“Defund the police!”
Protesters want to cut the gendarmes’ budget.
Here at the Diary, we’re all for it. Defund the Federal Reserve, while you’re at it. And the Pentagon… Homeland Security… the Department of Education… the FBI… the CIA… the NIH… Congress… and the CDC.
You see where we’re going with this, don’t you? Drain The Swamp!
The feds are over-fed. All of them. Sloppy. Wasteful. Foolish. And worse.
Big and Bossy
The core of the American experiment was that government should be limited and small… It should be The People’s servant, not its master.
But now, our government is so big and bossy, it decides who gets what… who trades with whom… what we can ingest… what we learn in school… It even tells us when we can go outside.
It undertakes wars against people with whom we have no quarrel. It “sanctions” foreign governments willy-nilly. At home and abroad, it tries to push everybody around.
To make a long story short, the feds have gotten too big for their britches, with too much money to spend… and too much power.
Direct Spending
In the deepest part of the Great Depression, the Roosevelt administration never ran a deficit of more than 7% of GDP. Now, the Trump administration is headed for a 20% deficit.
And even in the middle of World War II, the U.S. government spent only 40% of GDP. In the second quarter of this year, the U.S. is borrowing and spending 61% of GDP.
Granted, a single quarter does not a year make. But before the lockdown, the feds were expecting to spend $4.7 trillion this year. Then came an additional $2.2 trillion in corporate and household welfare… with another $1 trillion expected before the end of the summer. This could leave spending for the calendar year at about $8 trillion.
In May, GDP was running at about a $16 trillion annual rate. It’s unlikely the feds’ part of that will be less than 50%.
Spending Limit
And that’s only the direct spending. Add in all the money spent in the private sector complying with the feds’ edicts – tax preparation, regulatory compliance, bobbing and weaving to try to avoid punishment or gain favors – and the part of the economy under the feds’ thumb is probably up to 60% or 70%.
And it’s not going back to “normal” anytime soon.
In the second world war, the feds took a big piece of the pie – 40%. But it was for a single purpose – to win the war. And when the war was won, the soldiers came home and got to work. The economy boomed, and the feds’ share declined to under 20%.
Also, in World War II, Americans paid for the war with real money. They saved. They lent money to the government. And taxes were relatively high.
Government spending was limited, in other words, to what The People were willing and able to provide.
And when the war was over, federal spending fell… and the government itself contracted. Life went back to normal.
Real War
Today, there’s not going to be a return to normal because there’s effectively no limit on what the feds can print and spend… and never any victory in their interminable wars.
Instead, it is just one defeat after another. That’s the point; these are phony wars. Against poverty… drugs… terrorism… COVID-19. They are not meant to be won, but lost. Because the longer they go on, the more wealth and power the Deep State gets.
While the media and mobs focus on the struggle between red and blue… liberal and conservative… Republican and Democrat – Joe Biden goes to the George Floyd funeral… Donald Trump visits the police – the battle that really matters is not even noticed.
It’s the war between the Deep State – with all its beefed-up military hardware, unlimited funding, and self-serving crackpot ideas – and the people of the U.S.
After the Lockdown Crash, for example, investors judged the value of stocks to be only 65% of what it had been before it.
Then, thanks to Deep State (Federal Reserve) funding, the S&P 500 rose 45% – adding about $21 trillion in new value, almost all of which went to the richest 10% of Americans.
So, the 10% of the American public that owns stocks – that is, those invested in the Wall Street system – had a big payday. A person with $100,000 invested made about $15,000 per month.
Most likely, if the Federal Reserve had not funded the stock market, they would have made nothing… and would be down sharply for the year.
Different Levels
Over in the Main Street system, meanwhile, those who qualified got a $1,200 check. If they were eligible for unemployment, they might have also gotten about $1,000 a week.
This money, too, came from the feds’ inexhaustible supply of fake money. They were funding almost everything and everybody.
But not at the same level. Those in the Wall Street system with $100,000 invested got three times as much “funding” as those in the Main Street system. Those with $1 million got 32 times as much.
And since those in the Wall Street system – the Deep State elite, Wall Street, the professoriat, the commentariat, the jackasseriat of The Swamp – control the government and the printing presses, don’t expect any “defunding” anytime soon.
Regards,
Bill
• This article was originally published by Bonner & Partners. You can learn more about Bill and Bill Bonner’s Diary right here.