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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
March 26, 2012
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For the best part of the last two decades, it has been accepted as an indisputable fact even by the mainstream media that the two great pillars of the welfare state - medicare and social security - will break the government which offers them.  Today, every nation in the world makes at least some pretense of providing “welfare” to its citizens.  Since the “developed” (or “rich”) nations are those where these systems are most “developed”, these are the nations most at risk of crumbling under their burdens.

Welfare has many antonyms, but “hardship” is particularly apt in this context. Wikipedia’s entry on “welfare” ends like this: “... this term replaces “charity” as it was known for thousands of years, being the act of providing for those who temporarily or permanently could not provide for themselves.”  As usual, the defining characteristic is missed.  Charity is voluntary. “Welfare” as practised by government is compulsory.  This makes the two terms opposites.  It also brings about the opposite results.  Charity is a voluntary act made by those who have a surplus to assist those who do not.  “Welfare” is a system guaranteed to end up in hardship for everyone but particularly for those who are forced to be “charitable”.

The insoluble dilemma of a “welfare state” is twofold.  First, it results in a situation in which the majority of people who vote are partially or wholly dependent on the state for their sustenance.  In every “advanced” nation today, those who vote for a living outnumber those who work for one.  It is true that not everybody, or even a majority of those eligible in many cases, bothers to vote at all.  It is equally true that the “wards of the state” have much more incentive to vote than do those who are to provide for them.
The second dilemma is the issue of the unfunded liabilities.  The US government divides its budget into discretionary and NON discretionary items.  The bulwarks of the welfare state, social security and medicare, fall into the second category.  They are considered untouchable.  There are only two problems here.  First, the unfunded liabilities of these two programs are somewhere in the order of $US 80 - 120
TRILLION.  Second, any talk of sharply lower annual deficits (let alone talk of a return to a budget balance) are puerile without MAJOR surgery being performed on medicare and social security.  They are gigantic millstones around the neck of the US economy as they are on the economies of all other nations.

In the hands of government - “welfare” becomes its antithesis - “hardship”.  Today, this is being illustrated in real time in Greece.  But no nation can afford a welfare state in the long run.

The System Killer:

A national government like the one in Washington DC or London or Paris or Tokyo has no need for a “reserve” behind their unfunded obligations.  Again using the US government as the example, the US Treasury maintains something it calls a “Social Security Trust Fund”.  This is the fund which collects the so called payroll tax contributions (the government loves calling a tax a “contribution”) exacted by the government to supposedly fund future pensions.  Of course, none of this money is sequestered in any type of “fund”, it is simply treated as general revenue.  Like the rest of the government’s general revenue, it is spent much faster than it comes in, hence the deficits.

Social security in the US and everywhere else has always been sold as a system where people could “save” for their old age.  It is in reality the absolute antithesis of any such system.  Payments to retirees are NOT taken from their “contributions”, which have long since been spent.  They are taken from the “contributions” of those who have not yet retired.  There is nothing in the social security system except IOUs which the government has written on itself.  That is all that has ever been there, and that is why the unfunded liabilities of the US and all other governments are so much larger than the funded ones.

When one combines this lethal combination of funded and unfunded debts with the deliberate policy of all global central banks to continually diminish the purchasing power of the money they control, one has a lethal weapon against the gaining and keeping of real wealth inside the system.  Savings are penalised in every way imaginable and cannot in any case keep pace with monetary debasement.  The purpose is to turn the citizens of the nation into wards of the state and to give them a vested interest in the perpetuation of the state’s power OVER the economy.  That purpose has been realised everywhere.

As The Markets Go - So Goes Everything:

The unfunded or underfunded promises to pay of federal governments can always be “honoured” because the government has given themselves the power to create the means of payment and has forbidden its citizens to accept anything else as a means of payment.  What these governments and their central bank ultimately do historically is to destroy the money they are creating out of thin air.

The lower rungs of government (state, territory, municipal etc.) do not have these means available to them.  Nor does the private sector.  These entities cannot create the means of payment out of thin air.  In the state of California alone, the state and various local governments have run up unfunded pension liabilities owed to their own work force totalling $US 325 Billion.  That is $22,000 for every working Californian.  It is likely more than double that for every Californian creating wealth in the private sector.

In 1983, 62 percent of US workers in the private sector were covered by a traditional pension plan.  By 2007, the number of workers so covered had been decimated, falling to 17 percent.  Today, the figure is undoubtedly much lower.  The problem is that whether the individual works for the government or in the economy, most of the money that still remains in their pension plans is invested in the various paper markets, notably in the stock market.  This has been particularly true since interest rates were reduced to zero by the Fed at the end of 2008.  The stock market became the LAST market where hope of capital gains anywhere near sufficient to “fund” these pensions still remained.  This is true in the US.  It is equally true in every other developed nation.  Even in Australia, the “developed” nation which retains the highest interest rates, at least 30 percent of all “superannuation” is directly invested in stocks.

This makes the stock market sacrosanct.  It cannot be allowed to fail, or even to fall to any great extent. Today, a global market crash like the one which took place in late 2008 would be absolutely fatal for the system itself.  It would wipe out the pensions of everyone except federal government employees.

The universal attitude today is a hifalutin version of the old Aussie “She’ll be right - mate!”  The paper  markets must be held up at any cost.  The “fixes” will go in until the situation is beyond “fixing”.




.Ó 2009 – The Privateer

(reproduced with permission)


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