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- Any talk of a V-shaped recovery is poppycock, Bob Rodriguez of First Pacific Advisors says, warning the bulk of U.S. credit problems are still to come. By the close of 2011, Treasury debt outstanding will be $14.6-16.6T, and debt-to-GDP ratio will rise to between 97-110%, which leads him to wonder: "How do we finance all this debt?"
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This news story has 40 comments:
I think I am starting to connect some dots and I believe that Bernanke's recent testimony is a way of steeling himself and preparing Congress for a showdown between the Fed and the rest of Washington.
At the brink of financial peril, the Fed has monetized debt but I do not believe Bernanke will continue to do so simply to accomodate irresponsible fiscal policies.
I'm thinking out loud as much as sharing thoughts.
Now let's see, the last time debt was this high the country was fighting for literally the freedom of the world.
Today, we are literally fighting to continue to live above our means for a little while longer.
Sounds like the death knell to an empire to me. Obama/Bush names will live in infamy. (at least to me)
The dollar devalues...but how much 50%...100% 1000% that is what no one knows...
I don't think interest rates will go up because the Fed will be the buyer of all debt....
How about personal property? Homes. Food? Autos? Gas? Insurance? things you need to live?
Gold?
My personal opinion is to get into offshore gold..hard gold..not an etf..
What about Volence from gangs and others like the new mafia that will control the new black markets in the USA?
Lots of changes coming...and I don't think they are going to be good
On Jun 03 06:20 PM CautiousInvestor wrote:
> A well written and sober analysis of our fiscal health.
>
> I think I am starting to connect some dots and I believe that Bernanke's
> recent testimony is a way of steeling himself and preparing Congress
> for a showdown between the Fed and the rest of Washington.
>
> At the brink of financial peril, the Fed has monetized debt but I
> do not believe Bernanke will continue to do so simply to accomodate
> irresponsible fiscal policies.
>
> I'm thinking out loud as much as sharing thoughts.
What about the military?
No one wants to reduce their lifestyle...so they will never vote for someone who says you have to.
How do we as a country get it back together...back to the 50's so to speak...when schools were good, neighborhoods were good, jobs were good, everyone lived a clean lifestyle mainly, you knew your neighbors, and they knew you, and on and on.
I don't know if we can...and that is what scares me....its going to get very dark before it gets brighter IMHO
On Jun 03 06:17 PM youngman442002 wrote:
> How come all these talking heads in the know didn't think about this
> last fall when the taps got opened and it all started pouring out....why?
> Because Obama was in power and all is good. Now they are having second
> thoughts about becoming a third world socialist country...but guess
> what..its going to be a lot harder to win it back with the Black
> Panthers protecting every voting booth and no one has to have an
> ID to vote...think about it
While I don't think it will happen (US sovereign default), I could see the US dollar devalue more against other currencies. If anything is left of a US export market, then that might help a little to get near a sustainable level.
I thought the "bake sale" comment was funny, but it reminds me of something discussed not long ago. There was an idea floated about having a National Lottery. Basically, a lottery is a tax for stupid people, without them thinking about it too much. This would be a revenue generation apparatus without changing income taxes, tariffs, nor corporate taxes. Again, I don't think it would happen, but it would not surprise me.
Contrast this with what we now owe and who we owe it to. We used our economic engine to produce the profits that led to the taxes to pay down all of this obligation. It was debt we all approved of. It was necessary, and we gladly taxed ourselves to try to retire it once victory was achieved.
The debt we have now is entirely from a bloated, out of control, tax and spend scheme gone awry. I repudiate this debt, because I received no benefit from its accretion and never once approved where or what it was being spent on.
This past few months has taught me that our leadership cares as little about the consequences of adding to an already insurmoutable problem.
Let Geithner go begging, hat in hand, and prostate himself before China's ruling heirarchy. Allow Obama the be seen across the world, bowing in fawning reverence towards the oil rich Saudi King. I have respect for neither man in any case, so their desperate fawning does nothing to diminish me or mine.
