How often have you heard the phrase “the government will never let it happen”? It almost doesn’t matter what the topic is you are talking about, nothing “bad” can ever really happen …or so it is thought. The reason, of course, is because we are so many years into “MOPE” (management of perspective economics). No matter what has happened in the past, the media, Wall Street, and the government have constantly spun the narrative to lead the “perspective”. MOPE has been with us for such a long time, it is not surprising the public is conditioned into believing nothing bad will EVER happen.
We could go through the exercise of “how” and even “why” MOPE came about but that might end up being a novel. Rather, I believe there is a core how and why. Put simply, MOPE became a necessity to protect the ability for the U.S. to borrow …AND to issue the dollar as the world’s reserve currency. This topic, by the way, is a chicken or the egg question but really no longer matters as we are in the very late innings of the credit game.
You see, the U.S. has run a budget deficit every year since 1960 which means they had to borrow funds to keep the doors open and the machine running. Foreigners provided for many years to cover the shortfall and also willingly (for the most part) accepted and used dollars for trade. Rather than live within means, the U.S. fell into the trap of borrowing more to pay back past debt with more new debt and not allow living standards to “clear”. Mother nature saw this and began to drain the Treasury of gold in the late 1960’s which led to the U.S. defaulting on Aug.15, 1971 …which kicked off the need for MOPE.
Fast forward to present, “credit” has been used all these years to fund MOPE …which created the need for even more credit, dollars issued and thus the further need to manage perspectives. The Treasury market and the ability to issue dollars as payment for trade deficits are THE core reasons for all the lies and subterfuge these many years. Without the ability to borrow new funds, or the ability to create dollars that are accepted for the import of real goods, the U.S. would be completely cooked. The result would have been and will be …much higher interest rates and far lower exchange rate (purchasing) powers. In other words, we over lived our means for many years. Adjusting to a real and sustainable standard of living will be seen as complete collapse even though it will only be levels that were natural in the first place.
