Sunday, March 18, 2012

1929 Was Nothing....

"George, I've guaranteed the bank sufficient funds to meet their needs.  They'll close up for a week and then reopen."

"He just took over the bank." 

That scene from It's A Wonderful Life signaled the start of the Great Depression.  In 1946, when the film was made, the start of the Great Depression was a fresh memory in everyone's mind.  Coming out of World War II people were starting to connect the dots from the start of the Great Depression to the start of World War II.  World events often have a ripple effect across the globe.

Right now everyone is watching Greece and it's shattered economy rippling through Europe.  Well, while everyone watches Greece very few people are paying attention to the 12th largest economy in the world, Spain, who's eminent collapse will make Greece look like someone being $10 at their local bank.  Spain has 25% unemployment, 50% among young adults.  All this since Spain decided to be the leader in Green Energy in Europe.  Unlike George Bailey there is no Clarence waiting in the wings (pun intended) to save us.

All indicators are there showing that America is heading for a Depression that will rival 1929 and the Depression of 1873 which was a worse initial collapse than 1929 but President Buchanan smartly stayed out of it and let business cycle through it.  Economic cycles usually work themselves out when left to free markets to continue.  Even when unemployment hit 14% and 89 railroads failed the cycle swung upward by 1879.  The Government meddling with the 1929 Crash extended it 12 years when if left unaided many economists feel it would have been over in six years. 

Now, in 2012 and worse yet in an election year, if further economic collapse happens in the United States directly attributable to Spain and Greece and the Euro and the Middle East and myriad other factors watch the current administration dive in the deep end without checking the depth of the water.  Remember 2008 and the "Stimulus"? 

A policy of non-interventionism by the United States would help shield us from these ripple effects to some degree.  In this world of global economy we could not be naive enough to think we could close our doors and borders completely but there are things we can do.  Dramatically shrinking Government is the first step.  Stop loaning money to countries that we ourselves are either borrowing from China or printing phantom money by the Fed.  We need to instill a pride in America that has been missing for a while and urge people to get off the Government payroll.  Private industry and business can absorb all of these cut backs and make for a stronger economy.  We have to phase out social security.

Now please notice that I said phase out social security.  Not immediate stop, not strand people who depend on it now or are planning to use it who are near retirement age, but a phase out.  How would this happen?  Here is a plan I hatched a few years ago:
Lets say we started this phase out on January 1, 2013, here is how it would work.  Every person who has a social security number who has not yet reached the age of 22 (average age of college graduates) will be exempt from paying into social security and therefore will not have social security upon reaching their retirement age, be it 63, 65, 68, 70 or 100.  The Government can then call on private investment firms, banks, mutual fund operators or what have you to start an education program for this trailblazing sect of American's who will be responsible for their own futures.  We can impress upon them the fact that they are working without a net and that they must take steps to assure their own futures.  Just like our great grandparents did and their grandparents and so on.  These people would also not have social security deducted from their paychecks.  No passing on our mistakes to our children.

People at or above the age of 22 can have the option of stopping social security deductions from their pay and taking on the burden of their own retirement.  Social security paid already can be disbursed in smaller amounts at retirement or a rollover program could easily be instituted (directly from Government to Plan Administrators) because what they have paid in to phase out date is rightfully theirs.  But how will be pay the people that are now taking social security or approaching retirement age?  Easy.  The cutback in Government will release billions of dollars that can be funneled into the social security coffers so that Government can fulfill the obligation it has to these people.  Also, people who have means who would not normally have a need for social security could be left to option their payments to date as a charitable contribution to the system which would trigger a charitable tax deduction that could be taken over a span of three to seven years that would not be refundable but would be used to reduce their tax.  Again, the reduction of Government would cover the income tax loss for the short term.  Over time as the tax burden ebbs for fulfilling social security obligations taxes can be reduced for the running of a leaner America experiences unprecedented growth.

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