Consumer Confidence and the Fiscal Cliff
Consumer Confidence and the Fiscal Cliff Hoax

It’s the Holiday Season once again and that means attending too many parties and entering too many familiar conversations. I kind of promised myself (and others) to avoid participating in political discussions  of any kind whether it concerns gun control, Obamacare or the looming fiscal cliff rhetoric. So instead I have been listening and reading, instead of participating and what I have found is utterly distressing.

I am deeply saddened by the horrific mass murder of little children in Connecticut, but even this atrocity will not change the path we’re on and listening to combined government reactions that path will only accelerate the disarmament of future victims. It’s because the chattering class focuses on the tools used by killers, rather than on what made them killers in the first place. It’s that and the ethically and morally degraded state of society that I blame. Columbine and Aurora, Colorado, Virginia Tech Massacre, Newton Connecticut, Utoya Island Norway, German School killing in 2009 and hundreds of other massacres have proven one thing, guns can be obtained, no matter what the Law of the Land is.

Almost without exception the killers were recipients of drugs like Zoloft, Ritalin, Prozac or some similar psychiatric drugs, but no red flags there????

So I listen to the extremely emotional conversations and realize that pandering politicians will absolutely have no choice but to “do something” and that means in general catering to some of people’s deepest emotions: fear and anger. And giving them what they think they want: vengeance and the appearance of safety. They’ll call it “justice” and “reasonable” gun control, but it will be neither. Mark my words.

The Looming Fiscal Cliff

More in the field of my expertise are the conversations about the looming “fiscal cliff” and I just get cold chills when I hear supposedly intelligent people express their views on economics, while defending politics. Let’s make one thing very clear: it’s not the US economy that’s facing this alleged cliff, it’s the US government… well actually a large number of industrialized (is that a misnomer these days?) countries across the globe.

Love this cartoon!

Well not one person I’ve heard expressing their politicized opinions on the fiscal cliff really understood the real issue; yes they are aware of the ingredients as the simultaneous expiration of the Bush tax cuts and automatic spending cuts mandated by the Budget Control Act of 2011 that go into effect next year, but the real issue is so much more severe than marginally bringing government spending down while raising taxes to historically unacceptable percentages.

The real issue is that both political parties in the US think that the economy is fueled by confidence, consumer confidence. It is often proudly paraded by pundits that our GDP is 70% consumer driven and therefore if they can only restore confidence, the economy will grow.

Wrong!!!!!

The economy itself is the aggregate of all the people, businesses, inventory, manufacturing plants, mines, farms, transportation networks, research facilities and accumulated capital of all the participants. And the economy grows when people produce more than they consume, and save the difference. They then have capital to put into new ventures, create new jobs, develop new technologies, and so forth. And frankly No government is needed to make this happen – rather the opposite.

But the average American, who is unfortunately completely ignorant of economics, thinks the government is a magic cornucopia, not grasping that the government, of either one color, has been kicking the can of complete economic ignorance down the road for many years now. The reason why we’re at the Fiscal Cliff talk once again is because the can that was kicked down the road almost two years ago is in plain sight again. They didn’t think then that they would have a new solution today – they only wanted to escape certain impending doom… and hoped magic would happen. They have no solution, not then, not now. They’ll just try to put off judgment day once again. They’ll do it by selling hundreds of billions more in debt to the Federal Reserve – they’ll have to because the Chinese and Japanese aren’t buying anymore.

So where does that leave us?

It leaves us with the real question: What does get the economy going?

The answer is almost too simple: PEOPLE.

People can’t just sit at home because they lack confidence; they’d starve. They have to work, create, build, invest – deploy their capital, whether that be financial, intellectual, or the time they can sell to employers.

History has proven time and again that if the economy isn’t growing, it’s not because the government isn’t spending enough to “stimulate” it. Government spending comes from: taxation, which is a burden on the economy; borrowing, which is a future burden on the economy; or printing money – inflation – which is an especially dishonest, hidden form of taxation that makes people think they’re richer while they’re being impoverished.

No. If the economy isn’t growing, it’s because the government has burdened it with heavy taxation, smothered it with excessive regulation, distorted it with false information (the Fed’s manipulation of interest rates), and replaced real money – gold – with paper. And consequently people have become disenfranchised, confused and yes…ignorant. Ignorant mostly of the fact that the Fiscal Cliff is merely a diversion to keep  us away from the real problems called derivatives and a dollar crisis.

People today think it takes government to smoothen out an economic business cycle back into growth. Nothing is further from the truth. If we think it takes a sign from government to become confident again and restart the economy, we’re sadly mistaken. It takes entrepreneurial effort and ideas. Big and small ideas and a government that steps out of the way.

I recently went to re-visit a big idea called Disney World after a 30 year hiatus and witnessed first hand how the vision of one man created a sustainable one pillar economy outside of a swamp town called Orlando, 40 years ago, and how 66,000 people are now directly and gainfully employed on a concept that celebrates mankind and imagination.
With that in mind I am not too deeply concerned about the future of confidence in this country. More about that in another essay.