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The Great Pension Lie

“More than 3 million demonstrators – one in 20 of all French people – marched yesterday against the President’s plans to raise the standard retirement age from 60 to 62,” reported the UK Independent last week.

Strictly speaking, the protests are not really about France’s retirement age. After all, Frenchmen are perfectly free to retire at any age. There is nothing that holds them from quitting their jobs at 55 or 50 or even earlier should they be so inclined.

What the protests are really about is the desire of the French to begin state-sponsored retirement at one of the lowest retirement ages in Europe. For comparison, the retirement age in Germany and Denmark is 67. Britain is planning to increase pension eligibility to 68.

But the French have a problem: The government does not have the money to indulge the wishes of its citizenry. The French state is broke. France’s pension program is currently running a €32 billion deficit. With increasing life expectancy and fewer young people in the workforce, the figure is estimated to double within a couple of decades.

The fact is that the French government cannot afford to provide the kind of pensions demanded by the population. The French people, however, are apparently unimpressed by such excuses. They demand that the state provide anyway. And to get their way, they are prepared to turn their country upside down. This is how bad things stood last week:

Rail and air services were severely disrupted… Many schools and government offices, and even the Eiffel Tower, closed. Eleven out of the nation’s 12 oil refineries were wholly or partially closed in what local union branches threaten could become an indefinite stoppage to topple the pension reform. The state railway company, the SNCF, warned last night that it expected widespread cancellations…

This is a truly desperate situation: The impossible is demanded and social disorder is threatened if the impossible is not delivered. The state cannot make good on its promises and the citizens refuse to acknowledge that fact.

The coming on of this impasse was not unpredictable. It was, in fact, unavoidable. This is because no government can provide for the well-being of its citizens over the long run, be it through healthcare, employment or retirement. All such efforts inevitably culminate in fiscal calamity, which then morphs into social crisis.

Experience shows that all large-scale public retirement programs sooner or later turn into Ponzi schemes whereby pensions of current retirees are drawn from taxes paid in by the working population. Due to falling demographic trends that afflict welfare countries, there inevitably comes a point a point when the racket runs out of money. The citizens, however, do not easily relinquish the promised goodies. The politicians in charge have to give in if they want to stay in office. The enraged populace will accept nothing less. Kicking the can down the road is the pretty much the only option for politicians in modern western democracies where people have been conditioned to be taken care of by their government. But deficits and borrowing cannot go on forever. Things must eventually come crashing down, and in a bad kind of way.

This fatal dynamic is also playing itself out in the United States, where the government has promised to provide for citizens in their old age. This is a high-sounding notion, but one that can never be fulfilled. As in France, the US government is broke and in no position to deliver on its promises. Estimates of entitlement liabilities inherent in Social Security and Medicare range from $65 trillion to $200-plus trillion. Even the lower end estimate is completely out of the realm of fiscal possibility.

Nor will anything be done about it, since it is not for nothing that entitlements are called the third rail of American politics. Politicians just keep kicking the can down the road while contracting ever greater debts. Bad though they may be, it is wrong to blame the politicians for our woes, for they ultimately only do our bidding. The idea that Social Security needs to be scrapped would not go down well with the voting public.

We set out on the road to fiscal woe when we fell for that great lie: that the state will provide for our well-being and welfare. But this is an unaccomplishable task. Despite what we have been told, the state cannot provide education, retirement and job security over the long haul. The only way to have these things is to obtain them through our own efforts.

Self-reliance is not always be easy, but it can be done. Our ancestors showed us how. They managed to live in functioning civil society with almost no federal involvement. There was no Social Security or government healthcare then. It bears to keep in mind that they lived in a technologically far less advanced age, when life was much harder than it is today. And yet they did not look to the state to take care of their needs. They did what they had to do themselves.

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On the Right Track?

When discussing the American economy during his swing through Iowa, President Obama said: “We are on the right path. We’re on the right track.”

Not impressed with the president’s assurances, Goldman Sachs is advising its clients that the economy is likely to be “fairly bad” or “very bad” over the next six to nine months. Looking at the data, one can only wonder whether that assessment is not too optimistic.

Consider this.

According to Gallup unemployment, stood at 10.1 percent in September. Among Americans aged 18 to 29 the figure was nearly 14 percent.

Noted Bloomberg: “the jobless rate would have equalled or exceeded 9.5 percent for 14 consecutive months, surpassing the 13-month period from mid 1982 to mid 1983 as the longest span of elevated joblessness since monthly records began in 1948.”

Underemployment – which includes those who would like to work full-time, but can only find part-time work – is at a staggering 18.8 percent.

Last year Congress extended $160 billion in unemployment benefits. This was up 30 percent from the previous year.

Nearly 42 million people are on food stamps today. Each of the previous 20 months set a new record in terms of participation. This trend will continue. According to White House estimates, nearly one seventh of the American population will be receiving food stamps in this fiscal year. In New York City the situation is even worse: one in five there rely on food stamps.

The Census Bureau reported that America’s poverty rate was at a 15-year high of 14.3 percent in 2009. This means that one in seven Americans now lives below the poverty line. The figure represents the highest level since the 1960s.

Last week the dollar tumbled to a 15-year low against the Japanese yen. This despite the fact that the yen itself is becoming weaker, as the Bank of Japan tries to hold down the value of the currency in order to encourage exports.

In the last six weeks the dollar has declined 7 percent against a basket of major world currencies.

Spending by Americans dropped 2.8 percent last year. This is the first decline on record. Even as American consumers had to limit their consumption, spending on healthcare shot up by 9.6 percent.

