New York State Has First Deficit in General Fund – New York Times

As we can plainly see in an article from today’s New York Times entitled New York State Has First Deficit in General Fund we have a growing and very dangerous problem.  The states are running out of money to operate.  And in a related editorial put out by the Times editors entitled Failed State we read that the editors of this fine old standard of American journalism are seriously calling for the complete culling of the state legislature for New York staters to start all over again with a clean slate of lawmakers.

Why is this happening?  Very simplisitically, we "borrowed" more money than we actually have on hand and now the bill is due.  We bought short term financial security on a generations-long system of credit lending and buying to individuals, institutions and government entities and those transactions simply did not have "real" revenue to cover the expenses we were racking up. We are dead broke.

In a third article from today’s New York Times called Heart-Stopping Fall, Breathtaking Rally we get a rare and fairly easy to understand view of how we have deluded ourselves into thinking we were rich.

It seems that in 2008 the market on Wall Street fell by 38%. That is an astounding crash.  But in 2009 the market on Wall Street recovered by an astonishing 25%.  But here is the rub; it did not matter much on Main Street.  There was very little, if any, bleedover to the average American. 

Finally, we are getting real about what money deals on Wall Street can and cannot do for the average American.  Wall Street and Main Street are barely connected anymore.

Here are some excerpts from that article.  They are breathtaking in their simple call for a complete reevaluation of our understanding of our so-called "wealth" in this nation.

"This was the year that Wall Street turned a crash into a bang.

Stock markets will ring out one of their most volatile periods in history Thursday with an incredible rally that replenished half the losses caused by the financial crisis.

While the Dow Jones industrial average zigzagged through the last 10 years to finish near its start, 2009 proved to be the best year after the comeback in 2003, which followed another epic crisis, the dot-com bust….."

"If recent signs of growth fizzle out, markets could once again lose their ebullience, as they have several times in the last two years. A solid recovery would push stocks higher, though few analysts expect the market to repeat its stunning 2009 performance.

“There are long, long periods of time when the market and the economy go two different ways,” said Barry Ritholtz, a professional investor and author of “Bailout Nation,” a book about the causes of the financial crisis. “A rallying market doesn’t necessarily mean the economy is healing…..”

"At the same time, investors could also grow fearful of the huge bill that America is accumulating to spend its way to recovery. The White House estimates government debt accounted for 90 percent of the economy’s total output in 2009, up from 70 percent a year earlier. While the cost of borrowing for the government and others remains historically low today, it could surge higher in the coming years…."

In short, the news about our understanding of money and how it should be used as a national community is not good.

We are in for a long national struggle connected to how we view money as a nation and how we, as a group of consumers and savers, together decide how to spend it.  There is now much less "real" money to spend than we have had since World War II.  Every dime is now much more important than it ever really was in our lifetimes.  Our borrowing days seem to be very quickly coming to an end.  Credit can be almost impossible to obtain, even for states.  Ask the state government of New York.  They can tell you.  Money is very, very tight.

So, I ask you, should we be waging war against west Asian sheepherders that simply war with us because they want us out of their countries? Do we have the money for this foolishness?

How did we get into this mess and more importantly, how do we get out before we literally bankrupt ourselves for the sake of the Wall Street oligarchs who seem to be the only ones making money on this travesty of justice and assault on common sense.

CWO3 Tom Barnes, USCG (Ret.)