Not long ago, I had a strange dream.
I was many years older than I am today. My graying hair was mostly gone. And I had three grandchildren, including a 13-year-old girl.
We were at home, and it seemed to be the holidays. I was sitting on the floor, trying to answer the children’s inquisitive questions.
But the details of my dream are fuzzy. So after I awoke, I daydreamed to fill in the blanks …
Why Did You Do This to Us?
My granddaughter of the future was especially gifted and demanding.
She wanted to know why the world had gone downhill so quickly. She insisted on hearing why all the adults of our time had done absolutely nothing to stop it.
“Why did you do this to us?” she asked. “Didn’t you guys realize what you were doing was wrong? Didn’t you realize it would lead to big trouble someday? How could you have been so dumb?”
She pouted. Then she continued, proudly displaying her knowledge of history:
“When Mount Vesuvius erupted in 79 AD, all the people of Pompeii died. But how could they have known? Could they blame the emperor in Rome? Of course not! The same for Krakatoa in 1883. It exploded. Then came a series of tidal waves. Thousands of people died. But it was no one’s fault. They had no way of knowing.”
As I listened solemnly, she lifted her finger and began wagging it at me — and at any other adult in the nearby vicinity, declaring:
“But you guys were different. You knew you were messing things up for us kids. All kinds of smart people told you that. Those smart people were making speeches all over the place. They were writing about it in the newspapers. They even sent their reports to all the presidents of all the big countries. And what did you guys do? Did you listen to them? No! You just kept on doing all the wrong things they told you to stop doing.”
The room suddenly turned silent, as all the boisterous adults in the room stopped and turned, listening intently to her every word.
In response, she lowered her voice to a whisper. “They warned you once. They warned you twice. They warned you three times. But you didn’t listen. You were the masters of your house, but you let it burn down.”
Dire Warning #1, September 17, 2003
|David Walker, former Director of GAO|
The place was the National Press Club in Washington; the occasion, a monumental, landmark speech by David M. Walker, the Director of the U.S. General Accounting Office (GAO) and Comptroller General of the United States.
Its title: “Truth and Transparency: The Federal Government’s Financial Condition and Fiscal Outlook.”
“Importantly, while we are starting off in a financial hole we don’t really have a very good picture of how deep it is.
“Specifically, there are a number of very significant items that are not currently included as liabilities in the federal government’s financial statements; for example, several trillion dollars in non-marketable government securities in so-called ‘Trust Funds.’
“In the case of the Social Security and Medicare Trust Funds, the federal government took in taxpayer money, spent it on other items and replaced it with an IOU. Given this fact, why aren’t the amounts attributed to such activities shown as a ‘liability’ of the U.S. Government? Does this make sense, especially when the government continues to tell Social Security and Medicare beneficiaries that they can count on the bonds in these ‘Trust Funds’? …
“The current U.S. government liability figures also do not adequately consider veterans’ health care benefit costs provided through the Department of Veteran’s Affairs, nor do they include the difference between future promised and funded benefits in connection with the Social Security and Medicare programs.
“These additional amounts total tens of trillions of dollars in discounted present value terms. Stated differently, they are likely to exceed $100,000 in additional burden for every man, woman and child in America today, and these amounts are growing every day … The burden of paying for these is not a very nice present for a child born today!
” … [I]n my view, the federal government’s current financial statements and annual reports do not give policymakers and the American people an adequate picture of our government’s overall performance and true financial condition. This is a serious issue.
“As Thomas Jefferson once noted, an informed electorate is the basis for a sound democracy. But how can the American people and their elected officials make sound decisions if they aren’t given timely, accurate and useful information?
“The recent accountability failures in the private sector serve to re-enforce the importance of proper accounting and reporting practices. It is critically important that such failures not be allowed to occur in the public sector …
“In this regard, the GAO [has been] unable to express an opinion as to whether the U.S. Government’s consolidated financial statements were fairly stated. … I can assure you that the U.S. Government will not receive an opinion on its financial statements from the GAO until it earns one!
