Crappy Days Are Here Again
But here’s the real problem, our federal debt:
In 2005 constant dollars, the Federal debt was just under two trillion dollars. Today it is more than seven times that size: $14.57 trillion. And most of it is short-term borrowing — meaning, we’ll have to re-fi more than half of our debt in the next twelve months. The average maturity is just three years. But one thing is for sure: We need to find someone willing to re-fi more than seven trillion dollars in US debts at current rates, or we’re going to blow a hole in the budget the likes of which Obama/Reid/Pelosi never even dreamed of.
Right now, it costs us about $200 billion a year to service our debt payments on those 14 trillions. When Obamaflation takes hold, and the Fed is forced to raise rates and tighten the money supply, our debt service will, over the course of two-five years, quintuple to about a trillion dollars.
A trillion dollars a year, every year, just to service the debt. That’s more than a third of one of Obama’s overstuffed budgets. That’s the size of a Reagan budget in toto. Just to service the debt.
That’s bigger than Defense. That’s bigger than Social Security. That’s bigger than Medicare/Medicaid, combined.
So, other than going into hock to Visa & MasterCard for a decade or longer, what choices do we have? Only two: Default or inflate.
A default would force Washington to live within its means, as burned creditors put away their checkbooks for good. Inflation would wipe out the debt — and your savings along with it. I’ll give you three guesses as to which outcome Washington is more likely to pursue, and the first two don’t count.
Jeffrey Lord thinks five dollar gas and five dollar bread will ruin Obama’s election chances. I’m worried that five billion dollar gas and breadlines will ruin this country.
I applaud your wisdom. (Love the PJTV stuff with Scott, Bill and you.This isn’t on topic but you deserve the Kudo’s.)
The day has already passed. Today I put $40.00 dollars of gas in the car. That use to last me a month and was more than 1 tank now it barely crawls above half. Today I bought groceries for the month instead by the dish I was preparing as had become my habit to economize. I can’t afford to wait anymore because of almost constant price increases. Next month will the same money buy the same quantities? I do not think so. Last mont I ran out of dollars 13 days before my next payday. This month I hope it lasts but do not expect it to. All of us on a fixed income have to make do, as best we can, but making do means doing without something. What will I have to do without next month?
Next time you visit the gas pump, here’s something that you can do:
Gas Pump Activism: Print This Poster!
I’ll not be the first to say it Steve–but I’m scared.
I’ve noticed my real earnings diminish significantly over the past few years. I’m terrified of the day when I’ll tell my wife that we have to eat our cats to survive.
Me, too.
Borys, Hades, Dr. Claw, and Tuna Fish Casserole will be happy to know they’re not alone. Or, at least that they’ll not be the only ones becoming part of “mystery chili night”.
Thanks Steve.
We’ve got seven cats and no job for me in almost three years, do you have any recipes?
BEER ROASTED CAT
1 cat cut into roast
1 can of Campbell’s Cream of Mushroom soup
1 cube of beef bouillon
1 clove of garlic
1 Fine Irish Stout, like Guinness
Cover and soak cat roast in salt water for 24 hours. Drain water and then cover and soak in beer for 6 hours. Drain and place in crock pot with your cans of soup. Add a clove of garlic, and a cube of beef bouillon. If you start to slow cook your cat in the morning with your George Foreman Cooker (or it’s ilk), you’ll have finely cooked feline in time for supper.
If a slow cooker is not available, a cat can be baked at 350 degrees for 2-3 hours in a conventional oven and still come out pretty good. Beer Roasted Cat is fantastic served with mashed potatoes, collard greens, and fresh, homemade egg rolls. When planning a full meal just remember- cat is a course best served hot!
Venison in the freezer would work better than eating cats, but I don’t want to poo-poo anyone who is truly starting to feel desperate.
People in truly desperate economic straits tend to vote for Democrats and their safety nets. My father was always a nominal, if generally apolitical Republican until the hard times came. Then we would hear, “The Republicans have always been the party of the rich!” But, I guess that would mean we had a Republican President at the time.
