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Lessons from Greece

Below is the rough transcript of some remarks I made at the campaign's successful fun-raiser at the American Sandwich Company in Coopersburg on June 6, the 66th anniversary of D-Day.  More details on the fundraiser in tomorrow's post.  The event began with a moment of silence for veterans, especially the 5,490 soldiers who have died so far in Iraq and Afghanistan.

"Today we face a D-Day of a different sort, and while there is still war, the causes are economic. At the last Towne Hall, I presented “The Economy in Pictures” where I demonstrated that unemployment is >>17%, 1 in every 8 Americans is on food stamps, the FDIC that “insures” bank accounts is hopelessly insolvent, and the true national debt is really $120 Trillion - when the $13 trillion in US treasury debt is added to the unfunded liabilities of Social Security and Medicare -  a vast sum that is best put into personal terms as $400,000 for every man, woman, and child in the United States.  At this point, even if the government were to tax 100% of each citizen's dollars and properties, there still would not be enough to theoretically pay off this debt.

The plan the country should follow is very similar to an engineer solving a problem, or a doctor treating a bleeding patient. First we must contain the problem, then determine root cause, then take corrective actions. The steps are easy and simple enough, though this doesn't mean Congress will follow them. Let me recap.

To contain the problem, we must first stop all new taxation and all new spending. This means no healthcare tax, no cap and trade energy tax, and no inflation tax by the money-printing of the Federal Reserve.

Next we must stop all new spending – no “stimulus” plans or new federal spending of any kind. Our economic mess is due to the excessive spending and the doubling of the size of government over the past decade. We cannot cure the problems of excessive spending by yet more spending!! And again, we must remember these three words – GOVERNMENT HAS NOTHING. It is not possible for the government to give charity to someone without plundering it from someone else.

Lastly, we must cut both spending AND taxes. To cut taxes, the best tax to abolish is the federal income tax – it is not only IMMORAL that the government has the first claim on the labor of each individual American, but fiscally this tax is UNNECESSARY. There is no better stimulus to work than to remove the government interventions that keeps people from working and employers from hiring in the first place.

For instance 50% of the people who file contribute just 3% of the total tax. However, this does NOT mean they are not taxed heavily. If we slash government spending by the size of the federal income tax, the government would be the same size as it was in 2005. If we do this again, the government would be the same size as it was in 1998, which was still too big.

To cut spending, it really has been an educational experience to campaign door-to-door. Much of the time I feel as if people only grasp half of the whole picture. Some only understand the full impact of the welfare spending and can rattle off all types of statistics on social security or the Department of Education. Others don't understand the true size of the welfare spending, but they can rattle off all the facts you ever needed to know about warfare spending on the wars in Iraq and Afghanistan.

However, a lot of people are open to the full picture once I make it clear I understand where they are coming from on the welfare or warfare spending. Pragmatically speaking, it is very obvious that - while additional welfare spending should be frozen - the first place to make all the cuts is to the $1+ trillion dollar military budget that does not even secure our borders.  The other key place is the hundreds of billions spent on redundant and useless federal departments.  [As outlined in this ppt.]  At least a small percentage of welfare dollars does make it to recipients, and most of this is contractual obligations.

My candidacy represents the only possible way to save both Social Security and Medicare by returning to a constitutionally-limited government on everything else. If this is not done ASAP, there will be a currency crisis with the dollar, of that there is no doubt.

I'd like to talk for a moment on interest rates, which are so important to understand in today's crisis of debt. Many people don't understand interest rates, which included myself not all that many years ago as well.

Interest rates represent the present time-value of money. Interest rates serve as a natural regulator between savings and investment in capital on one hand, and consumption on the other. Each individual or business is left to decide whether to increase cash holdings, to consume, or to build a business or building.

Interest rates serve as a check-valve between the deployment of capital (and the amount of mal-investments!) for economic growth and the savings deferred to the future to pay for the goods and services resulting from the growth.

When central banks increase the supply of dollars by money-printing, this suppresses the market's interest rate in the present. This tends to trick entrepreneurs into spending dollars they otherwise would not have spent into business ventures that do not succeed just because consumers do not have any savings in the future. Meanwhile, consumers tend to consume all the goods and services they can in the present.  Why should they save dollars if the interest rates are so low?  Does this sound at all like 2001-2007?

The imbalances the government has created are only postponed AND worsened by additional suppression of the interest rate. This has played a critical role in not just today's economic depression but also in Greece. Lessons from Greece can help us understand what can also happen to our country. Those who read my column realize I first warned about the collapse of Greece in late 2008, when the rioting first began.  Why was I able to predict this?

Well, unlike most of the 1800s globally and the early 20th Century where the different FED regions varied interest rates to account for regional differences - like the agricultural Midwest or industrial East Coast - the modern FED constrains the economy to the same interest rate for the past 60 years or so.

This is similar to the EU's central bank has done since the currency union was first formed in 1993; not only do they all use the Euro but -- far more importantly -- highly industrialized states like Germany now share the same interest rates as states with very different economies more based on tourism and agriculture like Greece or Spain.

What we may now see out of Europe is a domino effect as the weaker countries from the PIGS group (Portugal, Italy, Greece, and Spain) cannot sustain their levels of debt. In fact, ALL governments in Europe are in debt, it is just a question of how much as the two comedians - err, economists - below point out.

The alternative the EU has is to bind all its governments into one gigantic “bailout nation,” not unlike the current situation with America's 50 states. This will weaken the EU's stronger states like Germany with temporary gains for the weaker states.

However, choosing this alternative of centralization by bailout – as America has chosen with the FED - will only prolong and worsen the inevitable collapse of the paper currencies.

History teaches it is during such a currency collapse that the likelihood of additional warfare increases.

For additional reading on this campaign's ideas on how to fix the economy:


Jake Towne is running for U.S. Congress in Pennsylvania's 15th District in the 2010 election as a citizen unaffiliated with any political parties.


We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

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Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.

Tu ne cede malis sed contra audentior ito. Do not give in to evil but proceed ever more boldly against it.

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