How To Painlessly Remove $9 Trillion From Our $16 Trillion National Debt

Earlier this month the U.S. Federal government national debt went over the $16 TRILLION threshold during the Demcoratic national convention. This debt level is $5 TRILLION higher than when President Obama took office and will grow anywhere from about $3.4 TRILLION to over $7 TRILLION higher in the next five years if no fundamental change is made to the size, scope, and wasteful spending of the Federal government.

Many credible organizations have done detailed economic scenario analyses of what might happen if nothing is done to change the current trajectory of government spending. Hyperinflation, the collapse and devaluation of the dollar, widespread unemployment, a shrinking economy, draconian cuts to government programs, etc. were part of our discussion. Truly dire consequences if we do not get government growth and wasteful spending under control soon.

But there may be some hope. The following recommendations prove that getting government spending under control is possible, is relatively straight forward, is easy to understand and sell to the American public, and will minimize the economic impact on most American citizens.

Most importantly, the work and analysis on how to do the reduction has already been done by many fine analysis organizations in the U.S. Given that the groundwork as already been laid, we do not have to wait for the political class to get around to doing what has to be done, waiting that will never result in an substantial debt reduction actions.

The data below comes from a wide range of government and non-government sources, representing some heavy analytical work and research into how to make our Federal government more inexpensive, efficient and effective without causing unnecessary harm or hardship to most American citizens. The organizations listed below come from the left to the right side of the political spectrum. Sources for the following government budget cut recommendations include:

•U.S. Public Interest Group

•The National Taxpayer Union

•General Accountability Office

•Congressional Budget Office

•Associated Press

•Senate Reports

•The Cato Institute

•Housing And Urban Development

1) Let's start with the tremendous amount of tax wealth annually lost to waste, inefficiencies, and criminal fraud in the following Federal programs:

•Medicare: $60 - $90 billion

•Medicaid: $30 - $40 billion

•Social Security: $100 billion

•One Federal Unemployment Program: $19 billion

•One Federal Food Stamp Program: $2 - $3 billion

•Total: $172 - $222 billion, midpoint = $197 billion

•Savings over ten years if you eliminated 50% of waste, inefficiencies and fraud - $985,000,000,000

2) Annual uncollected taxes due to the Federal government but not collected from tax evaders: $385 billion

•Savings over ten years if you just reduce the illegal tax evasion by 50% - $1,925,000,000,000 ($1.925 TRILLION)

3) The U.S. has about 84,000 combat troops unnecessarily stationed in Europe, about 30,000 combat troops unnecessarily stationed in South Korea, and about 25,000 combat troops unnecessarily stationed in Japan, serving defense purposes that were obsoleted decades ago. The Obama administration is about to unnecessarily deploy about 2,500 troops in Australia. If 75% of these troops were brought home, the country would save about about $212,000,000,000 over ten years.

4) If we cancel the production of the V-22 Osprey aircraft because it is over budget, likely to under perform, and has been designated as not critical by the Sustainable Defense Task Force, we would save $6.2 billion over the next five years.

5) If we cancel the production of the F-35 jet fighter which, according to the Sustainable Defense Task Force, "may represent all that is wrong with our acquisition process" and "would provide a capability that is not warranted considering emerging threats," we would save $22.5 billion over the next five years.

6) If we cancel the military Space Tracking and Surveillance System, which can be replaced with lower cost and more reliable options, we would save the Pentagon $5 billion over the next five years.

7) If we cancel the outdated, unreliable, and unneeded Expeditionary Fighting Vehicle, because the General Accountability Office has cited the program's history of cost growth, schedule misses (14 years late), and performance failures as reasons for terminating the program, we would save $16.3 billion over the next five years.

8) The General Accountability Office found that the Army, Navy and Air Force are wasting billions of dollars a year by purchasing items that were either never used or were never required. The GAO identified purchasing reform processes that could save $36.9 billion a year or about $369 billion over ten years.

9) Terminating various unneeded corporate welfare programs would produce substantial savings. These programs include the Overseas Private Investment Corporation, the Market Access Program, trade association subsidies for foreign marketing, subsidies to large agriculture business and wealthy farmers, tax credits for the blending of ethanol, the ultra-deepwater natural gas and petroleum research program, public timber sales subsidies, and Southeastern Power Administration. Ending these corporate welfare programs would save about $12 billion a year or about $120 billion over ten years.

