1. The crucial objective factor promoting economic growth in a private property social order is per capita investment.
2. Americans save less than 5% of household income.
3. The Federal Reserve System runs the show economically; Congress doesn't.
4. Here is the supreme symbol of the chain of command: Congress will not audit the Federal Reserve.
5. The politics of delay is the supreme mark of today's political order.
6. The Medicare budget is the single most important source of the Federal deficit, long-term.
7. Social Security is in second place.
8. Congress will eventually have to cut the benefits promised to oldsters in order to delay outright bankruptcy.
9. Congress will not cut the budgets of Social Security and Medicare in one fell swoop.
10. Oldsters vote at a higher percentage than any other age group.
11. The oldsters' lobbies are greatly feared on Capitol Hill — probably more feared than any other.
12. The oldsters vote as a monolithic bloc on the twin issues of Social Security and Medicare.
13. Congress knows that these twin issues are the third rail of American politics. He who touches it dies.
14. Oldsters are the dominant bloc within the Tea Party.
15. The Tea Party movement will not challenge Social Security and Medicare.
16. The Tea Party movement is therefore impotent to reverse the march to Federal bankruptcy.
17. There is no voting bloc that will make the balanced budget a non-negotiable demand.
18. Congress will therefore not balance the budget.
19. A Federal deficit in the range of $1.5 trillion was accepted by the public in 2009 and 2010.
20. The Federal budget deficit will remain close to $1 trillion a year for another decade, according to the government.
21. Both Social Security and Medicare are running deficits, and will continue to.
22. The FICA tax revenues long generated by Social Security in excess of Social Security expenditures will no longer be available to mask the on-budget deficit.
23. Most voters are unaware of this.
24. Most Congressmen pay no attention to this.
25. Most Congressmen will continue to pay no public attention to this.
26. Most Congressmen vote to kick the can down the road for another year.
27. Most voters believe that they, as taxpayers, will never be required to pay the debts of the government.
28. Most Keynesian economists teach that Federal deficits don't matter, except when the deficits are not large enough to stimulate the economy.
29. Most non-Keynesian economists teach that Federal deficits don't matter today, although deficits will matter eventually — somewhere, over the rainbow, way up high.
30. Most economists believe that economic growth will enable all Federal debts to be rolled over at relatively low interest rates.
31. Most economists believe that central bank policies can sustain economic growth most of the time.
32. Most economists do not foresee a great depression.
33. Most economists have said that Federal Reserve policy in 2008 was necessary: a doubling of the monetary base.
34. Most economists have remained either supportive or silent about the Federal deficits in 2008, 2009, and 2010.
35. Most economists deny that either hyperinflation or long-term deflationary depression is possible for the United States.
36. Most economists believe that, at some price, every problem can be solved.
37. Most economists believe that these problem-solving prices will be affordable to most people.
38. Most economists believe that there will not be a default by the U.S. government on its debt.
39. Austrian School economic theory teaches that politicians defer solutions until the problems cannot be solved at politically acceptable prices.
40. Austrian School economists teach that government makes existing problems either more expensive to solve or illegal to solve.
41. Austrian School economists teach that government-imposed solutions create new problems.
42. Austrian School economists teach that government-created problems are likely to be cumulative until a fiscal or monetary crisis leads to a default on government debts.
43. Austrian School economists note that the one exception — Great Britain after 1814 — was not a mass democracy with Social Security and Medicare.
44. Austrian School economists also note that there was an international gold standard from 1815—1914.
45. Most non-Austrian economists dismiss Austrian School economics as: (a) outmoded, (b) ideological, (c) methodologically amateurish, (d) pessimistic, and/or (e) crackpottery.
46. Most investment fund managers have been educated in Keynesian-dominated universities.
47. Most investors trust fund managers.
48. Most fund managers believe that there can never be a default on the Federal debt.
49. Most fund managers are concerned about beating other funds' performances by the end of the quarter.
50. Most fund managers believe they can beat the average: Lake Wobegone economics.
51. Most fund managers know that Warren Buffett will beat them, even though random-walk theory says he can't.
52. Most fund managers have never read Austrian School economics, but they are in agreement with non-Austrian School economists regarding the Austrian School.