I predict not a V shaped recovery, and not a W shaped one. Instead, let me be the first to predict a century of what I'm calling the Z shaped non-recovery skyscraper. It consists of short periods of leveling off before the next steep drop in value. We'll ride this Z shape all the way to the bottom, but it will take twenty years before we get all the way down there.
Not going to happen. In the 50's most U.S. adults had an expectation of earning a living by performing a job which actually added value. The difference in salaries and wages between the bottom 10% and upper 90% was not nearly as wide as it is now. In other words, a blue collar worker could afford to own a modest home and live a modest life style. Also, credit for the average Joe was only used for large ticket items. They lived within their means because they had no access to unsecured credit.
Today, too many of our best and brightest minds are intent on "earning a living" by siphoning off the life savings of the working class by creating financial instruments which are intentionally complicated so they can aspire to that house in the Hamptons, etc. Some of these people are narcissistic sociopaths that are nothing more than modern day mobsters, others have convinced themselves that they actually provide a valuable service. In either case they are the leaches of our society.
One of the reasons why the Chinese will be the next global financial super power is because their society is not afraid to work hard to earn a living. They perform the work that creates wealth as opposed to siphoning off somebody else's wealth. The only advantage Uncle Sam has left is military superiority and it is only a matter of time before we lose that.
______________________...
Market
We may be starting to comminicate on this line of thought. Article I, Section 8 gives Congress control over money..........so they hold the hammer. I believe the institution will survive but I am not convinced Bernanke will.
On Jun 03 06:18 PM Missing_Link wrote:
> We could have a bake sale.
You still have a system where the President has real authority, and the old adage says that it is better a bad captain, that ten (or 1000) captains. Frankly speaking, Obama may have gone too much socialist... it will be your job as electors and as "public opinion" to assure that some measures taken will be only exceptional and temporary... time will tell... but for several things he seems a good captain right now. To say one, I've never really heard the word "green" from the Bush family, and this is really the future, because this involves a lot of job (and if this saves some polar bears, we will also feel better, that's not bad :) ).
But, back to the point, I wanted mainly to say this: within this Seeking Alpha, and in some other places, within the last year I've seen somewhat excess "depression", lack of faith, you understand what I mean. What I wanted to say is that, hey, even a Country with really bad governance like mine, can do good things, and did not stop fighting. The debt, the universal healtcare, won't transform you automatically in Argentina, believe me; it doesn't even here, even if lots of these healtcare or other public jobs are a hidden form of public assistance (notice: in spite of this, in most Italian regions, public healtcare works very well - maybe it is economy of scale?).
Keep fighting for your freedom and keep strictly controlling each single dollar spent for a public cause (specially for all those bailouts): frankly I believe that the main problem we had and we have in Italy is the lack of controls. Here we say "L'occhio del padrone ingrassa il cavallo" that I know it translates (not literally but with the same meaning) with "The eye of the master does more work than both his hands". Keep your eye on them.
On Jun 03 07:27 PM TGals wrote:
> Re: "How do we as a country get it back together...back to the 50's
> so to speak...when schools were good, neighborhoods were good, jobs
> were good, everyone lived a clean lifestyle mainly, you knew your
> neighbors, and they knew you, and on and on."
>
> Not going to happen. In the 50's most U.S. adults had an expectation
> of earning a living by performing a job which actually added value.
> The difference in salaries and wages between the bottom 10% and upper
> 90% was not nearly as wide as it is now. In other words, a blue collar
> worker could afford to own a modest home and live a modest life style.
> Also, credit for the average Joe was only used for large ticket items.
> They lived within their means because they had no access to unsecured
> credit.