10) The Federal government owns more than 55,500 buildings that are either not used or are underused. A detailed analysis suggests that if 50% of these buildings were eliminated over the next five years, not an unrealistic target, savings in the area of $48 billion would be realized.

11) According to government audits of Housing and Urban development, the Federal government wastes about $4.5 billion a year due to bad accounting and billing processes. Fix this problem and save about $45 billion over twelve years.

12) Using conservative estimates, annual earmarks, which are usually nothing more than thinly disguised ways for incumbent politicians to fund their re-election campaign with taxpayer money, cost the Federal government about $16 billion a year in unneeded expenses. Eliminating earmarks would save $160 billion over ten years.

13) According to the General Accountability Office:

•The Federal government has 15 different agencies overseeing food safety laws.

•It has more than 20 programs helping the homeless.

•It has 80 programs to help economic development.

•It has 82 agencies working on improving teacher quality, few of which are working if you see how poorly American kids are being educated vs. the rest of the world.

•It has 47 agencies working on job training.

•It has 18 programs working on food and nutrition assistance.

This type of redundancy results in tremendous waste and unneeded overhead, duplicate responsibilities, and inefficient service. A formal Senate report and analysis of the situation, estimates that between $100 billion and $200 billion a year could be saved by consolidating and downsizing these functions. If we take the midrange of the estimates, we end up with $1,500,000,000,000 ($1.5 TRILLION) in savings over ten years.

14) A Congressional Budget Office (CBO) report identified savings in the area of government spending on Science, Space and Technology - savings over ten years - $25.26 billion

15) The same CBO report found Agriculture savings over ten years - $3.87 billion. This does not include the termination of unneeded ethanol subsidies and other farm support programs that are no longer needed, given how well the American farming industry is dong today.

16) CBO - Natural Resources and Environment savings over ten years - $32.23 billion. These savings are mostly concentrated in programs that support corporations, not endangering basic government environmental programs.

17) CBO -Commerce and Housing savings over ten years - $5.42 billion. This does not include the savings that could be found by cutting back on the widespread fraud and mismanagement in government housing programs.

18) CBO - Transportation savings over ten years - $141.64 billion

19) CBO - Community and Regional Development savings over ten years - $21.94 billion

20) CBO - Education, Training, Employment, and Social Services savings over ten years - $45.42 billion

21) CBO - Income Security savings over ten years - $68.83 billion

22) CBO - Veterans Benefits and Services savings over ten years - $21.50 billion

23) CBO - Allowances savings over ten years - $2.54 billion

24) CBO - Administrative of Justice savings over ten years - $10.26 billion

25) CBO - Social Security savings over ten years - $388.52 billion. Part of these savings are compatible with the recommendation from "Love My Country, Loathe My Government" which was to raise the retirement age to 70.

Not included the $388 billion is another step which is to uncap the total amount of earnings subject to Social Security tax. The CBO estimates that raising the cap amount the way they want to would provide an additional revenue of $503.4 billion to the Social Security finances over ten years.

This estimate also does not include another Social Security recommendation which was to terminate Social Security payments to anyone whose net worth is over $3 million in assets. People like Donald Trump, Warren Buffet, John Kerry, Barack Obama, and Bill Gates do not need the checks to live comfortably will not get them.

27) CBO - General Government expense savings over ten years - $5.21 billion

28) Since Obama came into office, the Federal payroll has grown by 231,000 civilian employees despite reduced tax receipts, the lingering impacts of the Great Recession, and the overall dire employment situation throughout the country. Since most of us would agree that we have not seen a corresponding rise in the quality of government service since these people have been hired, getting rid of them, like most efficient businesses would do, would not result in a degradation in Federal government services.

If we conservatively estimate that the weighted taxpayer cost (wages, benefits, and retirement costs) for these newly hired employees is $80,000 a year, than letting them go would result in annual savings of about $18.48 billion a year or $184.8 billion over ten years.

19) In any measure of education attainment, U.S. kids usually fare very poorly when compared to the education received by kids in other countries. Usually, the U.S. is bested by a dozen or more countries when it comes to comparing standardized test results. The Department of Education has been around for about thirty years and has done nothing to change this low performance.

Thus, given its nonperformance, the entire department should be eliminated. Cato suggests that this ill performing government entity be terminated at once, its responsibilities becoming the responsibility of the states to educate their own kids and the American taxpayer can save the annual $107 billion cost of the department. Jpwever, we could put a twist to this termination recommendation.

