Republican bill passes, opening path to debt deal

[jazdoc]

When they send one worth passing and the Senate turns it down, I'll be concerned. Their last one was a good example. The body that constitutionally incurred the debt (the House spends the money) refused to pay its bills unless they got a constitutional amendment they know no one will ever give them. It wasn't a serious bill. None of them have been. All they've done on this issue this year is come up with one wild scheme after another to try to pass their responsibility off on the Senate and the White House. They are cowards and children. I'll let you figure out which are which.

Tim

Couldn't agree with you more Tim.

Here's what Senate majority leader Harry Reid said in December 2010 when asked why the Congress wasn't raising the debt ceiling "“I want the Republicans to have some buy-in on the debt,” he said. “They’re going to have a majority in the House. I think they should have some kind of a buy-in on the debt. I don’t think it should be when we have a heavily Democratic Senate, a heavily Democratic House and a Democratic president.”

This petulant and child-like answer demonstrates why the debt ceiling has become irrelevant. It's simply a method to game the system; for one party to evade unilateral blame for their actions. For all I care, they could have made it $100 Trillion, we've passed the point were it's relevant.

I don't know how it works in everyone else family, but we don't sit around our kitchen table, come to a family decision and inform Mastercard what our credit limit should be; Mastercard seems to want to set that limit on their own. I suspect our creditors will have more influence going forward than any artificial 'debt ceiling'....

 

[Steve Williams]

I think I read somewhere once that if the National Debt was laid out in dollar bills the stack would reach the moon

 

[jazdoc]

Here's a nice visual of the debt:

http://usdebt.kleptocracy.us/

 

[jadis]

Mind boggling figures. $114.5 Trillion. I wonder what other countries belong to this 'group', as far as liabilities are concerned.

 

[Steve Williams]

Here's a nice visual of the debt:

http://usdebt.kleptocracy.us/

That is truly remarkable. It reminds of the days gone by and watching Carl Sagan do his "Cosmos" TV show where he put we mortals in perspective to our place in the universe. This link puts the national debt in perspective.

 

[Phelonious Ponk]

Couldn't agree with you more Tim.

Here's what Senate majority leader Harry Reid said in December 2010 when asked why the Congress wasn't raising the debt ceiling "“I want the Republicans to have some buy-in on the debt,” he said. “They’re going to have a majority in the House. I think they should have some kind of a buy-in on the debt. I don’t think it should be when we have a heavily Democratic Senate, a heavily Democratic House and a Democratic president.”

This petulant and child-like answer demonstrates why the debt ceiling has become irrelevant. It's simply a method to game the system; for one party to evade unilateral blame for their actions. For all I care, they could have made it $100 Trillion, we've passed the point were it's relevant.

I don't know how it works in everyone else family, but we don't sit around our kitchen table, come to a family decision and inform Mastercard what our credit limit should be; Mastercard seems to want to set that limit on their own. I suspect our creditors will have more influence going forward than any artificial 'debt ceiling'....

Yep. A lot of political posturing going around on both sides of the aisle. Of course has any Congress ever voted on the debt ceiling six months ahead of schedule? That's a question, not an answer. But I have serious doubts.

Tim

 

[Whatmore]

I'm not normally a big fan of American humour (or the way you spell it ) but I do like The Onion.

http://www.theonion.com/articles/democrats-republicans-celebrate-pitiful-excuse-for,21052/

 

[Steve Williams]

So President Obama signed the Bill just hours before deadline.

In spite of this the market is down 265 points and has given up any gain for the year to date.

Speculators are saying the Dow will close this year above 13,000 but "who knows for sure"

This leaves me with a empty feeling in my gut.

So to all you economists here, I ask, "what does this mean for us as a nation and each of us individually?"

 

[Phelonious Ponk]

So President Obama signed the Bill just hours before deadline.

In spite of this the market is down 265 points and has given up any gain for the year to date.

Speculators are saying the Dow will close this year above 13,000 but "who knows for sure"

This leaves me with a empty feeling in my gut.

So to all you economists here, I ask, "what does this mean for us as a nation and each of us individually?"

For me it means I have to try to guess where the bottom is so I can get back in then.

Tim

 

[Lee]

So President Obama signed the Bill just hours before deadline.