I have tried to manage my life so that I would not be economically desperate. So far, I have managed.
It is entertaining (if one is not desperate) to see politicians and their agents work to turn hard times to their own benefit. It’s a job; someone has to do it.
Practically speaking, one should be planting one’s garden right now; I am. If you have extra produce or venison, give it to a food pantry.
“Slutty money” – and epic turn of phrase.
I hated the 70′s the first time and I’m really not enjoying the nostalgia tour this time around. The 70′s were like having a yeast infection, this is like passing pieces of broken glass through your urethra.
We’re going to have to do more with less.
Energy prices will necessarily rise.
Grow gardens.
We’re too fat.
Plain English. What part didn’t u understand?
so when obama turns us into mad max beyond thunderdome the fatties will be able to ride the storm on their girth deposits
the organic gardens will be taken over by bad guys with big guns
and the yentas wont know what to do
Define “we”. Unless you include the government, your statement is not only irrelevant, but perverse.
He must be one of those Talibans that meddle into everything people do. Of course there are fat people in America. Dinesh D’Souza tells the story of man from India who asked him for advise on how to emigrate to the US. D’Souza asked him why he wanted to leave India and the man responded: “I want to live in a country where poor people are fat.”
Ok obese instead of fat.
But the point was they said those things & people voted for them anyway, did those voters think they were joking or those policies wouldn’t affect them?
It’s the old caveat of, “You get the government you voted for”.
DavidMac:
Is that why Glenn Reynolds is always apologizing for his vote for McCain? After all, they kept telling him that these things would happen if he did…
The part I don’t understand is “Why?”
Why was it necessary to bankrupt our country on crap? We let our politicians spend recklessly just to buy themselves votes.
Why do we let energy costs inflate us into a depression while putting nearly all our oil reserves off limits? Why are we wasting time with green energy that doesn’t work while not building a nuclear plant in decades?
Why?
See
http://pajamasmedia.com/blog/wake-up-critics-heres-obamas-grand-plan/
Old Soldier,
The ultimate reason is: some of us do not want to be a “nation under God” any more. As you kick God out of the halls of government, schools, media, etc. He actually starts to take distance and withdraws his blessings. It’s like driving away from a radio station. The signal gets weaker and weaker until you can’t hear it anymore.
We have abandoned goodness, then sound principles, then good science, the common sense. Darkness is quickly closing upon us. But there is still hope. Either we fall to our knees in prayer or prepare to be forced to worship Leviathan.
“As for me and my house…”
“A default would force Washington to live within its means, as burned creditors put away their checkbooks for good. Inflation would wipe out the debt — and your savings along with it.”
Wouldn’t inflation also have a similar chilling effect on the credit market? Who wants to invest in debt securities when you only stand to get back pennies on the …(?)? In order to get that trillion-dollar debt service down we have to be talking inflation rates approaching three digits if not more!
Also, don’t think that Uncle Sam can just default and end-of-story. Other countries that have defaulted have seen hyper-inflation take root almost instantly as confidence plummets and investors flee (think South America in the ’80s or Russia in the ’90s).
Either way, we’re talking about the same outcome.
There is another way. The government quits spending so much. Liposuction for government. Close down various extraneous departments. We do not need 17 (18?) Cabinet positions. Balance the budget and things will turn around. The moment the government stops sucking the money out of the economy, growth will catch up to the debt.
Back in ’08, they said we could cut 431 programs from the government with no pain. 100′s of billions in savings… from the ’08 budget! There was a $455B deficit that year, including TARP 1. In other words, we could have balanced the budget that year.
Nothing has changed. There is nothing the Dems have added to our government that has been at all useful. Nothing. It is all excess spending. The only thing they have added that we cannot cut is the additional debt. Once we scale back the government, our outlook will improve. It is all about confidence. Getting drastically back onto the right track will solve a lot of problems. Business and lending will all be looking up. If it looks like we will be able to eventually eliminate the debt, things take on a different perspective. We’ll never do it with a Democratic Congress, though.
