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August 28, 2009

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Yesterday I had lunch with another of our clients who told me his strategy for survival in this economy. Sell to the government, any government: state , local or Federal. They all have money. Not necessarily their own, but they have it from the Feds. And so it goes over and over again. Everyone who is doing ok these days seems to sell to the government. And then when you look to see who is hiring you find it is the Federal Government. The expansion of government jobs is immense. So the government is buying and hiring. No one else is. What does all this mean?
It appears to be a sort of self defeating cannibalism. You expand the government to create employment and to buy things to stimulate the economy. But, to do so your only revenue to pay salaries and buy things comes from the same people you are hiring and selling to: the taxpaying public and businesses. Now let's see the math: you pay out at 100% and take in at let's say a 30% tax rate. That seems to be the same logic my friends often give me when I am asked to make a charitable contribution: well you get to write it off. Yep and that saves me 30% but the donation cost me 100%. So if I donated all my money to charity the government would give me 30% back. Is that a good logic to make a donation? Then why is government expansion and spending a good move?
This cannot go on for long. The spiral requires debt to keep paying out at this -70% return. Debt we cannot service without printing money to pay it so we deflate the currency. This creates international instability as our creditors fret over declining value in the dollar. Then sooner or later the creditors stop lending. Much the scenario that all of the small businesses in America face today. What the world needs today more than ever is a modern day Ronald Reagan. And quick. Someone who will cut the spending. Someone who understands the world of capitalism. Someone who understands the value of domestic oil and gas production. Someone who will inspire and unleash American industry rather than constrain it. Sarah Palin comes to mind.
Soon Nevadans will take out Harry Reid. America's seniors will reverse the House majority. The young adult parents with children targeted to pay this debt will reverse the Senate balance. The revolution of taxpayers will not subside and Obama's promising
first term will be mired in confrontation just as Clinton's was with scandal and GWB's was with Iraq. In fact this reminds me exactly of the days before LBJ announced "I will not seek a second term" after the protests of Vietnam. And who are those protestors of Vietnam? The seniors of today, very experienced in bringing down Presidents who don't listen to them.
This is the credit card generation and they all know the perils of debt you cannot pay. Whether this Administration is just ignorant or hell bent on a social revolution doesn't matter. The end is already in sight. The people are smarter than this President and just as determined. After all, many of these people put their lives on the line to defend this way of life in War and they sure as hell aren't going to stop now.
I wrote this today, Bo, becasue your trip to England brought to mind how the communist system of Russia (that so many of Obama's czar's seem to believe is a good model)failed. It spins the money around in a circle with the communist ( 10%) elite taking from the top and the inefficiencies created with no motivation for the workers to be creative until all the money is gone. And then collapses into a system of corruption and black markets. So I thought why not describe where the USA is headed today?

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