What political and economic trigger points will make you look for a port in the storm

05-28-2011 • LewRockwell.com

The passage of the Patriot Act of 2001 was a blow to liberty. The development of the Internet since 1995 has been a much greater advancement of liberty. To shift the analogy, we are now in a "two steps forward, one step back" scenario. I think we have been since the end of the Vietnam War. The defeat of the United States was visible. The government has sought to reclaim the old trust, but it has failed to do so. The public accepts inconclusive, drawn-out wars in the Middle East only because it has no commitment to victory. Voters assume that there will be no victory. That is not the basis of strong political commitment. That is not the basis of that crucial form of political capital: legitimacy. The public's support of the Federal government has been reduced to the Valley Girl's shrug: "Whatever." As long as the public gets access to its entertainment and does not suffer immediate pain, it ignores the Federal government. Bureaucrats prosper, but the tax resistance is forever. The Federal government has been unable to collect taxes in excess of 20% of GDP since 1946, and it has never collected more than 23%. The pubic loves increased spending, but only if it is borrowed. So, money is borrowed. That borrowing is now facing resistance. The Federal Reserve is creating money to buy the deficit. China isn't. Japan isn't. PIMCO isn't. Interest rates are low because only the Federal government is borrowing heavily. The Federal debt climbs relentlessly. The public does not care enough to accept cuts in spending, but it will not tolerate tax increases. The debate over the deficit is gridlocked. That means more debt. It also means default. Today's "no pain, big deficit" will become "big pain, big default." The only question is this: By what arrangement? Hyperinflation? Outright default? Piecemeal default?