We should phase out the department over a four year period but would send the department's budget as block grants to the states during that four year phase out. The states could use the block grants to improve the teaching ability of their own state's teachers, improve their technology infrastructure, improve their curriculums, and improve their universities' teacher education curriculum.

At the end of four years, the states would be in a much better position to educate our kids, heaven knows the Federal Department of Education has not done anything worthwhile. 10 year savings - $909.5 billion.

30) Much like the Department of Education, the Federal government's Department of Energy has done nothing to get us to a coherent national energy strategy and policy and has not funded any breakthrough energy technologies. Terminate the entity and let the private market research and development new energy technologies. 10 year savings according to Cato - $382.8 billion.

31) Cato has done similar analyses on just about every other Federal organization, some of which we have already touched on. In order to avoid double counting, we will not go into their agriculture subsidy reductions and military spending reductions, given what we have already identified some of them above.

However, they have identified 10 year savings of $21.2 billion from the Commerce Department and if you conservatively accept only half of their Department of Transportation cuts, you get another 10 year savings of $424.4 billion.

These cuts alone would save the Federal government almost $9 TRILLION in expenses and costs over the next ten years with minimal impacts on needy Americans and ordinary American citizens. The $9 TRILLION does not include additional savings that would come from the following areas:

•More military cuts not listed above. Obama's own deficit reduction commission found that $100 billion a year could be taken out of the Pentagon's annual budget without endangering our national defense. Since the defense cuts suggested above do not add up to $100 billion a year, additional savings in this area are available.

•Reining in Medicare and Medicaid costs beyond the fraud and waste savings listed above.

•Deny Social Security payments in retirement to any American who has a net wealth of over $3 million.

•Savings from interest payments not paid because the Federal government took $9 TRILLION of debt out of play.

•The repeal of Obama Care which would save the country from expending an additional $300 billion over the next ten years, if you believe the recent analysis from the head actuary of the Medicare and Medicaid programs.

•The termination of the Federal Housing Authority, Fannie Mae and Freddie Mac government agencies and the associated hundreds of billions of dollars in taxpayer subsidies they are likely to consume in the next ten years.

•Elegantly privatize some government functions such as what Canada and other European countries have successfully done with their national air traffic control processes and postal systems and allow private contractors do the TSA screening function at all U.S. airports. We know from experience that they can do a far better job for less budget money than government employed TSA screeners.

•Elimination of traditional defined benefit pensions for future Federal government hires since most Americans no longer can receive such pensions. Thus, from a fairness perspective, Americans who cannot get a traditional pension should not be subsidizing pensions for government workers.

•Elimination of life long pensions and benefits for past, current, and future Federal politicians. They are in office to serve their country for a limited amount of time, not create a life long revenue and benefit stream for themselves. Besides, given their horrible performance of nonaccomplishments over the past few decades, they do not deserve such rewards.

People far smarter than this article can determine the value of these additional efficiencies in government operations. In fact, Cato has already done all of this work and summarized it at their "Downsizing Government" website. Their comprehensive analysis found a way to reduce annual Federal government spending over time by about $1.16 TRILLION a year, creating a ten year debt reduction of $11.6 TRILLION.

This is in the same ball park of our $9 TRILLION in identified savings and the additional unquantified savings in the list above. Two separate analyses, about the same results, indicating that this is doable without raising taxes on any American, rich or poor.

And while many of these cuts are one time spending reductions, e.g. the cancellation of some military hardware programs, the majority of these spending reductions are ongoing, annual spending reductions that will continue on beyond the ten year window. These include improved tax evasion detection, reduction in criminal fraud in government programs, and a smaller Federal workforce.

Thus, implementation of these changes will help insure that government spending reductions continue on into the foreseeable future and help keep the national debt from ever getting so large again.

The above cuts are a great start. However, one of the first acts of our next President should be to convene a commission of smart Americans that have already analyzed the need for drastically reduced government spending, put them in a room, and have them work together to overlay their plans together to come out with one overall plan, based on their expertise and past experiences in this area.