” … In less than 10 years, due primarily to the retirement of the baby boom generation, the United States will be hit by a huge demographic tidal wave that is not expected to ever recede! This is unprecedented in the history of our nation …
“We cannot simply grow our way out of this problem … The ultimate alternatives to definitive and timely action are not only unattractive, they are arguably infeasible.
“Specifically, raising taxes to levels far in excess of what the American people have ever supported before, cutting total federal spending by unthinkable amounts, or further mortgaging the future of our children and grandchildren to an extent that our economy, our competitive posture and the quality of life for Americans would be seriously threatened …”
This first warning was largely ignored. It was posted on the GAO’s website, at www.gao.gov. It was broadcast on C-SPAN. But beyond that, virtually no one talked about it.
The outcome: Today, ten years later, each and every one of these fiscal threats is far greater: The federal deficit has grown by leaps and bounds. The government’s contingent liabilities for Social Security, Medicare and other benefits are far larger. And adding insult to injury, the Federal Reserve has used a new stealth gimmick — money printing — to effectively borrow trillions from Americans and foreigners to finance its grandiose quantitative easing, which leads us to …
Dire Warning #2, October 4, 2010
|Thomas Hoenig, former president of Kansas City Federal Reserve|
The Federal Reserve had already printed and pumped about $2 trillion and was expected to do even more.
But one vocal and prominent Fed member — Kansas City Fed President Thomas Hoenig — warned that, unless the Fed ended the program promptly, a whole series of dire consequences would follow:
- New bubbles — not only in things like stocks and real estate, but also in a wide range of assets, including Treasurys, gold and commodities.
- A more vulnerable dollar. If confidence is lost, a downward spiral for the greenback could raise prices by making the cost of various commodities and imports, such as food and oil, more expensive for Americans.
- Higher interest rates. Overseas investors financing U.S. government debt would demand higher rates to compensate for expected declines in the dollar.
- Big losses at the Fed. Higher rates (lower bond prices) could gut the value of the Fed’s huge bond portfolio.
Did Hoenig’s colleagues at the Fed heed his warnings?
Not in the slightest!
They just chuckled nervously, shrugged their shoulders and put the pedal to the metal on America’s money printing presses.
Now, nearly three and a half years later, where do we stand? Just as Hoenig warned ..
* the bond bubble is far larger
* the dollar is more vulnerable
* interest rates are higher and
* the Fed’s bond market losses are mounting by the day.
Dire Warning #3, February 19, 2014
|Former 12-term Congressman Ron Paul|
Former Congressman Ron Paul of Texas enjoys a national reputation as the premier advocate for liberty in politics today.
He is the leading spokesman for limited constitutional government, low taxes, free markets, and a return to sound monetary policies.
And he has received many awards and honors during his long career in Congress, from organizations such as the National Taxpayers Union, Citizens Against Government Waste, the Council for a Competitive Economy, and countless others.
Now, just this week when I spoke with Dr. Paul, he issued the third and starkest warning of all: A shocking, climactic event that could impact the United States for decades to come.
Cake or Crumbs?
In my dream, I had no excuse to give my grandchildren. We sacrificed their future for our present. We got fat and never wanted to diet. We were indeed masters of our house, but we were fast asleep.
We thought debt was wealth. But we were wrong.
We thought we could defy the laws of nature and get away with it. We were wrong.
Even the market tried to teach us a lesson, slapping us down in 2000-2003, and in 2007-2009. But we thought the market was “just kidding,” and we were wrong again.
We thought we could have our cake and eat it, too. But in the end, all we got was crumbs.
“I’m sorry.” I said to my granddaughter at last, with as much empathy as I could muster.
Her response was not exactly heartwarming: “We’ll never forgive you for this. Not for the rest of our lives.”
But that was just a nightmare. In the real world, there still are folks who seek to take action, and many who are at least listening. I trust you are among them.
Good luck and God bless!