We’re Broke

Global stock markets have been plummeting. Where the bottom is, nobody knows. There will be gut-wrenching zigs and hopeful zags along the way; they will be of larger magnitude and-in our digital age of instant response-will occur with greater rapidity than ever before. Perhaps we are near the bottom. Remember, “the darkest hour precedes the dawn,” although it will take somebody smarter than me (and future historians) to pinpoint when the bear market ends.

What are stock markets telling us? I think they are signifying that we are broke, that, collectively speaking, the United States of America is bankrupt. How can that be, when so many businesses are profitable and so many Americans are gainfully employed and making ends meet?

I think we are financially bankrupt in at least two ways. There is way too much leverage and way too much debt in the financial system (see “America’s Debt Problem” for details). Leverage and debt are two-edged swords. When used in moderation, they can be constructive; when used to excess, they become destructive. Both the leverage created by financial institutions and debt (and here I include the implied debts of Uncle Sam’s massive unfunded liabilities) have soared-leverage into the hundreds of trillions and debt into the tens of trillions of dollars-and the financial system is now tottering under the burden of that dead weight. Sooner or later, this unsustainable mountain of leverage and debt will utterly collapse; whether that collapse is imminent or can be postponed, I know not.

Our real bankruptcy, though, is not financial, but political. George Washington once said, “government is like fire-a handy servant but a dangerous master.” Indeed, government (like debt and leverage) is useful when under control and dangerous when out of control. By trying to be all things to all people, Uncle Sam has led our nation into bankruptcy. But let’s not place all the blame for our predicament on government and politicians. We are at fault, too. “We, the people” have repeatedly voted for those who have expanded government.

Today, we are living through a gigantic crisis. As you may have read before, the Chinese character for crisis is comprised of the characters that denote danger and opportunity. That is exactly what we face here-great danger and great opportunity.

The danger is that we will demand more and more government programs to take care of us, even though it is Big Government that has bankrupted us. Bigger government was the policy of Hoover and Roosevelt during the Great Depression. As the economic factors of production (resources, labor, and capital) were diverted from the private sector to the public sector, the depleted private sector inevitably stagnated, producing a vicious cycle: the greater the private-sector stagnation, the greater the apparent need for more government intervention, and since government planning is inherently inefficient, the more sluggish the overall economy remained.

The opportunity we now have is to renounce the errors of our ways. We can forsake our debt addiction-the bad habit of enjoying things today while paying for them later. We can relearn the lesson that capital is an economy’s lifeblood, precious and limited in supply, and therefore that it is to be invested wisely in wealth-creating enterprises rather than used to just create more financial paper to generate commissions for financial gamesters.

Most importantly, we can reject the demoralized desire to get something for nothing through the political process. We have made a false idol out of government. Government doesn’t create the wealth that raises standards of living; profit-seeking individuals and businesses do. To use a biological analogy, the private economy is the host, and the government a mere leech on that host. We need to understand that it is not within the power of government to create wealth sufficient to guarantee our retirements, to pay for our health care, or to give everyone a house or an income, because in trying to do so, government slowly bleeds the productive economy-the private sector-to death.

So, which will it be? Will Americans seize the opportunity to return to free markets, and return to the ethos of self-responsibility and voluntary charity for those in need? Will we rediscover the value of thrift and deferring present gratification? Will we insist on sound money and renounce counterfeit paper “wealth” that is being vaporized before our eyes? Will we reject the seductive ethos of “something for nothing,” reaffirm the sanctity of private property, and get government out of the destructive business of redistributing wealth? Or will we live dangerously, and beg Uncle Sam to do anything-even nationalize everything-as long as he takes care of us?

From what I can see, the American people want more government. Most of us prefer the devil they know-Big Government-to the great unknown-free markets. How ironic and tragic that we would defeat socialism in the Cold War and then voluntarily put the chains of socialism on ourselves.

Subscribe to CE
(It's free)

Go to Catholic Exchange homepage

  • Dave

    Well said and easily understood… but highly doubtful that it will be read or approved by proponents of big government. Pray that the next four years lead to an enlightened citizenship and a return to morality in all aspects of life.

  • Warren Jewell

    Golly gee, (George Washington might have not said in these terms) ISN’T GOVERNMENT WONDERFUL?

    Even that silently intuitive leader would not see how we could EVER permit our governance to be dictated by a non-human monarch – the dollar bill with HIS picture on it. And, these same dollars will be used to chain us to socialistic ‘solutions’ that are just worse problems.

    Of course, too, Washington and his illustrious fellows would just shake their heads at our incredible ignorance. (“What ARE they thinking?”)

    Toqueville saw us as majestically led by our faith and our determination to freedom. He saw the two so closely knitted, that Christian freedom – where, remember, truth abounds – was intrinsicaly that which made the U.S. so different and so powerful and so potentially great. (Ever remember hearing anything of this in any school course in your life? How about just the suggestion that we read Toqueville?)

    I recall Dick the Butcher’s call out of Shakespeare – ‘first, shoot all the lawyers’ – that would make our politics less crowded with know-better-know-nothings. (Are not our legislative organs loaded with this inherent and breathtakingly and amorally dangerous conflict-of-interest: lawyers writing law for lawyers?) If we then suffer bankruptcy, we at least may get the ‘opportunity out of crisis’ to work toward greatness in Christian freedom once again.

  • http://arkanabar.blogspot.com Arkanabar Ilarsadin

    I’ve kept the original Geo Washington quote for about a decade:

    “Government is not reason; it is not eloquence. It is force. And force like fire is a dangerous servant and a fearful master.” — George Washington, First President of the United States.

MENU