“Non nobis solum nati sumus. (Not for ourselves alone are we born.)” — Marcus Tullius Cicero
Hallelujah! We’re saved! Praise [insert deity of choice here] for our merciful deliverance!
No longer will we be forced to endure the words “fiscal cliff” at every turn. No more will Fellow Reckoners be subjected to pointless speculation as to what might happen if we careen over said cliff. The phrase itself has been stricken from the English lexicon and, henceforth, anyone uttering the two words in tandem shall be banished from the intellectual landscape. Huzzah!
Well, not quite…
Despite an “11th hour” deal (which was quickly passed by both the Senate and then the House), it seems — at least for the immediate future — we are stuck with the term. Concerns over “what happens next” will no doubt encourage talking heads in the media to keep mentioning it and, though we’ll do our absolute best to avoid it, it’s possible the term will make an appearance in these pages as well, from time to time.
Of course, before this unfortunate collocation elbowed its way onto the nightly news, a different, decidedly more accurate phrase could be heard circling the airwaves. It describes the astoundingly offensive bipartisanship success that helped create the term “fiscal cliff” in the first place…long before the gasbagging politicos professed the audacity to try and disappear it. We are referring, of course, to the government’s longstanding policy of “kick the can.”
For the last decade, the US has played a dangerous game with its finances. To name but a few items on the government’s expense sheet: funding two (official) wars, bailing out its biggest banks and industries and continuing to “operate” an already bankrupt Social Security system. Its policies have created the largest debtor nation the world has ever seen…and have burdened an entire generation with an unbearable yoke of unfunded liabilities. Add to that the burden of student loan payments (to be repaid by a constituency that has a roughly 20% unemployment rate), and the solution seems almost unfathomable. Dan Amoss expressed as much in his essay “The Student Loan Time Bomb” back in November of last year.
“The default rate is horrendous,” Dan wrote, “and it’s only going to get worse. These are uncollateralized loans, so losses given default will be orders of magnitude higher than losses on subprime mortgages; in subprime, losses were mitigated by the value of housing collateral.”
It’s sad. And shameful. And it is, at least in part, owing to an overall sense that “more is better,” a misnomer that seems to resonate with the entire populace. Our reckoner-in-chief, Bill Bonner, began expanding on the concept late last year while compiling his thoughts for an upcoming book.
“The most-important single feature of modern economies is growth,” Bill observed. “Without it, neither businesses, households nor governments can pay their bills. Without it, pension funds…private and public…go broke.”
Bill expounded on this point in his essay “Too Much of a Good Thing.” And so, as we continue our look back on 2012 — and how it was we that approached that now-infamous precipice — we’re proud to feature Bill’s essay, along with Dan’s “Student Loan Time Bomb”, in today’s Daily Reckoning Best of 2012 Series. Enjoy!
for The Daily Reckoning
Greg Kadajski is the Associate Editor of The Daily Reckoning. He holds a BS from Towson University where he studied both English and Filmmaking. Since joining Agora Financial in 2006, he's been very closely involved in the overall production of The Daily Reckoning - reading, editing and occasionally contributing to the wide variety of material that appears in its pages. He lives in Baltimore, Maryland.
The past decade saw the U.S.A., the global superpower, a source of great ideas and innovations. Examples:
Credit default swap
Collateralize Debt Obligation (say what?)
To Big To Fail
$15 trillion debt and $1.5 trillion annual deficit don’t matter
Fannie May & Freddie Mac (who invented these stupid names?)
0.0% interest rate, forever
Bailout (but where is bailin?)
WMD (not, not in Iraq, but in Wall Street)
AAA rated mortgage back securities backed by AAA rates CDS
Socialism for the rich and capitalism for the poor
Outsource and downsize
What will 2013 bring? How about:
This country use to have producers and users. Producers took risk to make profit. Users, some worked for producers, consumed.
As risk is now UN-assessable and our countries produced profits are nil,
our countries producers have converted to users and production has
shifted elsewhere. As a country of all users there will come a time when
the producers will demand payment in something that they value. It
won’t be Federal Reserve Notes.
We can intimidate the world with our empire for only so long……….get prepared.
And don’t forget Derivitives
For 73 months running, the Fed has lashed the money markets to the gross financial anomaly of zero interest rates. Never before in the history of the world has any central bank dared to hand out so much free money for so long. David Stockman has the scathing report… and how it will splatter into a world of hurt…
Dr. Ron Paul, via his Ron Paul Institute for Peace and Prosperity, has written a full-blown indictment of the Fed and their 2% inflation target. It’s below, complete with 14 lessons we’d be wise to heed. It’s lengthier than our normal feature, but well worth your time...
2014 was a hard year for commodities, but there were some surprising opportunities, for in-the-know resource investors like you. Today, our friend Frank Holmes discusses some of the winners and losers and why we saw the market take the shape that it did. But more urgently for you, he also points out an unlikely winner…
Sony's recent hacking incident with The Interview is only part of the reason I believe the cybersecurity industry is on the verge of a breakout year. Target and Home Depot also suffered embarrassing incidents recently. The demand is enormous--companies just can't ignore the dangers of data breaches any more.
Bank insolvency doesn't have to end in money printing. Using a simple, 500 year-old law, Nathan Lewis explains how to break the cycle...