Members of this commission would be drawn from at least the following organizations:

1.President Obama's defunct and severely underutilized Deficit Reduction Commission

2.The Cato Institute

3.The Concord Coalition

4.The General Accountability Office

5.The Congressional Budget Office

6.The Urban Institute

7.The National Taxpayer Union

8.The U.S. Public Interest Group

9.Bipartisan Policy Center

10.Others TBD

There you have it. Almost $9 TRILLION in ten year savings, savings and deficit reduction that are attained without raising taxes and with minimal financial impact on most Americans except criminals that currently rip off the American taxpayer to the tune of hundreds of billions of dollars a year, defense contractors who are building unneeded military hardware, and unnecessary Federal employees.

And there is potential for more savings from the unquantified further steps listed above, e.g. more military reductions. However, it is unlikely to happen as long as we allow our current set of politicians to continually get reelected. Most of them have been in office too long and have not proven they are able, willing, or competent enough to get the job done.

We need leaders, starting with the President, who are willing to wade into the nitty-gritty working of government to wring out the fraud, incompetence, and inefficiencies that have accumulated over the decades within the Federal bureaucracy.

We need leaders, starting with the President, who are more concerned about the future fiscal integrity of the country than enjoying the overblown perks and benefits of being in office such as photo ops with athletic teams, five week vacations, golf rounds, high salaries for low production, etc.

We need leaders who can pull together and consolidate the budget work already done by the many organizations identified above and can make the sale to the American public that these are cuts are necessarily critical to the continuation of our democracy.

Thus, not only do we need to all of the budget reduction steps outlined and identified above, we also need to implement term limits on all Federal political offices. Those currently serving in Washington are the ones that allowed government spending to get so out of control, they are indeed part of the problem and need to be "reduced" along with government spending, i.e. swept out of office with the rest of the unnecessary Federal bureaucracy.

Walter "Bruno" Korschek is the author of the book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class," which is availabe at http://www.loathemygovernment.com and onoline at Amazon and Barnes & Noble. Our daily dialog on freedom in America can be joined at http://www.loathemygovernment.blogspot.com.

"Oops, We Meant $7 TRILLION!" What Hank and Fed Are Up to and How They Plan to Pay For it All

"We make money the old fashioned way. We print it." - Art Rolnick, Chief Economist for the Minneapolis Federal Reserve Bank.

The $700 billion that was arm-twisted from Congress by Treasury Secretary Hank Paulson in October was evidently just the camel's nose under the tent. According to a November 24 Bloomberg report, the Paulson/Bernanke team is now prepared to pay $7.76 trillion to rescue the financial system.[1] Prepared to pay how? Congress has not raised its debt ceiling to anywhere near that level; but the approval of Congress, which originally voted down the controversial $700 billion bailout, is apparently no longer necessary. The door has been opened, and the Treasury Secretary and Fed Chairman feel they can now pledge whatever they want. Perhaps they are inching up a zero at a time just to see what the public's tolerance is for unrepayable debt. The new sum - $7.76 trillion - represents $25,000 for every citizen in the country, or half the value of everything produced in the nation last year; yet it's not clear that a mere half of our net worth will rescue the financial system. One bankrupt bank after another has been bailed out with public money, in a futile effort to prevent a collapse of a massive multi-trillion dollar derivatives pyramid created by the banks.[2] But according to the Comptroller of the Currency, U.S. commercial banks now carry over $180 trillion in derivatives on their books. The public is liable to be bankrupted before this mess is resolved.

On top of the $700 billion initially extorted from Congress, an additional $2 trillion in loans and commitments has already been made by the Federal Reserve and the Treasury. Yet that wall of money has not kept the imperiled banks from collapsing. Citigroup was one of the nine lucky recipients of Paulson's largesse in October, when he set out to recapitalize the banks by trading dollars for shares. The bank received $25 billion from the Treasury; yet this handout was insufficient to keep its stock from dropping below $4 a share. Citigroup was then bailed out by the Treasury to the tune of another $20 billion, along with a commitment to guarantee $306 billion in toxic assets on its books. That equals half the $700 billion bailout, just for one bank; yet Citigroup's books, which sport derivative bets of $37 trillion, won't look much better than before.

