within a decade, will be fading even faster if we do not replace our creaky, antiquated system where the plutocrats skim off the obscene profits at the expense of less knowledgeable investors, which more and more are middle-class citizens saving for retirement. A start could me made as follows:

  • Riches acquired without commensurate creation of new real property should be taxed at 100%.
  • Derivatives, of any and all types, more than teo deep should be made illegal.
  • Executive bonuses that derive from corralling capital instead of creating it should be taxed at 100%.

Although these measures would certainly help, they may not be not enough. Doors for true capital creation must be opened, the wider the better. This is the best stimulus. Entrepreneurs, some rich, some penniless will step forward in droves. Given our present lead in technology, we could surely regain lost economic momentum. At the same time, government-funded programs to enhance our national infrastructure, like basic science aimed at enhancing the technologies of energy, medicine, and ecology need to be enhanced. High-speed rail could also have a place in certain areas.

Of course there are additional measures to be taken. Some appear to be fundamental to what led us into trouble in the first place. Understanding the most fundamental basics, enables effective responses. Enlightened citizens find enlightened responses.

Can that happen if we teach our children to be robotic authoritarians? Unfortunately, monotheism tends to do just that. So does the glorification of empire and war, as advocated by the Neocons. So also for a lock-step educational system that rewards rigid check-offs on achievement on specific tests. Check-off education lies in opposition to teaching for effect. Socially, we emphasize obedience at the expense of understanding our innate capacities for creativity, nurturing, parenting, altruism and cooperation. These latter are the real drivers beneath capital creation not to mention world peace. It is OK to teach about dice throwing--if we include understanding the odds that underlie each throw of the dice. Failing on this point, as we do, helps get us into the boom and bust cycles.

It is also OK to teach about the negative features intrinsic to our genetic inheritance toward aggression, hierarchy, and conventionalism, and how they came about--if at the same time we teach how our positive positive traits came to be. Knowing natural history and how civilization itself came to be are musts--simply for responsible citizenship.

We cannot know too much,
but we can know too little.

While basic skills and knowledge are certainly needed, they fail in the real world if they do not enhance individual insight and creativity. These are the characteristics of entrepreneurship in business, economics, science and arts. American history is all about entrepreneurship--across the board. But we are now dogmatically shooting ourselves in the foot. Educational reform is by tradition in the form of a Band Aid--superficial at best. Creativity and insight grow with each challenge is followed by achievement. It is not the mistakes we make, but what we can learn from them that counts in the real world. Therein lies real reform. Improved citizenship can only result.

Our natural instincts toward aggression toward those with different mind sets, obedience to authority, and conventionalism by adhering to established norms laid down by leaders are genetic traits working against us especially when people with this triangular mind set are elected again and again to the halls of power. If enough of these authoritarian personalities are psychopathic, they could conceivably turn our democracy into a dictatorship. Such people, when charismatic, could even convince the rest of us through fear, to give up our cherished freedoms. The irony of doing so in a democracy is the possibility of a democratic society overthrowing its vital freedoms. Conceivably that might happen in at least three ways:

  • A move toward dictatorship could arise from the template of a Munich-Beer-Hall-Meeting in response to an economic collapse that gathers strength by finding enough supporters to give it increasing momentum. All that would take is a charismatic organizer who can keep people in thrall while working on their prejudices to the point of no return. This is the prehistory of WWII, and it can happen again in any society that is substantially prone to prejudice as America is. Some tendency in this direction may be developing as in response to Obama winning the presidency. Political rhetoric, playing on emotions, together with the obstinate solidarity of the Republicans each seem to be combining in historic peaks. Of course there are institutional counter forces that could dampen out such trends. The US is not the Weimar Republic that had neither traditions nor infrastructure required for a stable democracy. So while the parallel is quite inexact, the danger still remains given the wild West attitude of some now engaged in vigilante-type activities.
  • A dictatorial takeover could occur by a coup led by an extreme fringe, right or left, whichever is in control and feels they can take total control. Could presidential findings rise to the level of absolutism? This too is quite remote, yet the possibility remains.
  • If any political or religious extreme projects another extreme is about to grab power, it could instigate violence in terroristic mode toward an out and out civil war. Could this be why extreme rhetoric playing on emotions, solidarity of one party in Congress, and increased civil unrest be harbingers? This too is very remote but remains yet another feature to guard against. History will tell.

Since money is power, our own authoritarian inclinations toward becoming, obeying, and following, the powerful seem to be driving our culture in ways that repeatedly tend to get us into the deep financial holes we now find ourselves in. Panics and booms were the norm in the 19th Century. The Great Depression in the 20th Century taught us a lesson and the financial institutions went on to thrive in spite of the controls imposed to restore discipline. These lessons were lost by the late 20th Century--to both major political parties. The Clinton Administration removed the last significant barrier--enabling a return to the boom and bust mode. The clock of history wound back a century!

When exuberance trumps rationality, boom and bust cycles logically follow. And the plutocrats are the only winners. Earnings are privatized; losses are socialized.

All that we are, all that we can do, affects how we maintain our bank accounts. But since it is the authoritarians who are in charge, how they manage our bank accounts should be the first order of business for each of us. But most of us, like many bankers even, do not understand the investments we make. We are simply rolling dice. Check that, others are rolling our dice. The authoritarians will invariably load the dice so that they win. They do that now by skimming money out of the system, not reinvesting in facilities for renewing our base for capital creation. Boom, bust, and inflating currency to make debt repayment possible are the inevitable result of unbridled free enterprise.


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