53. Most Americans say they do not trust Congress, but they trust the FDIC, Medicare, Social Security, and Homeland Security.
54. Most Americans think that a comfortable retirement is a moral right for all American citizens.
55. Most Americans expect to retire in relative comfort no later than age 67.
56. Few Americans have used a free Web-based life expectancy calculator to estimate how much longer beyond age 67 they are likely to live.
57. Few Americans have ever used a free Web-based retirement portfolio calculator to see how much income they will need after age 67.
58. Few Americans have ever factored in price inflation when considering retirement living.
59. Few American parents ever discuss with their children who will inherit what.
60. Few American parents ever discuss with their children who will have to do what in order to receive an inheritance.
61. Older Americans do not believe that younger workers will ever stage a successful revolt against Medicare and Social Security.
62. Few younger workers have recognized that such a revolt is politically likely when the costs of these programs threaten the Federal government's solvency.
63. Few Americans understand that monetary inflation produces price inflation.
64. Few Americans understand that price inflation can be a way for the government to disguise its default on its debts.
65. Few Americans understand that price and wage controls distort production, produce shortages, and reduce most people's wealth.
66. Most Americans in the past believed politicians when the latter blamed the resulting shortages on hoarders and black marketeers.
67. Most Americans believe politicians who blame oil companies for gasoline price increases.
68. Most Americans believe that Chinese workers will sell them cheap goods forever.
69. Most economists believe that China's central bank will continue to buy Treasury bills at close to a zero interest rate indefinitely.
70. Most Americans and most economists therefore believe in free Chinese lunches ("hold the MSG").
71. Most Americans believe that Franklin Roosevelt saved capitalism from itself.
72. Most Americans believe that without tax-funded education, millions of American children would never learn to read or do arithmetic above a second-grade level (as if they were graduates of inner-city high schools).
73. Most Americans believe that without government-funded safety nets, millions of Americans would be trapped in lifelong poverty (as if they were fourth-generation welfare clients).
74. Most Americans believe that a little price inflation is preferable to a recession.
75. So do most economists.
76. Some Americans are beginning to doubt that Federal deficit spending on stimulus programs will restore economic growth.
77. Hardly any economists have doubted this.
78. Most economists believe that high rates of income taxation on the rich will not reduce investment and economic growth.
79. Most voters agree that the rich should pay their fair share, which is at least double the rate most Americans pay.
80. Most economists believe that a high death tax ("estate tax") is a good policy, even though estate taxes result in very little revenue.
81. Most voters agree.
82. Most economists believe that municipal governments will never default on their bonds.
83. Most rich investors agree.
84. When long-term rates rise, bonds fall in value.
85. Price inflation produces rising long-term rates.
86. Monetary inflation produces price inflation.
87. The Federal Reserve doubled the monetary base in late 2008.
88. Only bankers' unwillingness to lend money has kept this increase from doubling M1.
89. Few Americans understand the logic or history of the gold coin standard, 1815—1933.
90. Few Americans have ever seen a gold coin.
91. There are very few retail coin companies that sell gold coins.
92. In a monetary panic, their toll-free lines will be busy.
93. Most economists deny that there can be an inflationary monetary panic — only a deflationary monetary panic (e.g., October 2008).
94. The average price of a house in Detroit is $7,000.
95. The U.S. government owns Fannie Mae and Freddie Mac, which supply at least 90% of home mortgages.
96. The rate of foreclosures is increasing.
97. Banks are refusing to lend money to local businesses.
98. Local businesses supply most of the new jobs.
99. The unemployment rate is close to 10%.
100. Employment supports the housing market.
101. "Things that cannot go on have a tendency to stop." ~ Herbert Stein
June 21, 2010
Copyright © 2010 Gary North