Take note:
The 4 Immutable Laws
Those who spend their own money on themselves are concerned with price and quality.
Those who spend their own money on others are concerned with price but not quality.
Those who spend others money on themselves are concerned with quality but not price.
Those who spend others money on others are concerned with neither quality nor price.
The country is imploding under the weight of fourteen trillion dollars of debt, sixty trillion dollars of unfunded entitlement programs, and a monetary policy bent on destroying the currency and economy. Government intervention in private citizens' lives and the economy has failed. The eighty year old Keynesian economics experiment that started under President Roosevelt is nearing an end.
The current state of economic affairs reminds me of the Saturday morning cartoon where the Roadrunner is chased by Wiley Coyote. The clever Roadrunner leads Wiley to the edge of the cliff, maneuvers quickly to safety, and Wiley runs off the edge of the cliff. Wiley remains suspended momentarily in mid-air before realizing his fate and plummets to the canyon floor.
Government has lied and deceived several generations of Americans. Politicians and bureaucrats will say and do anything to save themselves regardless of the consequences to the country or the economy. Citizens have been led over the cliff by the government and are in a state of suspended disbelief. This is our Wiley Coyote moment!
Consider two questions: how does government repay fourteen trillion dollars of debt, and how does government pay for sixty trillion dollars of unfunded entitlement program obligations? To address these questions you must understand how government raises revenue. Government has three options; to tax, to borrow, or to inflate.
Taxation
The debate over tax rates is an argument used by politicians to garner support and votes for their ideology. The so-called rich are demonized by politicians and the regressive media to pit one group of Americans against another. The rich are too small a constituency for politicians to concern themselves with when compared to the lower and middle income earners. The data tells quite a different story than politicians or the regressive media lead people to believe. The Internal Revenue Service released Publication 1304 - Individual Income Tax Returns 2008 last year. The data is summarized below:
| AGI Range | # Returns Filed | AGI Total (thousands) | Total Tax Paid (thousands) | Per Filer AGI | Per Filer Tax Paid | Percent of AGI | Percent of Tax Burden |
| >= 1 million | 321,294 | 1,076,046,308 | 249,019,686 | 3,349,102 | 775,052 | 13.02 | 24.1 |
| 200K - 999.9K | 4,054,365 | 1,385,961,656 | 287,598,531 | 341,844 | 70,936 | 16.77 | 27.9 |
| 100K - 199.9K | 13,851,341 | 1,845,103,256 | 232,270,420 | 133,208 | 16,769 | 22.33 | 22.5 |
| 50K - 99.9K | 30,925,946 | 2,193,691,414 | 184,553,934 | 70,934 | 5,968 | 26.55 | 17.9 |
| 1 - 49.9K | 93,297,623 | 1,762,057,537 | 78,138,354 | 18,886 | 838 | 21.33 | 7.6 |
| Total | 142,450,569 | 8,262,860,171 | 1,031,580,925 |
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*AGI - Adjusted Gross Income
If the government taxed every dollar above the $250,000 AGI threshold at 100% it would generate roughly $1.37 trillion of additional revenue. This still leaves a deficit of $250 billion dollars for fiscal year 2011. More importantly, people would simply stop working once government confiscated all earnings beyond a certain threshold. There is no point in working if government is simply going to confiscate your earnings to redistribute to government designated recipients.
Borrowing
The government borrows money to fund deficit spending. When expenses exceed revenues the government sells U.S. securities through the Federal Reserve to borrowers. The borrowers become creditors as the U.S. owes other governments, institutions, and private investors their principal plus some amount of interest. Every time the government borrows money to fund deficits the national debt increases.
Foreign governments have reduced their holdings in U.S. securities and are reluctant to continue funding deficit spending. The Federal Reserve is suppressing interest rates which means those investing in U.S. securities receive a low rate return. As with any investment there is a risk and reward, and many investors are not willing to risk their principal investment for such low returns on their investment. Eventually, interest rates must rise if the government wants to attract buyers of government securities.
Inflation
The government's great equalizer is inflation. Policymakers in Washington decide to create money out of thin air. New money is printed by the Treasury, at the request of the Federal Reserve, and used to purchase U.S. securities previously sold to investors. This is referred to as monetizing the debt. The inflow of new money results in inflation. Policymakers create terms like Quantitative Easing to not alarm the public to their actions.
