The Revolution Back Home

As worldwide events seem to spin out of control, I find myself paying closer attention to the events in Madison than those in Tripoli.

We are approaching a tipping point in America. The underfunded liabilities of state and local governments for the retirement and health care benefits of their employees, current and past, has been estimated to be as high as $3T. Amusingly, regular viewers of CNBS are still being treated to an endless series of "experts" who claim that soon the Fed will "begin to withdraw liquidity" and "end the policy of quantitative easing". What complete nonsense! Where, exactly, will this $3T come from if it isn't directly created from whole cloth by the geniuses at the Fed and Treasury?

Governors and mayors are the ones who are on the front lines of this battle. New Jersey governor Chris Christie saw his popularity grow after famously telling a teacher in New Jersey to "go get a different job" if she wanted higher pay. http://www.youtube.com/watch?v=aw0aBkt8CPA

But its not just the big states and the big cities that are struggling. Take a few minutes to watch this segment from "CBS Sunday Morning" yesterday and ask yourself what the possible solutions are:
http://www.cbsnews.com/video/watch/?id=7357162n&tag=related;photovideo

Now, I recognize that there are myriad reasons for why we are in this position. Here are a few, in no specific order:

1) Politicians negotiate much-too-favorable public employee contracts in order to buy votes.
2) Pension plans make far too generous return assumptions when planning fund growth.
3) Pension funds co-mingled with general funds and already spent. (Think Social Security.)
4) The soaring costs of current and future healthcare.

I could go on and on but it doesn't really matter. What does matter is that the money isn't there. Period.
So, if its not there, from where will it come?
In Wisconsin, all the protestations came about because the newly elected governor proposed three things:
1) That current employees begin to deduct 5.8% of their current pay. That money would be devoted to the maintenance and preservation of the state employee pension fund.
2) That current employees begin to pay 12.5% of their state-provided health care costs. So, if your health care coverage costs the state $100/month, you will now have to pay $12.50/month for the coverage.
3) That some of the state employee unions will no longer be granted the ability to collectively bargain.

I'm not here to debate the wisdom or the logic if the three proposals and if this thread degenerates into partisan political bickering, I will close it. However, the implications of this "battle" are significant and I feel that they must be discussed. Why? Look at the way we are being pitted against each other.

By refusing to "pick up some of the tab" in proposals #1 and #2, aren't the public employees of Wisconsin otherwise demanding that their fellow citizens should continue to foot the bill, instead? I recognize that many teachers and firefighters are struggling to "make ends meet" on their current salaries but why should private sector employees, who are struggling with all of the same issues, be made to pick up the slack? If we are going to get thousands in the streets, school shutdowns and service stoppages in Wisconsin...for this measly level of "cut"...what do you suppose the debate will look like in the U.S. when we are finally forced into real austerity?

Again, my point is this: There will be no end to QE. There can't be. QE will go until the entire financial/government ponzi finally collapses from its own weight.

The end of the Great Keynesian Experiment is upon us and it is coming faster than you think.
You should be "preparing accordingly" right now.  TF