In spite of this the market is down 265 points and has given up any gain for the year to date.

Speculators are saying the Dow will close this year above 13,000 but "who knows for sure"

This leaves me with a empty feeling in my gut.

So to all you economists here, I ask, "what does this mean for us as a nation and each of us individually?"

Steve, I think it means our taxes will go up and GDP growth will go down.

This deal did not address entitlements and that is not sustainable. And you cannot tax the rich enough to pay for all the Obama and W spending. The numbers simply do not add up.

And if you do raise taxes, it will hurt consumption which is 2/3 of the economy so growth will be hit.

 

[Steve Williams]

For me, everything was put into perspective yesterday with the link jazdoc posted here. If you haven't seen it, it is worth a look...

http://usdebt.kleptocracy.us/

 

[Lee]

For me, everything was put into perspective yesterday with the link jazdoc posted here. If you haven't seen it, it is worth a look...

http://usdebt.kleptocracy.us/

That is a great visual Steve. Thanks!

 

[Steve Williams]

Thank Jazdoc not me. I felt everyone should see it as it puts things into monumental perspective

 

[Mark (Basspig) Weiss]

All of this is just theater for show, because Washington knows that there is a growing contingent of people who are realizing that something rotten is going on with our government.

Nobody says it better than a friend of mine. I think he predicts it to the T:

"In 2007, the housing market collapsed, bringing down the house of cards of the subprime market. Because of securitization and derivatives, this caused an enormous black hole on the books of the top financial institutions. What to do?

One option was for the gov't to buy the bad mortgages from the banks-- this was the original intent of TARP, but the purchases just couldn't be made quickly enough to stop the collapse. What to do? After much back and forth about whether to create a "good bank" and "bad bank", etc the decision was made-- just fill the hole with money. At Morgan Stanley, we were suddenly a bank holding company with access to the Fed printing press. According to the recent GAO audit, $16 TRILLION in loans were made by the Fed to various financial institutions. An amazing number. But that much money would surely hyperinflate the dollar and collapse the global reserve currency, right? What to do?

So read this article closely-- they shut down interbank lending. The Fed pays interest on "excess reserves" making it more lucrative to keep the trillions locked away rather than loaning them out. This is what shut down the credit markets. It's like the economy swallowed a balloon of heroin but it's not hitting the bloodstream. This saves us from immediate hyperinflation, but at what cost? The interbank lending market dies on the vine, so only those banks with political pull.. i mean Fed access... have liquidity. Small banks died throughout 2009. I watched a whole bunch of them get seized by the FDIC, which then recapitalized them with TARP money and set them back on their feet-- with a new board of Goldman Sachs cronies to replace the original owners. Those banks that weren't worth stealing just went toes up... and the result was no business loans, limited access to capital, contraction in the real economy, and high unemployment.

So, so far, the decision to plug the black hole of derivatives and save the TBTF banks has had the unintended consequence of creating a deflationary depression in order to avoid a hyperinflation. They CHOSE 9% unemployment as a better alternative to fiscal collapse or letting the banks fail. But now we're coming up on an election year and-- liquidity still being tight-- the economy is not robust enough for Obama's re-election prospects.

They need to increase the velocity of money now-- what to do?

They tried direct monetary stimulus, they tried giveaway programs like Cash for Clunkers, they've turned this knob and tweaked that dial. Now they're revisiting the "Excess Reserves" issue. And, I believe, they are already loosening those trillions into the system. I think they've already poked a hole in the heroin balloon and we're just not high yet. Next year, we'll see a sudden drop in the unemployment rate, an increase in bank lending, a flood of liquidity. Just in time for Obama to declare that his policies have brought wealth to everyone. The nominal values of stocks will go up, wages will increase-- and price inflation will follow.

But price inflation will not stop, and the other benefits will be temporary. By 2013, when Obamacare kicks in, the debt ceiling is up for another review, etc, the amount of money chasing goods will increase exponentially. Because of fractional reserve lending, what began as a surge of liquidity will become multiplied as banks lend and re-lend the same dollars. $1 trillion will become $9 trillion in one generation of re-gifting. At this point the country panics, we see a massive surge in gold and commodities, the commodity exchanges break down and the paper markets for commodities collapse. The Dow skyrockets, but the nominal values don't really mean anything. You can't get cash out of the bank because physical currency becomes scarce and people stop accepting debit cards and electronic payments. Savings are trapped in institutions-- they absorb them, say tough luck to depositors-- who are then paid by the FDIC which gets the cash via more money printing from the Fed.