Moreover, government deceives us by referencing the Consumer Price Index (CPI) as a measure of inflation. The CPI is based solely upon a basket of ever-changing, government defined goods and services. However, the CPI is the nominal inflation rate because it does not include currency devaluation. The real inflation rate is substantially worse than the CPI because it accounts for the growth in printed money.
We know this as purchasing power and every time the Federal Reserve prints money it erodes purchasing power. In other words anyone holding dollars becomes poorer every time the Federal Reserve expands the money supply.
Two leading economists of the twentieth century had opposing views on economics and the role of government in free markets. However, both shared a common view on inflation.
Milton Friedman said, "Inflation is taxation without legislation."
John Maynard Keynes said, "By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens."
Another unpleasant effect of current monetary policy is it penalizes lower income earners. The Federal Reserve is keeping interest rates artificially low while monetizing the debt thus reducing purchasing power. Those who do not have the means to invest in equity or debt markets, commodities, etc. have no other options other than simple interest bearing checking, savings, or money market accounts. Interest is a pittance before inflation, and once you factor in the real inflation rate, those lower income earners actually lose wealth by saving. The little guy that government proclaims to protect is the first to feel the negative effects of the Fed's inflationary monetary policy.
The simple truth is government cannot tax or borrow its way out of the current situation. Moreover, austerity programs can only go so far as discretionary spending amounts to $1.3 trillion, or 36%, of the entire federal government budget this year. The remaining 64% covers entitlement programs and interest on the debt. By 2020, the federal budget is projected to be $5.6 trillion with $4 trillion for entitlement programs and interest on the debt. This is before Obamacare is implemented.
Government is left with two unpleasant choices; sovereign default, or erode the purchasing power of the currency in which the debt is denominated. Technically, the latter is another form of default. Practically, politicians will proceed with the latter option while trying to disguise their actions as necessary, or for the benefit of this or that class of people. Eventually, the economy and country will collapse. It's not a question of whether a collapse will happen, rather a question of when it will happen.
Citizens have been lied to and deceived by our government. This is our Wiley Coyote moment. Will citizens remain in a suspended state of disbelief and continue the farcical game? Or, will citizens wake up and do something about it?
6/15/2011 | Email Walter E. Williams | Columnist's Archive
Most of our nation's problems are a direct result of our being immune, hostile or indifferent to several moral questions. Let's start out with the simple and move to the more complex. Or, stated another way, let's begin with questions that generate the least hostility, moving to those that generate the greatest.
If a person benefits from a hamburger, a suit of clothing, an apartment or an education, who should be forced to pay for it? I believe the question has only one moral answer, namely the person who benefits from a good or service should be forced to pay for it, that's if we wish to distinguish ourselves from thieves who only care about enjoying something and who pays is irrelevant.
Aside from the moral question is the economic efficiency question. If the user of something isn't paying, it's a good chance that he'll overuse and waste it. Our country's problem is that too many Americans want to benefit from things for which they expect other Americans to be taxed.
A related moral question is: Does one American have a moral right to live at the expense of another American? To be more explicit, should Congress, through its taxing authority, give the Bank of America, Citibank, Archer Daniels Midland, farmers, dairymen, college students and poor people the right to live off of the earnings of another American? I'm guessing that only a few Americans would agree with my answer: No one should be forcibly used to serve the purposes of another American.
You might say, "Williams, if Congress makes it a law, then you should submit to being used to serve the purposes of others."
Such a vision introduces the next moral question, namely under what conditions is it moral to initiate force and threats of force against a person who himself has not initiated force or threats against another? Before that question can be answered, you might ask for a bit more specificity that has an important bearing on the answer, namely are we talking about a free or a non-free society?
In a free society, there's no moral case that can be made for the initiation of force against one who hasn't himself initiated force against another. But that's a societal ideal that might be beyond our reach here on Earth. After all, we have delegated certain rights to government to provide certain services, as enumerated in the U.S. Constitution, particularly as specified in Article I, Section 8 of the document. Each American is duty-bound to pay his share.
So a case can be made for the initiation of force against one who refuses to pay his share of those expenses. If an American says that he'll pay his share of those constitutionally mandated functions of the federal government but refuses to give up his earnings to be used for handouts to the Bank of America, Citibank, Archer Daniels Midland, farmers, dairymen, college students and poor people, should some kind of force be initiated against him?
