Is America’s economic future hopelessly lost? Reply

The Washington Times

HONOLULU, January 26, 2013 ― With national optimism now at a historical all-time low since the Carter Administration,  many are wondering whether or not America’s best days are behind us. Scarce  employment opportunities and rapidly rising costs of food and energy have made  life increasingly difficult for young and old alike.

For a perspective on the declining fortunes of America and what’s next for an  entire generation of young persons looking for both work and a sense of  self-value in the middle of the worst “recovery” in U.S. history, I sought out  economist and author Aaron Clarey.

Clarey, famously known to fans as “Captain Capitalism” from his highly popular blog, believes that there are “serious structural economic problems with the U.S. economy” and has published a new book entitled Enjoy the  Decline which tells readers how to brace for the coming time  of trouble. When I asked Clarey if he thought there was a D.C. policy  solution to this crisis, he told me that would involve serious reform to  entitlements such as Social Security, Medicare/Medicaid and constitutionally  eliminating corporate taxes – a therapy seen by many contemporary legislators as  so controversial that Clarey concedes “in other words, no, there’s no hope  whatsoever.”

Nevertheless, though times may be dismal, Clarey assures readers however that  one of the most important things to focus on right now is finding value in one’s  family and friendships and committing one’s self to living life in spite of the  fear of what is going on.

Danny de Gracia: Aaron, you’ve published several  economics and finance books on contemporary topics like Worthless: A Young Person’s Indispensable Guide to Choosing the  Right Major, and now you have a new book out, Enjoy the Decline, which talks about the collapse of the  American system. Tell us a little bit about yourself and how you got interested  in economics.

Aaron Clarey: My interest in economics had its origins in  high school when I took my first economics course. I realized because of the  mathematical and statistical nature of it, it was very much like math class and  nothing like English class. It was empirical and there was no room for error or  debate. Thus if you just studied a little bit of economics you would know more  than most adults about not just the world of economics, but politics, sociology  and all the other “amorphous” sciences.

DDG: Let’s talk a little bit about your newest book,  Enjoy the Decline. There are a lot of people in office right now who are calling  what we’re in a “recovery.” Do you think that a crash of the U.S. economy is  inevitable? What’s on your radar for the future of America?

Aaron Clarey, also known as “Captain Capitalism” is  a popular economics and finance blogger and author.

Clarey: If I knew the answer to that, I would be retired,  drinking margaritas on a beach with Jennifer Aniston. Nobody can predict the  economy, but to specifically address the question, by technical definition we  are in a recovery. RGDP growth is positive, the unemployment rate is coming  down. However, this is the weakest “recovery” in history and by most measures,  it is a stagnation.

Income or GDP per capita has remained flat … yes, GDP is increasing, but so  is our population. The unemployment rate is going down, but that is more a  function of people leaving the labor force out of frustration and hopelessness  than job creation. You also look at all the new entrants to the labor market and  I would estimate only half of them are fully employed with the other half  severely underemployed.

You throw in the massive amount of debt we’ve incurred in the past five years and the fact it was spent on stimulus, it not only shows you some  serious structural economic problems with the U.S. economy, but that this  Keynesian dream come true has become a spectacular failure.

As for what is in the future or if there is going to be a crash, I would say  the U.S. is in decline, the rate at which is up to the future. There  could be a slow decline much like France or Italy, or it could be a rapid  collapse triggered by some unforeseen economic event, or something in-between a  la Greece. Regardless, the statistics show a decline. Rolling average RGDP  growth shows our economic growth rate going from 4.5 percent in the 1940s to  1960s to 2.2 percent for the past twenty years. This decreasing economic growth,  with an increasing population and an increasingly unsupportable debt only  ensures a decline, barring an economic miracle.

DDG: What was your take on the “solution” we saw earlier  this month to the so-called fiscal cliff crisis?

Clarey: Band-Aid put on a cut aorta.

