Many Americans could be entering into the third--and perhaps terminal--stage of dependency on big, centralized government that's been growing for half a century.

The first stage came during the "guns and butter" administration of President Lyndon Johnson, who attempted to simultaneously win two unwinnable wars--the  Vietnamese War, and the War on Poverty.  Johnson considered himself a master politician, and saw his Civil Rights legislation and  "Great Society" entitlement programs as the way to get blacks to be loyal Democratic voters for decades.  

The problem is that humans of every age, race, and sex are attracted to free stuff, quickly becoming addicted to it.  Crafty politicians know that promising more free stuff to voters wont hurt them at the ballot box.  Alas, though, the reality is that stuff that's free to some will always be an expense for others.  The government's free stuff had to be paid for, and just as with families that live beyond their means, Congress resorted to borrowing and debt...ever more massive borrowing, inexorably followed by an ever mounting debt that has reached $20 trillion (one trillion is a million million) dollars with no real ceiling in sight.

As a nation, we're dependent on other nations' good will and generosity, but we can't repay what we've borrowed, and if interest rates rise substantially we may not even be able to pay the interest on what we've borrowed.  We aren't coming close to generating the Gross Domestic Product (GDP) to pay our way.  So, how--and how long-- can a nation that can't pay its bills continue to afford 700--800 global military bases and an increasingly dependent citizenry?

The second stage of dependency sneaked up on us in the late 1970s.  Up until that time the post-war boom had meant rising wages, which masked the rising inflation.  Real income of US workers flattened out

in the late Seventies, but nominal wage increases resulted in lower profit margins for manufacturers, so a decade later General Motors exported one of its automobile plants from Flint, MI to Mexico, and jobs became one of our chief exports.

Twenty-five years later we've seen the job drought (I won't even get into the job erosion posed by Artificial Intelligence and Robotics) withering middle-class America to a point where approximately 93,000,000 willing-to-work Americans are without work.  That many unemployed (and under-employed) has drastically increased the number of Americans (46,000,000) who have become dependent on the Federal Government for life's essentials. 

The lack of work also produces glaring income inequities because fewer Americans are employed, and their real income hasn't risen in over thirty-five years.  A recently published article and "prosperity map" generated by the Economic Innovation Group, and published in Wall Street On Parade, shows only spotty economic activity throughout the US.

Innovation, entrepreneurship, job creation, production, and good old American "self-reliance" are discouraged by economic uncertainty, by debt (government, consumer, and student loan), by government regulation, and by the easy profits of financialization.

The anticipated bankruptcy of Hartford, CT may mark the beginning of the third stage of dependency as municipalities and states fail to meet financial and pension obligations.  The other night while standing in line at Kroger I struck up a conversation with an older lady, who identified herself as a retired teacher.  She was bemoaning the fact that she had to watch her pennies because, as she put it, "My retirement income isn't nearly as much as they told me it would be."  She isn't alone, and I suspect millions of retirees are in for a shock when their retirement checks fall short of expectations. 

Reasons for retirement fund and pension shortfall range from a shocking lack of planning and/or funding, to the Fed's Zero Interest Rate Policy, which unpredictably reduced interest income from a viable 7-8% to virtually nothing.  The policy was a life-saving one for banks, but a murderous one for retirement and pension plans.  The way I look at it, the Fed and its banks morally owe retirement and pension plans a massive sum to compensate for an arbitrary Zero Rate policy... but let's not hold our breath until restitution is made.

Owners of IRAs might take note because a major market correction could drastically affect equity-based IRA's.  IRA's were designed by Congress and Wall Street to force investment dollars into equities.  So far, he Fed, as manager of the economy, has prevented--or at least delayed--a devastating correction like the dot.com and mortgage bubbles that wiped out the retirement dreams of millions. 

Incurably optimistic investors assume that rising markets will rise forever, but, "all the king's horses, and all the king's men" can't prevent the hope of an ever-rising Dow from becoming a Humpty-Dumpty.  Historically, the stock market experiences a major decline every seven years.  It's been longer this time, but some think that a delayed crash will mean a more vicious crash when all the banking wizardry fails and "the can" can't be kicked any farther.

I wouldn't place any bets on how soon the next crash comes, but it seems to be matter of when, not if.  A prudent bettor might predict that owners of self-managed equity IRAs and gold or silver IRAs would come out well ahead of those who are locked into bank-managed, dollar-denominated IRA's.  The latter, suffering substantial losses, could mean an entire generation of American retirees entering into the same kind of government dependency experienced by 46,000,000 brother and sister Americans. 

IRA custodians aren't likely to ever suggest that their clients cash out of their IRAs (perhaps pay an early withdrawal penalty and taxes) to invest in something other than paper assets, but, neither are they likely to provide compensation to clients whose equity-based IRA accounts suffer the fate of the market in the next major correction.

A correcting market doesn't care who loses. It doesn't care about your --or your broker's--feelings or future  The next correction could subtract millions more from the roster of those who expected to enjoy a stable and secure retirement.  The names of losers could end up on the ever-lengthening list of Americans who look to the government for shelter, food, and other necessities.  

The growing addiction to entitlements can only be ended by those who see the trends, and who rely on old-fashioned Emersonian Self-Reliance...which is about as "American" as it gets.  The mushroom effect of entitlement programs makes it next to impossible to shrink or end them.  That history, and present trends, should prompt us to question if a nation of government dependent people can ever control, discipline, or overrule that government.  If we become so indebted to government that we can't say "No" to it, then we'll pay for all our freebies with our rights and our freedoms.  With that in mind, how will you productively and profitably manage your assets and steer your way through the next crash?