I am all too afraid that most of my fellow Americans would answer, "Yes, some kind of force, fines or imprisonment should be initiated against a person who refuses to give up his earnings for the use of another." Their only source of disagreement would be just who had the rights to another's earnings.
Some would argue that farmers and dairymen don't have a right to another's earnings, but students and poor people do. Others would argue the opposite.
French economist Frederic Bastiat (1801-1850) said, "Government is the great fiction through which everybody endeavors to live at the expense of everybody else." That endeavor has plagued mankind throughout his history and has now reached a crisis stage in Western Europe and the United States, and the prospects for reversing it don't appear to be promising.
By James Delingpole Politics Last updated: June 10th, 2011
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And yet at Oxford he was so sound....
Sometimes it takes a trip abroad properly to ram home just how screwed your country is. And so it proved when, on the deck of a Baltic cruise ship, I first read reports of Scottish Power’s dramatic gas and electricity price rises. Instead of experiencing a wave of fury, as no doubt I would have done at home, what I felt instead was the sort of detached, sardonic amusement an alien might feel on viewing from outer space a once-great civilisation destroying itself over an issue of immeasurable triviality.
That issue, of course, is “Climate Change”. Never before in history, I doubt, has so much money ever been squandered, so much suffering and poverty exacerbated, so much economic damage been inflicted, so many lies promulgated and so much environmental destruction wrought in order to deal with a problem so microscopically miniscule. Really, if Barack Obama were to declare war on Belgium because he’d always found Tintin Au Congo offensively racist, or if David Cameron were to launch a nuclear strike on Mykonos because all those white-painted buildings were “way too gay”, you still wouldn’t be even half way close to equalling the quite breathtaking stupidity, purblind ignorance and suicidal wrongheadedness of the disasters currently being inflicted on the world by our boneheaded political and administrative classes on their holy mission to “combat climate change.”
Let’s concentrate on the British example since, thanks to Cameron’s determination to lead the “greenest government ever”, we’re further down the road to Eco Hell than most, and let’s look at the reasons behind those electricity and gas price rises.
These are outlined here in this must-read piece by the Global Warming Policy Foundation’s Benny Peiser, which lists the various mechanisms (Renewables Obligations, European Emissions Trading Scheme, Feed-In Tariffs, etc) which, this year alone, will drive up our domestic energy bills by around 15 per cent and business energy costs by 20 to 25 per cent. Every one of these mechanisms is based on the so-far-very-much-unproven hypothesis that Anthropogenic Carbon Dioxide emissions are contributing dangerously to “Global Warming” and that this “Global Warming” is an undesirable thing. In other words, our political classes are imposing on both our domestic expenses and on the broader economy swingeing costs whose sole justification is the threadbare theorising of a small number of heavily compromised scientists brandishing dodgy computer models.
“How did those charlatans get away with it?” That is the question historians will be asking in generations to come. And: “Why, given his hearty endorsement from the start of all this green lunacy, was there ever a period when David Cameron was treated by significant segments of the media as an homme serieux?” And: “How can it possibly have been that, during the worst global recession since the 1930s, the world’s political leaders were able to impose such enormous, unjustified extra costs on their ailing economies without serious criticism from the commentariat or rebellion from their electorates?”
You’ll find at least one answer to the last question if you have a look at how these gas and electricity price rises are being spun. Consider this article, cited by Richard North, from “Scotland’s top-selling evening paper” the Evening Times. It’s titled “Energy Companies Are Mugging Customers”:
ScottishPower put up gas prices by almost 20% and electricity by 10% yesterday, adding hundreds of pounds to the average annual household energy bill from August this year, with other firms expected to follow suit.
John Robertson, Glasgow North West Labour MP, has called on Chancellor George Osborne to take action and to rethink his cut in the winter fuel allowance this year.
Mr Robertson, a member of the Energy and Climate Change Select Committee, said pensioners would be hardest hit as they will lose up to £100 this winter just as the increased bills start to be delivered.
He said most of those aged 60-79 will get £200 instead of last year’s £250 when the payment is made in November or December. Those who are 80 or older will get £300 instead of £400.
