A new era has begun

Ron Paul hit the nail on the head last night at the Republican debate. He said that a new era for America has begun. Nothing could be so true. Decades ago the U.S. was a dominant force in the world, and not necessarily in a negative way. That has changed.

Never before in our history have we faced the threat of a massive amount of people retiring (now, 10,000 baby boomers turn 60 every week). Never before have we had over 700 bases around the world. Never before have we spent more on the military than the rest of the world combined. Never before has most of the world disliked us so much (they actually used to love us). Never before has the Federal Reserve inflated our currency so much and destroyed our dollar so much (three bubbles in eight years!). Never before have we had such a broken health care system (which will get worse once we get "universal health care.")

Never before have we been in such bad shape. Yes, Ron, you are right. A new era has begun.

We're living history

History textbook writers are updating the last chapter as we speak, writing about the housing bubble bursting. As you can see by this article, the loss so far has been about $1 trillion. The Yale economist in the article indicates that those losses may triple.

The question is: Will the textbook writers get the root cause correct? It is doubtful, since they get the root cause of the 1929 crash and the ensuing Great Depression wrong. They'll probably blame it on "predatory lending" practices and poor decisions by consumers, which were a factor, but will miss the root cause: unfettered money creation by the Federal Reserve. A dramatic rise in the money supply (artificially created, not a market rise) leads to easy credit. Easy credit leads to malinvestment, since people are intrigued and duped by the easy credit. Once the punch bowl is taken away from this easy credit party (liquidity dries up, since the money printing has to slow down sometime), the contraction begins.

You couldn't write a better script

Want to screw up a financial system? Love to create credit and market distortions? Like to have American taxpayers bail out cranky government interventions in the banking, mortgage, and securities sectors? You've got it! It's all right here in Washington! Come one, come all!

Now the Secretary of the Treasury is getting in on the act, as you can see by this article. Just one more bandaid to forestall the inevitable: an economic meltdown. The more the government intervenes to put off the pain, the greater the ultimate pain will be. In the last paragraph, George Miller seems to understand the problem.