“Parasites do not care about the well-being of the host. We have too many parasites, and the host is weakening.” – Me
(People have been using my arguments, my words, so I figured I’d put them in quotes this time.) ;D
I like that. Been using an even shorter version myself. “Smaller crops, bigger locusts — this will not end well.”
“Parasites” has more emotional juice than locusts. Americans need to be hit by a 2×4 to get their attention.
This is what has to happen. So far the only politician to say it is Rand Paul, and he is vilified as a kook.
They would rather have a few more months in power than save the country.
This isn’t going to end well.
Proreason….Since the only thing that separates the two political societal principle of oure socialism and anarchy is the great American experiement….. I’m going to make you happy!
I’ve long said that if it came to a ‘last choice’ of radical weapons to defend against socialism I would choose anarchy as my weapon only to effect a new beginnings for a new foundation for the original American project. Anarchists in these times are represented by the rather newly formed Libertarian Party with Ron Paul being the most centric voice.
Our families may well vote for Mr. Paul should he decide to run this time!
oure = ‘are’
I’m not a Ron Paul fan. He would be the last Republican I would vote for.
Rand has started his career in a better place, and it was Rand I was talking about.
I would characterize myself as on the libertartian side, and at the moment I’m isolationist, but only because I can’t imagine little lenin doing anything that would help the US. Ultimately, I’m more of a foreign politicy traditionalist.
For domestic issues, I’m a regular conservative on fiscal issues, but more libertarian on social issue.
But I HATE politicians. 90% of them are criminals.
Proreason…Ron Paul is the only person who is finitely knowledgeable and can communicate to the people in understandable language, the corrupted fed, the need to re-constitutionalize our military and reconstitutionalize the federal government.
Mr. Paul knows how to institute an new and viable domestic monetary system that one is not centralized in structure and responsive to newly established regional capitalist demographics. Economically, he endorse an ‘America first’ philosophy counter but active through surpluses to the global machine. Militarily he believes in the constitutional mandate of a ‘defensive military’ and not a nation building military. Likewise, there is no need for the size of commands and locations worlwide of our military. As for the federal government, he believes that it should be realigned constitutionally and not the adminstrator and regulator of capitalism carte blanche. He is a firm believer in the constitutional mandate of the States and peoples rights over the federal government.
These are all things that must be addressed with success to begin restoring America and I had thought at one time, these were going to be the [centric] issues of the Tea party movement but……..I guess not!
Its going to take a very knowledgeable person on these issues who can teach by communicating in common language the broken system and likewise, comprehensive and viable solutions, if we’re going to have any hope of getting a voting majority focused, stay focused and come to understand the issues. Mr. Paul doesn’t allow himself to be side tracked with all the populist diversions of the moment. He is the only most knowledgeable, disciplined and centric person on the most critical issues.
Maybe its time to listen to him more seriously!
We will soon find out what we Americans are made of. As a former combat marine who served in Vietnam(and still picking shrapnel out my chest) I say given the current climate,we probably will quit.We just don’t want to fight them ,(the left ),the way they go after us.I am ready for the fight, but I think I will wind up watching Patton again for the memories.Semper Fi.
Buddy, if I have to go I might as well take a few with me. Remember the Alamo.
As an addendum,can we cut off Bernanke’s nuts after the fall?
“As an addendum,can we cut off Bernanke’s nuts after the fall?”
shouldnt be too hard, theyre sitting on uncle sams forehead.
If we produced more energy, and we could do so easily, energy prices would NOT have to increase . If we stopped spending so much on regulation and boondogggles the country could recover and prosper .If the fed stopped printing/counterfeiting commodity prices wouldn’t have to rise.
So you may well be fat but you aren’t correct. What part don’t you understand
I had cancer a few years back. Thanks to a skilled medical team and a clever surgeon here I am. I have a feeling the next years aren’t going to be any more fun than August 1994 was. Just slower.
It is amazing when you think about it. They’ve done everything possible to make economic inputs, except the price of money—basic energy, food, and standard economic regulations to have a green economy–more expensive, costly, which decreases economic outputs. No wonder the economy sucks and the recovery is stalling.