He said “People in Glasgow and the rest of Scotland are struggling to keep warm at winter, and the big energy companies are mugging the poorest people in our country.
“The big six energy companies are acting like a cartel and instead of price rises being the last alternative it seems to be the first. They seem to view consumers as cash cows and the Chancellor seems to view the poorest consumers with contempt.
“These companies are pinching money out of the pockets of the poorest people in this country at a time when ordinary household budgets are threadbare.”
Housing charity Shelter Scotland said the rise would put even more families into poverty.
Gordon MacRae, head of policy, said: “Prices cannot keep going up – something’s got to give. Either the short-term profit margins of utility companies or, for families, the choice of heating or eating. We fear that more families will not be able to pay their bills and eventually lose the fight to keep a roof over their head.”
The SNP also condemned the price rise. Energy spokesman Mike Weir MP said: “People just cannot keep absorbing continuous and colossal energy price increases like this, and the UK Government must step in.”
ScottishPower said the rise was necessary due to increasing cost of wholesale prices.
Raymond Jack, ScottishPower’s UK Retail director, said: “Wholesale prices for gas and electricity have increased significantly since the end of last year and continuing unrest in global energy markets means future prices are volatile.
“We understand times are difficult for many people, and we have done what we can to absorb these additional costs for as long as possible to minimise the impact on our customers.”
I’ve quoted the article in full just to show you how much of it is dedicated to explaining the hidden costs being imposed on the consumer as a result of eco-scaremongering. Not one single word. And the Evening Times is no exception. Here is a report from our own paper in which MPs are heard making much the same claims:
Michael Meacher, the Labour MP, said: “These are enormous increases. Energy companies claim they put up prices when wholesale prices go up. But then they are very sticky on prices when wholesale prices are coming down. They are profiteering at a time when everyone else is suffering austerity.”
Ed Miliband, the Labour leader, took to Twitter, to call for the Prime Minister to personally intervene.
He wrote: “David Cameron should urgently meet w Scottish Power to get prices down. PM needs to stop sitting idly by.”
and
Tim Yeo, Conservative MP and head of the Commons energy and climate change select committee, said: “If energy companies want to win back trust they should make clear what they have paid. Until we have that transparency, the public will remain suspicious that prices go up rather quickly and come down rather slowly.
“The amount by which they increase their prices should relate to what they have actually paid rather than to some theoretical calculation. We know that energy prices are rising, but what we will not accept is companies who appear to be exploiting their position.”
“Action is needed. It is best if it was voluntary, but if that does not happen then the government would be right to compel disclosure.
The technical term for all this, I believe, is “democratic deficit.” Here we have Tim Yeo MP – a Conservative MP, allegedly, and one with an influential position on Britain’s energy policy – joining up with various violently left-wing members of the Opposition to promulgate exactly the same almighty whopper: that the reason are energy prices are skyrocketing is down to a combination of insufficient regulation and corporate greed.
Let me just repeat that: here is an influential member of Britain’s Tory-led Coalition essentially arguing that what Britain needs right now is a less free market and more regulation. And also pretending that a policy for which he himself is partly responsible – the costly and pointless drive for renewables in the name of combatting climate change – DOESN’T EVEN EXIST.
How much longer are they going to get away with this? Well, I said at the beginning that this country was doomed, but I’m encouraged to see signs that just a hint of a fightback is beginning.
It’s nice, for example, to see my previously fairly agnostic colleague Charles Moore take up the baton for climate realism in this excellent Telegraph column. The Daily Mail, too, has been going MENTAL (but in a good way) on the subject all week, the latest entrant into the fray being the goose-downishly light-of-touch Richard Littlejohn.
Charles Moore is bang on the nail:
High energy costs kill economic growth. That is another way of saying that they make people poorer. Higher energy bills are implacable, direct, and impossible to avoid without personal discomfort. They are coming in now, whereas the counter benefits of any “Green Deal” are much more speculative and long-term. If people think that politicians are making them poorer for no good reason, they will not vote for them.