DDG: My concern is that inflation is distorting all  levels of American society. For example, as prices skyrocket from monetary  dilation at the Fed, we have this effect where as Rose Wilder Lane says, everything becomes increasingly more  expensive and government starts creating laws and fines just for the purpose  of revenue generation. So the formation of a police state and this loss of  freedoms is in large part a result of government wanting to get more and more  revenues to finance outlays that are being dilated as a result of the inflation  they themselves are creating. What’s your take on this?

Clarey: I don’t know if it would be at the police state yet  where the federal government comes in and confiscates wealth, as much as it is  something much more clandestine. The government likes inflation in that it  increases asset prices. Thus when somebody sells an asset – land, stocks, bonds,  et cetera – they have to pay a capital gains tax.

Forget whether there was an actual real rate of return for the investor, the  government gets to tax the real capital gains and the inflationary capital  gains. Inflation also erodes the value of the federal debt, forcing the costs on  US treasury holders. However, unless things change, the government will be  forced [to cope with] with a simplified problem: Does it inflate its way out of  its debts or does it confiscate wealth to pay for it?

I can’t read Paul Krugman and Barack Obama’s minds – if any exist – but I  believe they will opt to go the inflationary route to solve the country’s debt  problems. If they went the wealth-confiscation route, that would mean  nationalizing people’s IRAs, 401(k)s and brokerage accounts much like they did  in Argentina and Bulgaria. I fear however, because of their political ideology  they have no problems doing both.

DDG: I think a lot of young people who are in high  school right now either in their junior or senior year are looking at what’s  going on right now and wondering what kind of future they’re about to step in.  Isn’t there some policy course that can be taken to stop America from completely  going into the gutter for future generations?

Clarey: Yes, it would be to increase the retirement age, cut  Social Security, Medicare and Medicaid, and to pass a balanced budget amendment.  Constitutionally eliminating corporate taxes would also help spur economic  growth so these kids might have future employment prospects. So in other words,  no, there’s no hope whatsoever.

DDG: What do you think the future of the world’s  monetary system will look like?

I believe different currencies will vie for the title of “reserve currency”  with no clear leader.  The Chinese have their own often under-reported  economic problems that I believe will prohibit the Yuan from achieving such a  status. The Euro is plagued by problems about 1.3 times as bad as ours.  Australia, Switzerland, Norway and so forth have great fundamentals for  currencies, but their economies are too small to achieve reserve status. And  Russia, India and Brazil are too corrupt to make an effort either. Sadly, simply  because of the U.S. historical reputation and relative non-corruption, the  dollar will probably remain the default reserve currency, in spite of the  country’s economic fundamentals.

In terms of central banking, I believe the industrialized world will follow  the path of Japan, where it is in a constant state of expansionary monetary  policy, completely ignoring the fundamental of classical economics – [that is,  giving] people an incentive to work and produce, not interest rate/borrowing  monetary hocus pocus.

DDG: So do you think Ron Paul and Peter Schiff were  right?

Clarey: Of course they were. There’s no opinion to be had  about it. Economic reality has proven them correct.

DDG: Aaron, in closing is there any advice you’d like to  give to our readers and the nation right now?

Clarey: Focus your efforts on enjoying your life, your  family and your friends. These things are not under the control or influence of  politicians, central bankers, lobbyists or international organizations. You get  one life on this planet and you need to make the most of it, accepting what you  do and do not control is the single best thing you can do to achieve that. I  would say nearly half the book Enjoy the Decline is dedicated to that  one topic: making you happy in this environment.

 

Danny de Gracia is a political scientist who lives in Hawaii. For more  articles, interviews and to find out more about Danny, follow him on his official blog!

Read more: http://communities.washingtontimes.com/neighborhood/making-waves-hawaii-perspective-washington-politic/2013/jan/26/aaron-clarey-on-the-decline/#.UQSS0F642uQ.twitter#ixzz2JSmAZOzO Follow us: @wtcommunities on Twitter

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