I know this is simplistic but why can we not go back to the budget of 2008? Any constituencies that have grown up since then cannot have taken root too deeply. As a matter of fact, are there any constituencies? I don’t see any, but then again, I see little of what government provides, other than the roads I travel on (getting worse) and the tax collectors who patrol them (aka the police). And I thought that until recently, at least, wasn’t there a huge percentage of the $700+ billion bailout still not spent. Well if it’s not spent, why not just put it back in the treasury? Or am I just an unsuffistikated, klewless roob?
the streets in my neighborhood are being gutted by the stimulus atm
(they werent in bad shape either; in fact, they were good)
now the streets are torn up, the workers hardly work, traffic sucks, blah blah…
i agree with your “what about unspent stimulus?”
no one asks; is everyone just defaulting that it is gone?
or is it “Obama’s Stash” and we’ll never find it?
apparently the repubs think that hundreds of billions of dollars is too much to ask for (even though the people that voted them into office thought the least the house could have done was to start the negotiations at $1 trillion dollars—-> boehner is such a noob: http://www.youtube.com/watch?v=jTmXHvGZiSY
also, no one has ever recommended to return the unspent stimulus to, i dont know, THE TAXPAYERS!!!
Absolutely.
I love Paul Ryan, but why on earth did we open up the topic of Medicare when there is about $1T in new federal spending added just since the marxist siezed power?
THAT should be the priority before the election, along with the economy in general as Mr Green’s excellent article describes..
Instead the nitwit Republicans decided to hand open another front (Medicare) that is simple to demagogue. And apparently only Ryan has the moxie and smarts to even explain it why it has to happen. Well, they should have waited until Jan 2013 to fight that battle.
But going back to 2008 is so easy to explain that a child can do it.
When I think about these clowns for more than a minute, it’s clear that Boehner’s Bozos are just a slightly less dangerous virus than the marxists.
Well, yes, it is bad politics, but he is actually trying to SOLVE THE PROBLEM. SS/Medicare needs fixing right away. Medicare will run out of money in 2017! We do elect them to actually do a job. He’s trying to do the job.
The problem is not that he opened this can of worms. Any fix he tries to do will be characterized by the Left as “hurting the poor”. When Reagan did his temporary fix with Tip O’Neill, there was at least some effort on the part of the Dems to actually work on a solution. They have completely given up on doing the job.
Everything is winning the messaging now. No matter how bad it gets, they intend to use it to their political advantage. It is all about raw politics and power. Fix the blame, not the problem.
Fact is, these Marxists believe they are in the endgame, and they know that a crash is necessary to get their way. Fixing the problem is contrary to their goals. Now it is about keeping the other side from stopping the crash. Time is on their side. We are pushing back, but are we advancing fast enough? Can we hold them off until 2013? Even then, will the damage be too great to recover? Will the reformers get into office only to be left holding the bag and getting the blame? Will the Marxists win in the end by doing enough damage now?
They may be right. This may be the endgame. We are down to our last few moves. It all comes down to Americans waking up soon enough and the reformers not making some critical mistake. Anyone care to put odds on the outcome? I do not.
I always like a good set of predictions, and “slutty money” included your charts are still linear. If we add in anywhere the hyperbolics of natural disasters or terrorist attacks, then the graph leaves the paper. Unlike Japan, who needed no National Guard to guard the abandoned homes, looting, here stateside is a speciality. One wonders where a $300 B contingency fund would come from?
“So, other than going into hock to Visa & MasterCard for a decade or longer, what choices do we have? Only two: Default or inflate.”
Steve, you might want to check out Veronique de Rugy’s latest post on NRO.
“The United States should not consider defaulting on its debt, nor should it put itself in a position where it has to postpone payment to contractors or “manage” other non-debt obligations. However, Congress shouldn’t be forced to raise the debt ceiling under false pretenses. That’s why lawmakers should check this list of assets [that can be sold.] There’s roughly $2 trillion in assets on that list, in addition to $2.2 trillion in tax revenue. (Lawyers may have a different take on this than we do.)”
