By David McAlvany

As July lurches unsteadily into the history books, a number of bellwether statistics tell the tale of a civilization deeply in trouble.  Gross U.S. public debt is now estimated at 11.57 trillion. Until a few short years ago, most Americans had never uttered the word “trillion,” and most still can’t fathom its meaning.  Yet we now owe nearly twelve of these incomprehensibly large blocks of dollars to various well-connected banks, corporations, investors, and foreign countries.

Additionally, the government’s unemployment figures are for the first time north of 20% in a half dozen states.  This is only 5% less than the (nationwide) figure reached during the depths of the Great Depression.  When you consider that workers are the building blocks of a nation’s economy, the true impact of this figure becomes staggering.  And such a figure doesn’t just represent a reduction of a state’s productivity by a fifth.  Because of our socialistic system, every unemployed worker soaks up a good bit of the productive capacity of those still working.  As in a five-member chain gang, when one member becomes incapacitated, the others must not only continue their work, but carry and care for the incapacitated member.

Of those who are unemployed and collecting benefits, 500,000 are scheduled to see their unemployment checks stop by the end of September.  This will of course prompt political action to extend their benefits, lest the hue and cry of those with a “right” to a paycheck offend the delicate sensibilities of Congressmen facing imminent elections.  The only people who Congress and the Administration intend to punish for this economic meltdown are productive middle class Americans who were conservative and wise in their financial affairs.  Everyone else will be bailed out using these poor marks’ hard-earned and harder-saved money.

On another front, GE Capital’s tax rate has fallen from 16% to 7%. Like IBM before it, GE has learned to game the system.  This tax decrease does not indicate any improvement to GE’s core business, but an unfair advantage gained over other companies by political manipulation.

Of course, earnings projections can be gamed more ways than one.  Another way is to liquidate assets.  We note that several banking giants here in the U.S. are selling their stakes in Chinese banks? Is it just to raise capital and improve earnings? Or is the Chinese banking system on the brink?  After all, bad loans do ultimately come home to roost.

And on the subject of China, Commerce secretary Gary Locke in a speech in Shanghai proposed that if China won’t play in the cap and trade game, we will add it into the price of Chinese imports to “cover the carbon content of imported goods.”  Something he ought to remember is that a tariff is a tariff.  You can call a tin can a piston, but when you put it in your engine and turn the ignition key, you won’t get the outcome you want.