NetNews Usenet Archive 1992 #27/NN_1992_27.iso/spool/alt/activism/19080

Text File | 1992-11-21 | 9.9 KB | 232 lines

Newsgroups: alt.activism
Path: sparky!uunet!zaphod.mps.ohio-state.edu!moe.ksu.ksu.edu!ux1.cso.uiuc.edu!news.cso.uiuc.edu!uxa.cso.uiuc.edu!bfrg9732
From: [e-mail] (Brian F. Redman)
Subject: Bankruptcy 1995 (part 6)
Message-ID: <[e-mail]>
Summary: The approaching fiscal Armageddon
Sender: [e-mail] (Net Noise owner)
Organization: University of Illinois at Urbana
Date: Sun, 22 Nov 1992 00:56:18 GMT
Keywords: treachery trickery deceit deception
Lines: 219



Bankruptcy 1995: The Coming Collapse of America & How to Stop It.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

by Harry E. Figgie, Jr.
with Gerald J. Swanson, Ph.D.

About the authors:
-- Harry E. Figgie, Jr. is the CEO of Figgie International Inc.,
a diversified *Fortune 500* operating company. He was co-chairman
of President Reagan's Private Sector Survey on Cost Control, also
known as the Grace Commission.
-- Dr. Gerald J. Swanson is an Associate Professor of Economics
at the University of Arizona.

"Any profits from this book have long since been assigned to
charity. We make no profit whatsoever from it." (p. 25).

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
*                                                               *
* The United States has a problem that is easy to understand,   *
* but whose effects are difficult to comprehend. Its solution   *
* is simple to prescribe, but hard to implement. This problem   *
* is more insidious than drug addiction, more pressing than     *
* recession; it is crueler than poverty and illness and more    *
* hazardous than a hole in the ozone.                           *
*                                                               *
* This problem, which is of our own making, will precipitate    *
* an economic nightmare that will dwarf the Great Depression    *
* and turn the history of America into one of history's         *
* closed chapters. This problem has a name. It is *government   *
* debt.*                                                        *
*                                                               *
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

--------------------------- part 6 ------------------------------

             -- Death by Debt --

"Unless the people's government in Washington, D.C., makes
drastic changes in its fiscal policies now, the typical American
family will be fortunate in 1995 if it can feed and house
itself..."


The authors forecast the following conditions which we are likely
to be facing within the next two-and-a-half years:

--* As many as 20 percent of American jobs gone.
--* Personal savings obliterated by inflation.
--* Pension and Social Security payments cut or eliminated
because of inflation and mismanagement.
--* The American dollar "a joke."


The authors emphasize that "It's going to be awful."

The authors predict that the fiscal collapse will predominantly
take one of two forms: 1) panic or 2) hyperinflation.

All this is going to happen unless we wake up *now*, according to
the authors. They warn that once the crisis begins it will be
virtually impossible to reverse its course. "Americans have the
attitude that they can get out of any crisis *after* it's
occurred. This time they are wrong. You can't recover from cancer
once you've died."

The authors paint the following picture showing their view of
each of the likely scenarios:

          -- Scenario 1: Death by Panic --

"In 1992, the Bush administration will rack up a nearly $400
billion budget deficit, the largest gap between revenue and
spending ever recorded by any nation in the history of
humankind... The American national debt at the end of 1992 climbs
to $4 *trillion* [my emphasis], and the interest on that debt
rises to some $300 billion -- more than the country spends on
education, justice, housing, and the environment combined."

Continuing with this scenario, the 1993 deficit goes to $640
billion. This is partly due to higher interest rates on Treasury
bonds brought on by a growing lack of confidence regarding the
national debt. Government debt climbs to $4.98 trillion. The
world's investors are getting edgy.

By 1994, interest rates have risen quite a lot. Because of high
interest rates, new mortgages decline and the housing industry
collapses. Businesses stop borrowing and reduce or eliminate
expansion and/or modernization projects. The interest charge on
the national debt reaches $517 billion. Bank failures become
epidemic.

In February of 1995, foreign bankers no longer have confidence
that the U.S. will ever pay back, dollar for dollar, its colossal
debt. Financial markets all over the world shut down under an
onslaught of sell orders. The value of Treasury securities
plunges.

