It increased the bank-loan rate and began to sell securities in the open market. Both actions have the effect of reducing the money supply. Rates on brokers' loans jumped to 20%. On October 29, the stock market collapsed. Thousands of investors were wiped out in a single day. The insiders who were forewarned had converted their stocks into cash while prices were still high. They now became the buyers. Some of the greatest fortunes in America were made in that fashion.
Section VI
TIME TRAVEL
INTO THE FUTURE
In the previous sections of this book, we have
travelled through time. We began our journey by
stepping into the past. As we crisscrossed the
centuries, we observed wars, treachery,
profiteering, and political deception. That has
brought us to the present. Now we are prepared
to ride our time machine into the future. It will be
a hair-raising trip, and much of what lies ahead
will be unpleasant. But it has not yet come to pass.
It is merely the projection of present forces. If we
do not like what we see, we still have an
opportunity to change those forces. The future
will be what we choose to make it.
Chapter Twenty-Four
DOOMSDAY
MECHANISMS
That's enough history for one book. It will soon be time to reset the coordinates on our time machine and jump into the future.
Before activating that switch, however, let's take one last look around us. The future is molded by the present. Where we are now will greatly affect where we are going to be.
MIRED IN DEBT
One of the most obvious characteristics of our present time is the extent to which Americans and their government have become mired in debt. Annual federal deficits have grown steadily since 1950, and the rate of growth is now in a vertical climb. It had taken 198 years for the federal government to borrow the first trillion dollars. Then, in just twelve years—mostly under the Reagan Administration—it borrowed another three trillion. By the end of 1995, after three years of the Clinton Administration, the debt had grown to about $5 trillion.
It is difficult to comprehend numbers of that size or to translate them into their effect upon each of us. $5 trillion represents about 80% of all the goods sold and all the services rendered in America throughout the entire year. If you had a stack of $100 bills 40 inches high, you would be a millionaire. $5 trillion would rise 3,350 miles into space.
508
THE CREATURE FROM JEKYLL ISLAND
By 1993, net interest payments on that debt were running $214
billion per year. That consumed about 14% of all federal revenue.
It now represents the government's largest single expense; greater than defense; larger than the combined cost of the departments of Agriculture, Education, Energy, Housing and Urban Development, Interior, Justice, Labor, State, Transportation, and Veterans' Affairs.
These charges are not paid by the government; they are paid by you. You provide the money through taxes and inflation. The cost currently is about $4,500 for each family of four. All families pay through inflation but not all pay taxes. The cost to each taxpaying family, therefore, is higher. On average, over $5,000 is extracted from your family each year, not to provide government services or even to pay off previous debt. Nothing is produced by it, not even roads or government buildings. No welfare or medical benefits come out of it. No salaries are paid by it. The nation's standard of living is not raised by it. It does nothing except pay interest.
Furthermore, the interest is compounded, which means, even if the government were to completely stop its deficit spending, the total debt would continue to grow as a result of interest on that portion which already exists. In 1995, interest on the national debt was already consuming 57% of all the revenue collected by income taxes. At the present rate of expansion, it will consume 100% by the year 2010. That includes corporate taxes. Interest will consume 100% of our personal income taxes much sooner.