Meanwhile, commentators are scratching their heads over where the money is supposed to come from to pay for all this. Congress hasn't approved these multi-trillion dollar sums, and the Federal Reserve doesn't show them on its books. Some clues to this mystery came on November 25, when according to The New York Times:

"In the first of two new actions . . . , the Treasury and the Fed said they would create a $200 billion program to lend money against securities backed by car loans, student loans, credit card debt and even small-business loans. The Treasury would contribute $20 billion to the so-called Term Asset-Backed Securities Loan Facility and assume responsibility for any losses up to $20 billion. The Federal Reserve would lend the new entity as much as $180 billion. The new facility would then lend money at low rates to companies that post collateral based on securities backed by consumer debt or business loans."[3]

It appears that the $20 billion in Treasury money will be serving as the "reserves" to create $200 billion in credit on the books of the Fed and its network of banks. Ten to one is the reserve requirement established by the Federal Reserve for private bank lending under the "fractional reserve" system. The New York Fed has now deleted its earlier discussion of this process from its website, but as it explained the money-creating process in 2004:

"Reserve requirements . . . are computed as percentages of deposits that banks must hold as vault cash or on deposit at a Federal Reserve Bank. . . . As of June 2004, the reserve requirement was 10% on transaction deposits [deposits immediately available to depositors]. . . . If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+ . . . =$1,000)."[4]

In a revealing booklet called "Modern Money Mechanics," the Chicago Federal Reserve detailed how fractional reserve lending allows money to "expand." The booklet is now out of print, perhaps because it revealed too much; but it is still available on the Internet. On page 11 of the booklet is a helpful chart (above), which shows that the original deposit is not actually "lent" but remains in the bank throughout the expansion process. What is lent is an additional sum created on the bank's books valued at 90 percent of the original deposit. Then another sum is lent that is 90 percent of the second deposit, and so forth, until the total sum generated is 10 times the original deposit, with tidy sums collected in interest at each step along the way.

The November 25 New York Times article continued:

"The Treasury secretary, Henry M. Paulson Jr., made it clear that the new lending facility was just a 'starting point' and could be expanded to many other kinds of debt, like commercial mortgage-backed securities. . . . It was the first time that the Fed and the Treasury have stepped in to finance consumer debt. The $200 billion program comes close to being a government bank."

A government bank that makes credit available to all qualified borrowers is not a bad idea. It would seem to be a more useful idea than manipulating interest rates, the conventional tool used by the Federal Reserve to regulate the money supply. When Paul Volcker raised interest rates to 20% in 1980, he bankrupted much of the Third World; and when Alan Greenspan lowered the short-term interest rate to 1% in 2001, he precipitated the housing and derivatives bubbles that are bankrupting the U.S. today. A government-owned bank that put credit into the economy in an open, accountable and impartial way could be just what the doctor ordered. The problem is, the Federal Reserve isn't government-owned (it is owned by a consortium of private banks[5]); and it is not distributing the public credit openly and impartially. The Fed has kept the recipients of its largesse largely secret (something Bloomberg News is currently suing about under the Freedom of Information Act[6]). However, it is clearly favoring its banking cronies over consumers.

Note that the "consumer debt" the Fed is now supposedly financing does not consist of loans directly to consumers. The loans are to lenders holding consumer debt ("companies that post collateral based on securities backed by consumer debt or business loans"). Like with subprime mortgages, lenders have pushed credit cards and student loans onto anyone who would take them, because the lenders had no intention of keeping those risky loans on their books. They intended to package them up as "securities" and sell them to investors. But the investors are catching onto this scam and are no longer buying; so the Fed is stepping in to underwrite the debt, advancing "credit" created on its books with accounting entries. When these loans are not paid back, we the taxpayers pick up the tab, either directly or through the "hidden tax" of inflation. The benefit goes to the lenders, who get off scot-free for their risky ventures, while the people bear the risk and pick up the losses.

If these investments are too risky for investors, they should also be too risky for the "government bank." We don't need more consumer debt to keep the economy going. We need more wages and salaries, and that means more jobs. Rather than propping up the "finance" industry (the business of money making money), the Fed should be furnishing low-interest loans directly to businesses, state and local governments and other qualified members of the producing economy.

Watching the Paulson/Bernanke bailout scenario unfold is a bit like watching the end of the Charlton Heston movie El Cid, where the Spaniards prop up their dead general on his horse and charge the Moors, giving the illusion that the champion is still alive and leading them. In this case, what they are propping up are not national heroes but banking pretenders who are not only unnecessary but have established their incompetence at managing the banking business. Congress could avoid this costly masquerade by either nationalizing the Federal Reserve or setting up its own publicly-owned lending facility, one that created credit on its books just as private banks do now and made it available openly, impartially, and at modest interest rates to all qualified borrowers. Unqualified borrowers should be denied, and that includes insolvent private banks, which should be put into FDIC receivership, had their books washed clean in bankruptcy, and reorganized as truly "national" banks advancing the "full faith and credit of the United States" for the benefit of the people of the United States.

