COUNTRY RUN!

Anyone remember studying about bank runs? People would lose confidence in the bank's ability to secure our deposits, we'd go withdraw them from the bank....along with everyone else, hence the panic. Our solution? Create a lender of last resort, namely, the Federal Reserve, or in other countries, the Central Bank. At the centralized level, banks would secure deposits with a combination of tax revenue treasury debt. That seemed like a problem resolved for many years. Of course, the system necessarily devalued currency and caused several booms and busts, but we all seemed to acclimate ourselves to these swings.

Now, it appears we've reached the bottom of the central bank bucket...specifically, central banks are stressed on the ability to raise funds for government spending through the sale of government bonds. For Greece, which is insolvent, a bank run has evolved into a country run. Greece, like us, have a problem controlling government spending. Add to that a progressive tax system, like ours, that relies almost entirely on rich Greek citizens, you have the ingredients for a country-run. The rich pull the money out of Greek banks and go somewhere else. Those remaining are left to potentially pick up the slack, causing even more pressure and more potential for flight. Now, the EU has to seriously consider bailing out an entire country. If they do, Greece will be healed for the time being. However, without curtailing the systemic issue of spending and taxation, they will just be back at the EU trough in the near future. Also, we have Spain, Portugal, Iceland and Ireland teetering as well. Spain will probably go next. If the EU bails out Greece, it sets precedence for bailing out other nations and jeopardizes the EURO as a currency and the EU as an entity.

Over here, California is Greece. It's insolvent. They have over $500billion in IOU's with no ability to pay, a progressive tax system relying on rich people, while rich people are leaving, creating a bigger hole and, as we have seen in the brilliance of California governance, higher taxes on the rest, which will never fill the gap. Michigan is right behind California. New York, New Jersey, Oregon are all sliding in the same direction of insolvency. The main problems? Well, aside the real estate crash impacting all of them, including Nevada and Arizona, the states I mention are like the Federal Government in that they are heavily weighted down with welfare spending and ever-growing public sector union payroll and pension costs. In collective bargaining, you have the labor force negotiating for higher compensation across the table with company management, who try to maximize profits. In state and federal government, collective bargaining means automatic pay raises and pensions, even during recessions when the private sector experiences cuts and lay offs.

In essence, the progressive dream from 100 years ago of a heavy centralized government Network Operating Center, managing aspects of human life at the state and federal level, has failed. What we are seeing in the states and in other nations is insolvency, collapse and uncertainty about what fills in the gap. In the short run, central banks and the Fed will simply rely on shooting up the same narcotic....auction off more bonds and raise more cash. However, they also have to balance that with making sure the amount of cash in the banking system encourages lending. Add to that the stress of selling bonds in a world that is already so heavily leveraged, Moody's has even considered downgrading the United States from AAA to AA. As that happens, yields and interest will necessarily rise, causing more stress on the private sector and more gaps in government spending compared to tax receipts. As interest rises due to spiralling interest and government spending/debt, corporations and individuals have less taxable income and the government loses tax receipts. Add to that a central bank (The Fed) that tries to manipulate growth and contraction through soaking up or pumping in money via debt creation and you get our tenuous situation. As debt gets harder and harder to sell, culminating in zero interest rates and quantitative easing, both the government and the fed are running out of tricks as the law of physics bears down more and more.

It's a spiral and barring some reset button, this 100 year experiment is speedily culminating in a global watershed moment. Since progressive power is entrenched in Washington and most state capitals (the Reagan Revolution didn't extinguish progressive government....just slowed the train down about 5 miles per hour), it doesn't look like a return to constitutional republicanism will prevail without adding an element of political upheaval to the mix.

Human government is impossible. Human systems, no matter how ingenious and successful in the short term, fail and end up in the dust of time. Our choice is to bury our head in the sand, fight for change we can't really envision after a century of centralized bureaucratic and monetary exploitation, or trust God. A remnant will trust God. However, the rest will choose either of the first two options. If, for some strange anomaly, many people do trust God, then maybe we can see new life breathed in America. However, that doesn't seem likely. Couple this with a global melt down, it seems as if much more than human short sightedness is doing the shaking these days.

Count on the church surviving it all, contrary to all efforts to marginalize or quell her. In the west, her numbers aren't growing that much. However in parts of the world where preaching Jesus is still illegal and constitutes jail time, it is growing rapidly. You can bank on God and His church hanging around through the long haul. Even though Rome co opted the church in the 4th century, when Roman state fell, the church survived and became a constant reality throughout history. It will be no different through this watershed period. Intricate monetary or governing systems are ingenious creations destined to follow the curve and end up in the trash, along with all the others.

We can spend our life or invest it. You can't invest it in human systems that end up in the land fill. If you could ask Octavius Gaius Caesar, he'd concur, if you could get him to stop cussing and spitting long enough to respond.