>
> Today, too many of our best and brightest minds are intent on "earning
> a living" by siphoning off the life savings of the working class
> by creating financial instruments which are intentionally complicated
> so they can aspire to that house in the Hamptons, etc. Some of these
> people are narcissistic sociopaths that are nothing more than modern
> day mobsters, others have convinced themselves that they actually
> provide a valuable service. In either case they are the leaches of
> our society.
>
> One of the reasons why the Chinese will be the next global financial
> super power is because their society is not afraid to work hard to
> earn a living. They perform the work that creates wealth as opposed
> to siphoning off somebody else's wealth. The only advantage Uncle
> Sam has left is military superiority and it is only a matter of time
> before we lose that.
See here:
mwhodges.home.att.net/...
And let me slodge out this old comment:
"The Despotism of Dependency" --- we have arrived.
Government is not shrinking. Today's government consumes 45% of the economy by its spending, plus another 13% of the economy via its un-funded regulatory mandates - - leaving less than half of the economy to the free-market private sector.
"45% of our economy today is dependent on government spending & control."
Slow, gradual government expansion over time is not recognized by the masses which gradually become dependant upon it. This leads to serfdom to the state. America is more a socialistic nation, and less a free-market economy, then ever before in its history, because our total economy has become significantly more government-dominated and dependent. Our founding fathers are rolling in their graves and weeping for the children of this once great land.
We are being extinguished and stupefied as a people, reduced to a flock of timid, subservient sheep of which the government is the shepherd.
However, such is not the same analogy with Uncle Sam. Our current GDP in 2008 is ~ $14.26T. And by 2011 if our national debt is (just) $14T we shouldn't be worrying given the example of my case above. Right? Ans: Wrong.
I was able to figure it out myself. It is like the Arabic Genie in a lamp story. The United States is the largest Genie. It will taken an even larger Genie to finance us. There isn't any.
It is scary.
"spare change?"
love, U.S.A.
On Jun 03 08:27 PM Harry Tuttle wrote:
> How it will be financed? By saving more either by choice or, more
> likely, by necessity and at higher rates.
On Jun 03 06:30 PM youngman442002 wrote:
> Lets take it the next step...say everyone but the treasury quits
> buying our debt...what happens...
>
> The dollar devalues...but how much 50%...100% 1000% that is what
> no one knows...
>
> I don't think interest rates will go up because the Fed will be the
> buyer of all debt....
>
> How about personal property? Homes. Food? Autos? Gas? Insurance?
> things you need to live?
>
> Gold?
>
> My personal opinion is to get into offshore gold..hard gold..not
> an etf..
>
> What about Volence from gangs and others like the new mafia that
> will control the new black markets in the USA?
>
> Lots of changes coming...and I don't think they are going to be good
On Jun 03 09:59 PM BrucePile wrote:
> Instead of having a bake sale suggested by Missing Link above to
> finance the $16 trillion or so Treasury is in the hole for, endangering
> the whole world with hyperinflation and monetary collapse, I have
> an even simpler solution. They are throwing around these trillions
> of dollars in a convoluted, complex, idiotic maze of bureaucracy
> to "stimulate" the poor folk here in the U.S.A. out of this horrible
> recession. Wouldn't it be so much more efficient to just give every
> man, woman, and child 1 million dollars making everyone an instant
> millionaire - even the kids? Poof - no recession for quite awhile.
> This would cost just $300 million - 300 million U.S. population X
> $ 1 million dollars each - a tiny FRACTION of the $trillions being
> "spent" to combat this recession.
On Jun 03 09:59 PM BrucePile wrote:
> Instead of having a bake sale suggested by Missing Link above to
> finance the $16 trillion or so Treasury is in the hole for, endangering
> the whole world with hyperinflation and monetary collapse, I have
> an even simpler solution. They are throwing around these trillions
> of dollars in a convoluted, complex, idiotic maze of bureaucracy
> to "stimulate" the poor folk here in the U.S.A. out of this horrible
> recession. Wouldn't it be so much more efficient to just give every
> man, woman, and child 1 million dollars making everyone an instant
> millionaire - even the kids? Poof - no recession for quite awhile.