"The next day, the sun is bright but millions of Americans find
they have no jobs, no prospects, and no savings. They have no
savings because the banks have no cash, only IOUs, such as
mortgages and government bonds -- and those have now become
worthless." An economic depression begins.

"Within the week, the government announces plans to cut the armed
forces by half. The other half will be kept on... to quell the
uprisings that have begun in cities and suburbs alike. Riots
become commonplace throughout the country."

           -- Scenario 2: Death by Hyperinflation --

Hyperinflation can be defined as inflation that is severe enough
to cause people to lose faith in the U.S. dollar. Hyperinflation
would occur if, instead of selling government securities to
outside investors, the Treasury instead sells its securities to
the Federal Reserve (i.e. "monetizing" the debt).

By following this policy of "monetizing" the debt, new money is
created. This is problematic in that "Creating new money without
any accompanying economic growth breeds inflation, since it just
adds money to the economy without increasing the amount of goods
or services to spend it on."

In this scenario, the financial markets notice that the Treasury
is selling its securities to the "Fed" and they react by raising
*their* interest rates. They do this because they anticipate that
this policy of monetizing the debt is going to be inflationary.
"After all, what's the use of charging 4 percent interest on a
loan if the inflation rate will climb to 10 percent... So, if
lenders think inflation will rise to 10 percent, and they want to
earn 4 percent *real* interest, they'll raise their *nominal*
interest rate to 14 percent."

Higher rates in turn mean that the interest on the national debt
grows. This increases the deficit even more.

The value of securities purchased in the 1980s plunges. This is
because they were issued at low (pre-inflation) rates of interest
and now nobody wants to hang on to them. Instead, because steady
inflation causes a steady drop in the value of the dollar, people
purchase durable goods. But this new demand for durable goods
causes the prices to rise even more.

"By late 1994, the annual inflation rate has climbed to 22
percent and is rising by a point or more a month. Interest rates
are running at 30 percent and more... profits vanish, submerged
by inflation, and no individuals or companies are able to borrow.
The home construction industry dies... [manufacturing] plants
deteriorate."

"As time goes on, banks cancel consumer credit cards...
Accounting systems break down... Hyperinflation is pushing the
economy, along with public morale, into a hopeless and major
depression."


         -- Early Warning Signs --

The authors do not think that either of these two scenarios will
be played out exclusively but rather that some mixture of the two
will occur. But "...that it's going to happen somehow in the
absence of quick and dramatic remedial action by the federal
government I am absolutely certain. We have frittered away a
decade when we could have done something about our problem
without too much pain." [Sorry to butt in, but I wish to stress
"Pain for whom?" While it is laudable that the authors have
pointed out the mess we are in, I am concerned that they are
turning this issue into a new "red scare" which may wind up being
used as a tool to benefit the already rich and powerful. Beware
of calls for "shared" sacrifice. Yes, we are in a mess but how
about having the rich and powerful lead *by example* in their
calls for sacrifice?]

The authors close this chapter by giving three "warning signs"
which they say will be an alert that U.S. government securities
are no longer "rock-solid safe."

1) The government can no longer service its debt.
In 1992, the annual debt service (i.e. interest charges) on the
debt "...is expected to reach 44 percent of the total revenue the
government collects." In 1993, this annual debt service is
expected to reach 61 percent. At some point, if this rate of
service on the debt continues to rise, "...investors will begin
reevaluating the safety and security of U.S. government debt
securities... You'll see this warning sign in news reports
comparing the deficit with the government's interest expenses,
but you may have to read closely to find the numbers."

2) The federal reserve begins to buy substantial amounts of the
government's debt.
"To keep an eye out for this warning sign, watch the newspapers
again. You'll begin to see stories about... the expanding money
supply."

3) The government shows complete unwillingness to address the
deficit problem.
Forget what the politicos *say* about the deficit and instead
watch what they *do* about it. If they do nothing, look out.


------------------------- end part 6 ----------------------------

You can do a lot of good by taking this article and posting it to
other areas besides "alt.activism." You can also post this or
upload it as a file to a local BBS. This would help give the
people of this nation an alternative to the "fluff" and
propaganda posturing as hard news which they are currently
getting from the major networks.


Synopsis/Review by Brian Redman
"Ah yes, Armageddon. I remember it well."
End part 6