[1] Mark Pittman, Bob Ivry, "U.S. Pledges $7.7 Trillion to Ease Frozen Credit," Bloomberg (November 25, 2008).

[2] See Brown, "It's the Derivatives, Stupid! Why Fannie, Freddie and AIG All Had to Be Bailed Out," webofdebt.com (September 18, 2008).

[3] Edmund Andrews, "U.S. Details $800 Billion Loan Plans," New York Times (November 26, 2008).

[4] Federal Reserve Bank of New York, "Reserve Requirements" (June 2004).

[5] See Brown, "The Fed Now Owns the World's Largest Insurance Company - But Who Owns the Fed?", webofdebt.com (October 7, 2008).

[6] Mark Pittman, et al., "Fed Denies Transparency Aim in Refusal to Disclose," Bloomberg (November 10, 2008).

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In "Web of Debt," her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://www.webofdebt.com/ and http://www.ellenbrown.com/ Her eleven books include the bestselling "Nature's Pharmacy," co-authored with Dr. Lynne Walker, which has sold 285,000 copies.

Will Trillion Dollar Deficits Lead Us Into Anarchy?

In 1933, the average German citizen piled his money into a wheel barrel just to buy one loaf of bread. Desperation, crime, and corruption ruled the day. Six years later, Adolf Hitler invaded Poland.

What does the burgeoning world debt mean to our future? What about the yearly multi-trillion dollar U.S. deficits? What signals are hinting that economies around the globe may be growing unstable? Are we being led to the trough of complacency by a systematic program of propaganda? Or are our leaders so blinded by the shadow of Gigantor that they cannot see the monster, therefore they refuse to admit that he is right there, standing over them, about to devour them... and us as well?

These questions are not new. They were asked during the Reagan and Bush administrations when deficits were a mere three billion dollars per year. Today, as we approach the second year of the Obama administration, deficits are predicted to reach 2.5 trillion, and there is no end in sight. Even the most insightful among us cannot imagine a trillion dollars, making the thought of 2.5 trillion the stuff of fiction. In fact, it seems the thought that trillion-dollar-deficits could cause, or even contributing to, economic collapse is analogous to the sun going dark -- not in the realm of human conceivability.

What will it take to rally a call to action? The following postulation describing what could happen if the industrialized nations, including the United States, begin defaulting on their debt, may lend a sense of urgency to the looming crisis. The events described, although based in fact, are hypothetical, but all of history was, at one time, hypothetical...until it happened.

The economies of the European Union(EU), while still reeling from their recent bailout of Greece, begin a tailspin when Spain declares it will default on its upcoming debt repayment to the (EU). Following the Spanish announcement, and despite the recent loan to Greece of just over 100 billion Euros, Greek Finance Minister George Papaconstantinou makes a surprise announcement that he will resign amidst accusations that he grossly understated Greece's projected deficits for the year. In an attempt to stabilize markets, the President of the United States declares that the US, along with the IMF (International Monetary Fund) and the EU, will come to the aid of Spain and Greece to prevent any declarations of default.

Within days, Moody's reduces Portugal's bond rating and downgrades eight Portuguese banks. These developments prompt an opportune albeit unbalanced reaction among the Middle East Oil Producing nations which includes Venezuela. This concerns are voiced by Hugo Chavez, the president of Venezuela. The Saudis reluctantly call an emergency meeting of OPEC. The result is a shocking curtailment of oil shipments to a selected list of European and Asian countries, including Japan and South Korea. The move is harshly criticized by the US, its allies and the international media. Nevertheless, the effected governments scramble to put a positive spin on OPEC's political bombshell.

The ball falls further when two of America's largest banks, within a day of each other, announce cash reserve imbalances as a result of the European and Asian debt crisis. Not a week goes by before a leak to the press discloses that another major US bank will not have the cash reserves to cover withdrawals. At the next day's opening of securities and commodities markets, rapid selling begins. Although not characterized by the media as panic selling, financial news analysts sound worried, which causes the ever distrustful and recession weary people, in towns across the United States, to make a mad dash to withdraw their money from their accounts. Financial institutions, large and small, begin to close their doors and, in some cases, chain and barricade them. Several instances of bank employees being shot and killed hit the news. Panic races through the populations of the world with venomous speed. The US President reiterates the Central Government's intention to fulfill the obligations of the Federal Deposit Insurance Corporation (FDIC). All individual losses incurred from failed banks will be backed by up to two hundred thousand dollars. This alleviates the panic for a day or so, but the devastation done by falling stock markets and the failure of some banks to reopen their branches leads to growing uncertainty and waning confidence in the monetary systems. The trading of currency is halted and the bottom begins to fall out of most of the major world markets.