Read the rest of the article at American Thinker

Predatory Governance

There is a telling passage in the Biblical book of Nehemiah. Its author, the man whose name the book bears, served as governor of Judea in the 5^th century BC. In the fifth chapter of the book, Nehemiah speaks of the rule of governors who served before him. This is how he puts it:

But the earlier governors – those preceding me – placed a heavy burden on the people and took forty shekels of silver from them in addition to food and wine. Their assistants also lorded it over the people.

In this short statement, Nehemiah inadvertently captured the nature and essence of the state: It lords it over the people. This is its universal characteristic. Be it the pharaoh in ancient Egypt or the caesar at Rome or a medieval king or the modern managerial bureaucracy – they all run roughshod over the citizenry. They all extract money from the people and destroy or kill anyone who dares to oppose them. This is as true in contemporary America as it was in the days of the Roman tax-collectors. The state oppresses and plunders regardless of its geographical location or time in history. The loot is then used to enhance the well-being, prestige and power of those who hold its reins.

Today this dynamic is playing out before our eyes in a truly striking way. Even as the economic situation keeps deteriorating and many Americans face joblessness and hardships of various kinds, our “governor” – the president – and his “assistants” surely live it up.

According to recent analysis by USA Today, government employees earn twice the compensation of their counterparts in the private sector. To work for the state is profitable indeed:

Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation gap between federal and private workers has doubled in the past decade… Federal compensation has grown 36.9% since 2000 after adjusting for inflation, compared with 8.8% for private workers.

Many elected politicians and their families lead extravagant life. It seems there is some party in the White House every other day. The president’s wife travels to foreign luxury resorts where she books sixty rooms in a trip that costs hundreds of thousands of dollars. She does this while ordinary Americans – whose taxes paid for the trip – struggle to make ends meet.

Economist Murray Rothbard called the State “a gang of thieves writ large.” Rothbard’s observation is no hyperbole. That is exactly what the state is. When stripped of the phoney aura of statesmanship, Charles Rangel, Barack Obama, Nancy Pelosi, Maxine Waters, Charles Schumer, Harry Reid, Dick Durbin, Christopher Dodd and their compadres are that gang of which Rothbard spoke. They scheme and plot and extract money from the productive and then give it to themselves and their armies of minions who keep them in power with their votes. The American federal government increasingly resembles a redistribution racket that is run by operatives who call themselves public servants.

Many of us have been blind to this, because we have been brainwashed by the decades of government propaganda dispensed through the public school system, universities and the media. But the behavior of the political class has recently become so brazen and outrageous that scales are falling from people’s eyes everywhere.

Continue reading at American Thinker

The Main Thing

That the world economy is in turmoil is quite obvious. But it is less obvious what the problem is and where it will lead. Neither are the wise men very helpful. Some of them tell us that things are getting better and we will pull through. Others lament that things are critical and all is lost. The President’s financial wizards assure us that the situation is under control.

They all offer erudite analyses to prove their point. Most of those analyses contain complicated concepts and data that are difficult to grasp. Very often they yield contradictory results.

So how does one know whom to believe? How are we to make sense of all his jungle of abstruse analysis and conflicting material?

As we try to cut through the confusion, we would do well to take a cue from Lee Iacocca, former President and CEO of the Chrysler Corporation, who once said: “The main thing is to keep the main thing, the main thing.”

Here is the thing: A number of western governments have contracted more fiscal obligations than they can conceivably cover. It is this immense burden of government debt that will drive global economic events in the years to come.

Strictly speaking, government debt is not an economic issue but a fiscal one. But fiscal excesses always have economic consequences. This is because they invariably weaken currencies by inflationary pressures.

Continue reading at American Thinker

Money and the State

In the introduction to What Has Government Done to Our Money, Murray Rothbard – one of last century’s most brilliant economists – made an incisive observation. Rothbard noticed that most people, including most of those who consider themselves free marketers, “never think of state control of money as interference in the free market.”

Rothbard’s point is almost universally applicable to those of us who call ourselves conservatives today.

Many of us believe that government cannot do things aright and that eventually it wreaks havoc on everything it puts its hand to. This is confirmed by endless empirical evidence as well as by theoretical analysis of how government works.

The inner dynamics and workings of bureaucracies are conducive neither to efficiency nor to wisdom. And even if they were, they would still be counterproductive because life is simply too complex to be run by technocrats. It is, therefore, no surprise that government agencies and departments do not solve problems. They only make existing problems worse and create new ones in the process.

Ronald Reagan got it exactly right when he remarked: “The nine most terrifying words in the English language are: I’m from the government and I’m here to help.”

In light of this, we need to ask this question: How is that we who hold such low view of government see nothing wrong with the the fact that it runs and controls the very lifeblood of our economy – money.

Think about it. We believe that government cannot do anything well, and yet we never question its ability to manage the currency. This issue is not even on our radar screen. In other words, we do not even see that there is a problem. But we most definitely need to see it, because it is a huge problem.

If our underlying view of government is correct, then the government will eventually destroy our money. Given our worldview, this is the inevitable consequence of the way things are at the moment. This notion can be expressed in the form of a simple propositional argument:

Government eventually ruins that which it controls and manages.

Government controls and manages our currency.

Therefore, government will eventually ruin our currency.

If the initial premise is true, sooner or later the dollar will be destroyed. The conclusion follows logically from the first premise.

Continue reading at Canada Free Press

The Death of the Dollar

Nothing can save our financial system in the long run.  It is doomed to collapse. This is inevitable, because our government controls and manages its very foundation — the dollar.

The federal government began its takeover of the dollar in 1913 when it established the Federal Reserve Banking System. Prior to that the dollar was a real store of value. In the period from 1783 to 1913 there was a long period of currency stability with virtually no inflation. If you saved one dollar in 1800, your great grandchild could buy roughly the same amount of goods with the same dollar one century later.

Continue reading at American Thinker