2013-06-05

Are you ready for Wave 3? American government will be paralyzed

The headline isn't overly dramatic, though Americans may take it that way. In most of the world, a fall in the government means the ruling regime is removed from power. I use it in that sense, except it is more serious in America because much of the government is not elected. I foresee not just the wholesale collapse of the Obama regime, but an even deeper crisis that strikes deep into the heart of government.

We now can clearly see the outlines of a political crisis worthy of a Wave 3 collapse in the stock market. In 1973-1974 a greater than 40% collapse in stocks accompanied the Watergate scandal. That was a Constitutional crisis because it involved law breaking by the President, but it was a relatively contained scandal in that removal of the President (in that case via resignation) was enough to end the crisis. In this case, it appears the problem goes far deeper. In fact, it may be so deep that even removal of the entire Executive Branch officials would not stem the damage.

I have previously presented the Michael Burry case. He was targeted by the IRS and the FBI after writing an article critical of the Federal Reserve. His article was not political; it was critical of the Federal Reserve's monetary policy and inability to see a housing bubble. You can read it here: "I Saw the Crisis Coming. Why Didn't the Fed?" From his example we know two important facts. One, the government is targeting anyone critical of it, regardless of politics. Two, the government is coordinating across agencies.

Now we are learning just how deep this crisis reaches:


Now we have five agencies involved. IRS, FBI, EPA, OSHA and ATF. The government has now acted along three separate lines: it has abused IRS power to intimidate political groups, asking illegal questions as part of the tax exempt process. It has targeted individuals involved in these groups with personal audits. It has targeted the businesses of people involved with these groups.

There has been coordinated action across government agencies to target and abuse individuals who were deemed enemies of the State. These are not anarchists plotting to set off bombs, nor communists or fascists working in the employ of foreign governments. Rather these are ordinary Americans exercising natural rights as basic as speech. It is not an exaggeration to say this is the biggest peacetime abuse of power since King George III because the evidence is building for a very wide, and very deep systematic crisis within government. At best, the scandal may have been concocted by multiple agency heads, and the mass jailing of many high ranking officials would serve to send a message. But if the problem goes deeper and reaches into the permanent state, the bureaucrats who are not tied to an administration, it speaks to corruption so deep that whole agencies may need to be abolished and government stripped of its powers.

You don't have to agree with such outcome and I am not proposing that outcome will come to pass. What I am proposing is that the U.S. government will be paralyzed by this crisis because it could grow into an existential crisis for parts of the government. If much of the country fundamentally distrusts the government, there is no possible way to reform it because the problem isn't the people running it, but the system itself. A crisis this deep does not even need to result in a partisan battle: both left and right may agree on the need to reform, but reform so fundamental will be very difficult to agree on because of its great import. The government and the public's attention would be consumed by this debate.

Now imagine there is a concurrent collapse in stock prices and economic activity. The government will not take action because the debate will be over government itself. Even if you expect a much more limited scandal, the story is growing into something that will at least result in a scandal as large as Watergate.

Pay attention to the growing scandals. If Wave 3 is truly as large and histroic as anticipated, we have the outlines of a political scandal to match it.

No comments:

Post a Comment