China, faced with a growing concern that US debt repayments will, in all likelihood, be reduced or stopped altogether, launches its military into Taiwan as a diversion to its invasion of the Russian frontier, where it intends to secure the Sevastyanovo oil fields in eastern Siberia. The newly discovered fields hold reserves of over 150 million metric tons of oil. The United States and NATO condemn the blatant and dangerous act of aggression. The US, however, has no choice but to declare its treaty with Taiwan indefensible. The world is in shock as the most powerful country in history reneges on its defense treaty with Taiwan. Meanwhile, the US dispatches additional military personnel and equipment to the Middle East to insure the uninterrupted flow of oil for the US and its allies. Many of the Gulf of Mexico oil rigs have still not gone back on-line after the BP (British Petroleum) oil spill of 2010. As a result of that spill, the US governments cancelled off shore drilling leases and slowed production of crude oil from existing platforms until safety and environmental issues were investigated.

Europe, including England and the Scandinavian countries, are experiencing rioting. The United States goes to full military alert. The President's next announcement is that, under the current circumstances and in the interest of national security, the national defense oil reserves cannot and will not be used for civilian purposes. Oil prices skyrocket. Within five days, 30% of trucking comes to a halt. Many rigs are hi-jacked, looted, and burned. Grocery store shelves grow emptier by the day. Not a gun can be found for purchase, and even if one could be purchased, ammunition at Wal-Mart, the largest retailer of guns and ammunition has been sold out for weeks. Smaller stores are also without inventory.

Brazil attacks Mexico as pro-military president, Lula Da Silva, takes the Mexican military by surprise and overruns the country in less than a week. Lula Da Silva makes a brief statement after the invasion stating that Brazil was acting on behalf of the Conselho Sul-Americano de Defesa (CSD - South American Defense Council). The Brazilian military secures Mexico's oil facilities while amassing heavy artillery, air defenses, and troops along the US, Mexican border. Argentina, in turn, announces its alliance with Brazil and the existence of a jointly developed nuclear submarine.

The border between Canada and the US becomes blurred as Canada seeks to distance itself from international affairs, but soon it secures its borders to stop the massive influx of Americans fleeing the deteriorating urban areas.

With hundreds of banks closed, ATM's, automatic payments of welfare benefits, pension benefits, Social Security, and public and private payroll deposits literally dry up. The President has no choice but to declare Marshal Law. The National Guard, already out in force in most states, is joined by the army in an effort to maintain order in the cities and outlying areas. Washington DC erupts with rioting. Within weeks, people across the country and in most regions of the world begin to run out of supplies. Electrical and gas companies, and other basic city services, begin to shut down in urban areas. Over the next few weeks, rural electrical grids also begin to fail. There are major outages of cellular phone service. Airports are jammed with people trying to flee the cities. Highways are gridlocked. Local governments try to maintain order by filling the needs of its citizens, but soon the onrush of chaos fueled by basic human needs and self-preservation takes over.

Russia fails to stave off the Chinese invasion and threatens nuclear attack. China ignores the warning. The US again tries to take the lead by organizing a meeting of the G8 to be held in the Azores. The meeting is a failure and no consensus of what should be done to bring about stability can be reached. The delegations leave the island after less than twenty four hours. There are no negotiations with China.

The US Congress is moved out of Washington DC to undisclosed safe locations around the country, and emergency defense systems and communications go into place. Air Force One does not land but remains air-born while the Speaker of the House and the Vice President's whereabouts are kept top-secret.

The US President declares that the United States will defend its sovereignty and world interests to the fullest extent. In the same speech, he makes a desperate appeal for all nations to work toward finding a solution to the cascading world disaster. Three days later, the United States shuts down the Global Positioning System (GPS) and subsequently orders Cisco Corporation to prepare to enact server codes that will curtail civilian and foreign internet communications. Microsoft and Apple Corporations are similarly ordered to be ready to implement highly top secret national security codes if and when the President decides to selectively shut down computer operating systems around the world. The financial markets, having been in free fall for weeks, completely implode.