At this point you want a gun, a dog, and a year's worth of food.

The crisis will last as long as people are not storming the capital with guns. They will have people in a desperate condition, and desperate people will make bad choices. This is the period when the transfer of hard assets will take place. When currency markets are in upheaval, people won't work, they won't get paid, when they are paid it won't retain purchasing power. Markets will shut down. Food will become scarce. Hungry people will be willing to part with assets-- homes, gold, pianos, cars, furs, diamonds, paintings, commercial real estate, Action Comics #1-- you name it. During the period of desperation the hard assets will move to those who have liquidity. Like, say, the Fed and those with first access to the printing press before each dollar loses purchasing power.

At the end, the people revolt. But before that happens the IMF will zoom in for us as it has for Greece and Spain and Italy et al. It will have the new global currency to replace the dollar as the international reserve. It will be based on commodities, or gold, or maybe the IMF will just absorb the Fed and they'll start a new system of fiat money printing. But the crisis will be over, and a New World Order-- to coin a phrase-- will emerge that is much more globalist in nature-- with a socialist central power unaccountable to individual nations much as the Eurozone's leaders are unanswerable to the the people of the individual countries.

Now-- one question for all of us should this come to pass-- is it deliberate murder, negligent homicide, or suicide? The end result is the same."

 

[Steve Williams]

Wow Mark

Scary if it all comes to pass.

 

[Mark (Basspig) Weiss]

Wow Mark

Scary if it all comes to pass.

Don't worry, the rich can simply hire security guards and stock up on food and also pay off the local constabulary to pass them by when they start those FEMA camp relocations. The rest of us have to lock and load and hope our aim is better than the US troops who'll be tasked with taking out the 'malcontents' and moving them to concentration camps. Some say we're 15 months away from this. I hope we have a couple or three years. I'm not quite ready yet to fight a war.

 

[Whatmore]

I must say my radar goes on full alert when terms like "New World Order" get bandied around

 

[Phelonious Ponk]

I must say my radar goes on full alert when terms like "New World Order" get bandied around

Was there a "new world order" in there? I didn't get that far.

Tim

 

[jadis]

Wow Mark

Scary if it all comes to pass.

Horrible scenario, I thought only possible in the movies. Being way out here, I find it hard to imagine people in the USA revolting and taking to the streets.

 

[Phelonious Ponk]

Horrible scenario, I though only possible in the movies. Being way out here, I find it hard to imagine people in the USA revolting and taking to the streets.

Conspiracy theorist fantasies. Anything is possible, but the truth is that so far, as unpopular as they are, the TARP bail-outs have been one of the most profitable things the government has done in a long, long time. Were they the right thing to do? Not as long as the biggest banks are still too big to fail. They should be busted up and the regulations that kept them from inbreeding should be restored. We're left with the conditions that created the crisis, but that doesn't change the facts that the bail-out averted an international financial catastrophe of a scale we don't want to think about, and that the money is coming back even faster than expected. If you want a doomsday scenario to worry you over your children's future, the far more likely one is a slow decline and decent of US status, power and influence, both political and economic. Just look east, at all the great powers of Western history -- the UK, France, Italy, Greece. Their present is more likely our future. Empires fall. Then again, we have an incredible depth of natural resources that none of the above have. With the world industrializing and growing quickly and recklessly, and with by far the most productive system for growing and processing food in the world, we'll have to be pretty stupid not to find something to do. What, if anything, is killing our future is not the debt itself, but what it has done to prevent us from investing in ourselves. If some kid out there would just invent the flux capacitor, and we could just develop the wisdom not to pay a handful of shareholders for the intellectual property and send all the manufacturing overseas, the prosperity and resulting tax revenues would take care of the debt all by themselves. Don't believe me? Look at the 90s. But we're not educating our kids to invent anything. And we're not supporting the pure research to support the few that are emerging brilliant in spite of our neglect. And that's a much bigger problem.

Tim