How the U.S. Will Become a 3rd World Country (Part 2)

The United States is quickly coming to resemble a post industrial neo-3rd-world country. Unemployment, lack of economic opportunity, falling real wages and household incomes, growing poverty and increasing concentration of wealth are major trends in the U.S. today. Behind these growing problems are monetary inflation created by the Federal Reserve's monetary policies, federal government deficit spending and the dominant influence of "too big to fail" banks and large corporations in Washington D.C., which has altered the direction of law in the United States. To make matters worse, the U.S. government faces a historic fiscal crisis. Photograph courtesy of Mitch Cope High unemployment, lack of economic opportunity, low wages, widespread poverty, extreme concentration of wealth, unsustainable government debt, control of the government by international banks and multinational corporations, weak rule of law and counterproductive policies are defining characteristics of 3rd world countries. Other factors include poor public health, nutrition and education, as well as lack of infrastructure--factors that deteriorate rapidly in a failing economy. Apparently ineffective regulation and relatively little law enforcement action by the federal government in the wake of the sub-prime mortgage meltdown resulted in widespread speculation that special interests had taken priority over the rule of law. Critics have also charged that the federal government's policies threaten to eliminate what remains of the American middle class. Accelerating Concentration of Wealth In response to the economic downturn that began in 2007 and the start of the financial crisis in 2008, the U.S. federal government and the Federal Reserve resorted to a radically inflationary policy intended to save banks and to shepherd the U.S. economy through a recession. Instead, radically inflationary policies greatly increased the concentration of wealth. Under ordinary circumstances, monetary inflation has the effect of redistributing wealth in favor of those who receive newly created money first. The value of money is reduced as a function of the number of currency units in the economy but recipients of newly created money can spend it before it loses value. In a declining economy, however, the wealth redistribution effects of inflation are magnified. When the Federal Reserve or the federal government supports banks and financial markets through liquidity injections, bailouts, asset purchases, quantitative easing, etc., the lion's share of financial support, i.e., newly created money, is captured by the largest financial institutions and by the wealthiest 1% of Americans. Money printing skews the distribution of money over the economy while the value of money, i.e., the purchasing power of wages and savings, is reduced. The overall effect is a wealth transfer from proverbial Main Street to literal Wall Street. Looming Fiscal Crisis U.S. government debt and deficit spending have markedly accelerated over the past decade. For example, The U.S. Department of Homeland Security (DHS) was created and the U.S. military grew to 3 million active duty and reserve personnel, not including contractors. Since 2001, the U.S. spent approximately $1 trillion on military expansion while the total cost of the U.S. wars in Afghanistan and Iraq has been estimated to exceed $3.7 trillion. Although the U.S. federal government remains in denial, the Congressional debt ceiling debate and subsequent U.S. credit rating downgrade on August 5, 2011 were only the tip of the iceberg. In fact, the United States faces a historic fiscal crisis. As of 2012, the majority of new federal government debt will stem from interest on existing debt. Treasury bond issues totaled $2.55 trillion in 2010, roughly 2x the federal budget deficit of $1.3 trillion. Artificially low U.S. Treasury bond yields, created by the Federal Reserve's quantitative easing (QE1 and QE2) programs and by its current "Operation Twist," only slow the rate at which the federal debt balloons. The U.S. federal government's fast growing debt is $14.94 trillion, approximately 100% of GDP. Additionally, future liabilities total $66.6 trillion based on generally accepted accounting principles (GAAP accounting) and using official data from the Medicare and Social Security annual reports and from the audited financial report of the federal government. Medicare: $24.8 trillion Social Security: $21.4 trillion Federal debt: $10.2 trillion* (not including intra-governmental obligations) State, local government obligations: $5.2 trillion Military retirement/disability benefits: $3.6 trillion Federal employee retirement benefits: $2 trillion The eventual insolvency of the U.S. federal government cannot be a...

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