Russia launches a long-range ballistic missile tipped with a nuclear warhead into the Peoples Republic of China, destroying the Three Gorges Dam, in Hubei Province, subsequently releasing 22 billion cubic meters of flood water into the Yangtze River. Thousands die.

The US military moves into tactical positions and prepares for war. Anarchy sweeps the country.

Egypt and Syria meet in Tehran, the Iranian capital. The meeting is successful. Iran will not launch its nuclear weapons at Israel. Instead Syria and Egypt will coordinate a conventional attack to remove the country of Israel from the Middle East permanently.

It is naive to suppose such events cannot happen. We pray they don't, but hopes and prayers will not be enough in this case. Immediate action is required to cut spending and reduce taxes. Please, write to your Senator. Write to your congressman. Write to the President of the United States. Get involved.

Thank you for reading.

Jeffrey B. Allen

Author of Gone Away Into the Land, Jeffrey B. Allen has brought a powerful and exciting new twist to the genre of Magical Realism. By skillfully shifting in and out of reality, Allen intertwines the triumphs and tragedies of the human condition with a land of the unknown.

How To Spend $9 Trillion Over 10 Years

In the year 2001, the national debt stood at $5.8 trillion. Today that figure has more than doubled to $14.3 trillion. This $9 trillion increase over the past ten years can be attributed to government expenses, particularly with the 2001 and 2003 tax cuts, additional interest costs, and also the war in Iraq and Afghanistan. Why is it then that we constantly hear politicians and Wall Street bankers going after Social Security payments as a key way to balance the the debt? Compared to the aforementioned expenses, Social Security hardly factors into the $9 trillion in question. Out of the top three contributors to the increase in debt, the only item being discussed, albeit rather quietly, is taxes. The 2008 financial industry bailout added an additional $200 million, although the Federal Reserve partook in a shadow bailout of its own totaling over $2.8 trillion on their balance sheets.

The fact of the matter is that both political parties have set up a system where money is filtered to the top one percent, while the middle class wilts on a vine. This new economic system distributes wealth by political will, while backstage of this farcical theatre the working class is being forced into debt serfdom, finding it virtually impossible to buy a home or even get an education without racking up onerous amounts of debt in loans.

The velocity at which the national debt has grown in this country is stunning. When comparing annual changes in GDP and government debt over the past 50 years, the rate at which our debt is growing has far surpassed our growth in GDP. This is clearly not a good thing; as a country you do not want to accumulate debt faster than your economy can develop and compensate for this number. For the most part, during the 1980's or the era of "deficits don't matter," is when we really notice this change. This trend has continued through the years, with little of the $9 trillion having trickled back down into the hands of the middle and working class. The only group seeing solid income growth is at the top and much of their growth is secured by government favoritism and welfare for the rich.

Not convinced? In this new kind of system we live in, hedge fund managers pay taxes at a much lower rate than your typical construction worker. Additionally, one out of three Americans have no savings to their name, so financially they have nothing to protect. A majority of the population has bought into the notion that political parties are out to help them, but the current distribution of wealth alone should be enough to shatter this idea.

Tax breaks are of little use, especially since they tend to benefit only the extremely wealthy. Were this all free market based, it would be a different story. Bailed out companies now invest overseas and create jobs in other countries with U.S. taxpayer dollars while our economy suffers. Most Americans would rather have a healthy economy instead of seeing their tax rates fall and having an economy that is producing low wage capitalism jobs. We have spent so much in so many areas, all with no significant, positive impact on the middle class.

Do you think we have spent $9 trillion wisely over the last decade?

Even with all of this negativity in the political realm and the major implications it has on our economy, there is light at the end of the tunnel. While we climb out of this giant debt bubble and major financial changes occur, there is going to be more opportunity to gain wealth than ever before. If you are able to keep your eyes open as things change, instead of putting your head in the sand and hiding, you will be on the winning side of this financial storm.

Owens Consulting Group founder Mathew Owens is a California licensed CPA and a full time real estate investor. He has completed over 100 transactions in the past three years, representing approximately $10 million in real estate, most of which has been sold to cash flow investors. He does multiple live educational events and online webinars. Find out more info about him and his blogs at http://www.ocgproperties.com