Say what you like about David Cameron – and you’ll have noticed I do, quite a bit – but if there’s one thing he’s good at it’s being more slippery than a jellied eel in a tub of KY Jelly. And he’ll need this skill in spades if he’s not to go down in history as the Prime Minister who, in the name of a non-existent problem, presided over the devastation of the British countryside with bat-chomping eco-crucifixes for rent-seeking toffs (aka wind farms) and the destruction of the British economy thanks to the imposition of wholly unnecessary costs and regulations. The best of luck to you Dave. And I don’t wish it you for your sake but the sake of our country. It deserves better than this, really it does.
It is no mystery that the United States economy is struggling right now. We hear the consistent cries across virtually every medium of communication, online and offline, stating the same thing. While the causes and culprits are tirelessly up for debate by those with opposing viewpoints and beliefs, one thing we can hopefully all agree upon is that something is terribly wrong. Rest assured that you will not hear about Charlie Sheen giving his ‘winning’ approval on the US economic decisions over the past several decades. Make no mistake, if you think the US federal government is the only bad seed in this party, you’re as blind as they are. This growing fiasco has involved everybody that has ever made a financial decision; from federal and local governments to large and small businesses to the most powerful decision makers of all…everyday consumers.
The America Family Association has organized ten powerful economic graphs that put financial facts and figures into visual form. Sometimes you can quote economic statistics to people until you are blue in the face and it won’t do any good, but when those same people see charts and pictures suddenly it all sinks in. As you examine the economic charts below, pay special attention to what has been happening to the U.S. economy over the last 30 or 40 years. All of the economic problems that we are experiencing now have taken decades to develop. The sad fact of the matter is that we have been living in the biggest debt bubble in the history of the world over the last 40 years. All of this debt has purchased a wonderful standard of living for the vast majority of us, but all of this debt has also destroyed the economic future of our children and our grandchildren. Someday future generations will look back on what we have done in absolute horror.
With absolute sincerity to our great nation, my professional recommendation is to be prepared for the worst. Let’s of course go out kicking and screaming and not give up without a fight, but the writing is on the wall. Short of a miraculous recovery that takes, at the minimum, decades to complete (anything is possible), I would start thinking about how to best take care of you and your family for the remainder of your living years and beyond. It involves NOT relying on anybody else but yourself to make sound short and long-term financial decisions. It involves having a backup plan and a backup plan for your backup plan. And heck, if we as a nation get smart and make a true recovery (even if it takes 40 years), you’ll be one step ahead of the competition and able to pass down your financial wisdom and advice to younger generations.
Take a good look at these graphs and allow the information to sink in. Use common sense to determine how this has and will continue to impact your life and build a strategy on how you plan to get active in protecting yourself against the seemingly inevitable economic brink wall.
Federal spending is almost 18 times higher than it was back in 1970. Now Barack Obama has proposed a budget that would increase U.S. government spending to 5.6 trillion dollars in 2021. Just imagine what the following chart would look like if that happens....
he U.S. national debt is currently $14,081,561,324,681.83. It is more than 14 times larger than it was back in 1980. Unfortunately, the national debt continues to grow at breathtaking speed. In fact, the Obama administration is projecting that the federal budget deficit for this year will be an all-time record 1.6 trillion dollars.
The chart is from an official U.S. government report to Congress. As you can see, it is projected that interest on our exploding national debt is absolutely going to spiral out of control if we continue on the path that we are currently on....
The sad truth is that it is not just the U.S. government that has a massive debt problem. U.S. households have also been accumulating debt at a staggering rate. Total U.S. household debt did not pass the 2 trillion dollar mark until the mid-1980s, but now total U.S. household debt is well over 13 trillion dollars.
The total of all debt (government, business and consumer) in the United States is now well over 50 trillion dollars. For the past couple of years this figure has been hovering around a level that is equivalent to approximately 360 percent of GDP. This is a debt bubble that is absolutely unprecedented in U.S. history.
There are about 3 and a half times as many unemployed workers in the United States today as there were when 1970 began. These jobs losses are going to continue as long as we allow our corporations to pay slave labor wages to workers on the other side of the globe. All of the major trends in global trade are very bad for the U.S. middle class. For example, the U.S. trade deficit with China for 2010 was 27 times larger than it was back in 1990.