> This would cost just $300 million - 300 million U.S. population X
> $ 1 million dollars each - a tiny FRACTION of the $trillions being
> "spent" to combat this recession.
The country will need to impoverish someone to save the other. The choice by Ben, Hank and Timmy is to impoverish everyone except their friends at the banks. Since it is significantly cheaper and politically more playable than a correction, that is the way they will continue to play.
On Jun 03 10:40 PM Dr. Sami wrote:
> Are you dumb? 300 million people x $1 million = $300
www.taxfoundation.org/...
www.census.gov/hhes/ww...
So here's the jist of the situation...taxes were higher across the board, especially the higher your income went. The point of this is that while people tout the 50s as being this great time for Americans, seldom do I get an direct answer about what taxes were like then when the thesis is that progressive taxes are awful and inhibit economic development. The 1950s fly in the face of the thesis that personal income taxes matter that much. In fact as taxes have gotten lower, spending has gone up, disproportionately.
This leads me to my thesis on the matter; Tax rates don't matter that much but government spending does and more to the point, how one reduces or bridges the deficit is far more integral to the growth picture. Even further, the idea that extremely progressive taxes and tons of brackets encourages less productivity would essentially encapsulate the rich of the 1950s were the least productive people ever to avoid paying taxes (The whole premise of widespread avoiding taxes by working less is based on being ignorant of how income taxes and non-whiners operate in the work world).
The only inherent problem with reducing government spending is that everyone has a sacred cow (their constituency and usually social programs or defense/drug programs depending on party) that can't be sacrificed and this ties back to accountability of elected officials. There is a bigger payoff for screwing the country and pumping the constituency than vice versa.
You can criticize the actions being taken today but you can't blame today's problems on Obama who has been in office for four months.
On Jun 03 07:15 PM youngman442002 wrote:
> So Market Mojo with 1 comment...you are defending your man Obama.....where
> is he going to take us and how is he going to pay for it? You can
> tax the Rich..but the rich will leave..look at what Microsoft said
> today..and what is hapening in Massachusetts..
At the end of the day we built or inflated an economy on excessive leverage and we are trying very hard to keep it at the same level by pushing leverage problems from corporate and private sector balance sheets to the federal government balance sheet. The federal government is only too eager to take on this debt so they can exert more control over our everyday decisions and the general economy, they can appear like they have actually done something when campaigning in the future as they obviously have not done anything the last 20 years and of course a number want to help relieve the pain of a recession.
The crux of the issue is that the consumers' balance sheet in aggregate is a mess from taking on too much mortgage debt as they bought into the myth that real estate never goes down in price. Unlike excessive credit card debt which can be paid off with a second job or some short term thriftiness a mortgage will take 15 to 30 years to work off. So the consumer could be in trouble for a long time.
The problem with the consumer having a terrible balance sheet is that they are 70% of the economy and they are cutting back on spending. The corporate sector and the public sector depend on the consumer to be healthy and that is not going to happen very fast. The federal government is trying to replace the consumers spend to keep the economy going but that money is not earned it is stealing money from future generations and dropping a huge tax burden on all Americans. Excessive debt will lead to our currency devaluing which will also lead to inflation. We have the potential to be in some very negative feedback loops. It looks like a good time to hold investments in non dollar denominated assets.
If you take the adult population of the U.S. of around 220 million and take the $16 trillion and just give it directly to them, it amounts to about $75,000 to each and every adult. But still that would possibly stop the recession better than juggling it around amongst the corporate entities that are receiving it.
But it would do nothing to stop the inflation that such money printing creates. That will happen no matter who receives the created money (Illusional Delusion's point above). This is Jim Rogers' point when he says that you can't solve problems by printing money and debasing a currency, you only change the type, and timing of the problem.