For most of the post-World War 2 era, when the median duration of unemployment in America reached 10 weeks that was considered a national crisis. Well, today competition for jobs is so intense that the median duration of unemployment is now well over 20 weeks
Since the Federal Reserve was created in 1913, the value of the U.S. dollar has declined by over 95 percent. One of the reasons given for the existence of the Federal Reserve is that the Fed helps control inflation. But that is a huge lie. The truth is that the United States never had consistently rampant inflation until the Federal Reserve took control. In particular, once the U.S. totally went off the gold standard in the 1970s inflation really started escalating out of control.
Now the Federal Reserve says that the solution to our current economic problems is to print even more money out of thin air. The games that the Federal Reserve is playing with our money supply are simply inexcusable. Just look at what the Federal Reserve has done to the monetary base since the beginning of the recession.
The price of oil is now ridiculously high. A high price for oil is very, very bad for the U.S. economy. Our entire economic system is based on being able to use massive quantities of very cheap oil. Unfortunately, that paradigm is starting to break down and the consequences will be very bitter. Back in mid-2008, the price of oil hit an all-time record of $147 a barrel and subsequently the world financial system imploded a few months later. Well, the price of oil is on the march again and that is very bad news for the U.S. economy.
Source: http://www.afa.net/Blogs/BlogPost.aspx?id=2147503555
Tagged with: america • americans • debt • dollar • economy • federal reserve • government • household debt • inflation • money • print money • unemployment
June 1, 2011
The latest Social Security Trustees Report tells us that the program will be insolvent by the year 2037. The combined unfunded liability of Social Security and Medicare has reached nearly $107 trillion in today's dollars. That is about seven times the size of the U.S. economy and 10 times the size of the national debt. Those entitlement programs, along with others, account for nearly 60 percent of federal spending. They are what Congress calls non-discretionary spending. About half of discretionary spending is for national defense. Each year, non-discretionary spending consumes a higher and higher percentage of the federal budget.
The language Congress uses to describe their spending is corrupt beyond redemption. Think about the term entitlement. If one American is entitled to something he didn't earn, where in the world does Congress get the money? It's not Santa or the Tooth Fairy. The only way Congress can give one American a dollar is to first take it from another American. Therefore, an entitlement is a congressionally given right for one American to live at the expense of another. In other words, Congress forcibly uses one American to serve the purposes of another American. As such, it differs in degree, but not kind, from that uglier part of our history where black people were forcibly used to serve the purposes of their slave masters.
What about the terms discretionary versus non-discretionary congressional spending? Non-discretionary refers to uncontrollable things like sunsets and sunrises, low tides and high tides and laws of thermodynamics. By contrast, all congressional spending is discretionary and controllable. For political expedience, Congress has written laws to shield certain spending from annual budget scrutiny by calling it non-discretionary.
The level of congressional spending is unsustainable, but how willing are Americans to do anything about it? A courageous member of Congress, Paul Ryan, R-Wis., chairman of the House Budget Committee, has put forth a budget plan that would trim the deficit by $4.4 trillion over 10 years by reforming Medicare and Medicaid, making defense cuts and imposing hard spending caps on domestic spending.
Ryan's plan was immediately attacked as trying to balance the budget on the backs of the poor. In the wake of this attack, even some of his Republican backers, including House Speaker John Boehner, have become lukewarm in support.
The president and his supporters call for tax increases as a means to cover the deficit, but higher tax revenues cannot eliminate the deficit. Controlling for inflation, federal tax revenue today is 23 times greater than it was in 1960, but congressional spending is 42 times greater. During the last half-century, except for five years, the nation has faced a federal budget deficit. It's just simple math. If tax revenues soar, but congressional spending soars more, budget deficits cannot be avoided.
People ask what can be done to save our nation from decline. To ask that represents a misunderstanding of history and possibly a bit of arrogance. After all, how different are Americans from the Romans, Spaniards, French and the English? These were once mighty nations standing at the top of civilization. At the height of these nation's prosperity, no one would have predicted that they'd become third-rate nations, especially England. If during Queen Victoria's Jubilee in 1887 had a person suggested that England would become a third-rate nation and later challenged on the high seas by a sixth-rate nation (Argentina), he would have been declared insane.
One chief causal factor for the decline of these former great nations is what has been described as "bread and circuses," where government spends money for the shallow and immediate wants of the population, and civic virtue all but disappears. For the past half-century, our nation has been doing precisely what brought down other great nations. We might have now reached the point of no return. If so, do we deserve it?