You’re not a lawyer, are you ?
I do not think there options are going to play that way. Investors are dumping US bonds all over the place since last year. Inflation it is and worldwide inflation at that because everyone and their cousins have US dollars under the mattress. It is going to be worse the more dollars you have and the further away from the industrialized West you are.
The Chinese don’t want to price their currency right to absorb the hit, the US government cannot stop spending, stupid policies in the US prevent people from being productive… It’s the perfect storm. Something’s gotta give and that something is the US dollar. However in a worldwide super-inflation scenario we may be able to end up on top. But it’s not going to be pretty.
The good side of it: the Liberals will be in power when it happens and as long as lampposts and rope abound they will find their end at the hands of their fickle friends: “the masses.” My grandpa used to say: “He who plays the redeemer ends up being crucified.”
We have to prepare to survive the hit and be ready to build a world without the Liberal Illusion after the dust settles. The Germans did it in 10 years. We can do it in five.
BTW I love the title. It is a serious article but the title is hilarious!
Gas at this point costs me a grand a month to keep each truck on the road. Where does G-d damn Barry think this money comes from? If this keeps up I’ll be working to pay my gas bill.
The US dollar became a Fiat currency when President Nixon replaced the Gold backed dollar, with a petroleum backed dollar ( Petro Dollar system). This allowed congress to print money Nilly Willy with no accountability. This is why the US dollar has lost 90% of its value since 1971 When Nixon and Congress made that fateful decision.
No Fiat Currency has ever survived more than a 2-3 decades, ours had longer lifetime due to massive borrowing and literally exporting huge amounts of US dollars overseas. The largest export of the United States is its currency, desperately trying to plug holes in markets.
What is coming cannot be stopped, there is simply no room left to maneuver or adjust to market forces demanding accountability and more importantly value behind the US Dollar.
Interest rates, Inflation, are symptoms. The Cause of US Dollar collapse is the Petro Dollar system.
Buy hard assets ( gold, silver, guns, ammo, good quality alcohol, etc, etc) and prepare yourselves. Politics will not matter when nobody will accept the US Dollar as payment for goods and services.
The situation will improve iff a solid majority of the American electorate requires their representatives to take the problem seriously. I.e. We’re screwed.
The answer is right under our feet. I mean that literally. We can bring down the price of gas simply by drilling for our own oil which we have plenty of. We also have plenty of coal and natural gas and we also have the ability to build and put online safe and affordable nuclear power plants. Once we get our energy policy under control the price of everything else will fall in line. Why do you suppose groceries and almost everything else is going up? It’s because most everything you buy at the supermarket or Wal-Mart is trucked in and when it cost a trucking company $400.00 or $500.00 to fill up instead of the $100.00 it used to cost they will pass the cost of their diesel fuel on to everyone else. Control our energy and we’ll solve our problem.
And what do we do with the protesters, the “you can’t do that” bureaucrats, and the mountains of regulations designed to impede any progress?
Give them the Syrian treatment perhaps?
Gee Steve,
Aren’t you reading this site?
Don’t you realize that by making the statement “what choices do we have? Only two: Default or inflate” that your inviting Roger and Charlie to jump in an call you an idiot? or do they only reserve that vitriol for commenters that get “uppity”?
You are essentially correct. This is MUCH worse than 1979 because in 1979 there was a simple answer–politically difficult, but straightforward… hike interest rates and tighten up on the money supply, reform the tax code to encourage investment, cut spending and ride out a shrt, sharp recession. Congress and Reagan even failed to cut spending and it still worked.
Now, there are no good answers, tho some (Obama’s budget) are definitely worse than others (Ryan’s proposed budget).
Dear Leader has the result he intended, just much earlier than he imagined possible.
Half our debt rolled in 12 mo? I thought the IMF just said 1/4. Impossible in any event.
There is a wild card in the economic deck: the resourcefulness of private American citizens.
We cannot know when it will rise to fullness, but I’ve seen some signs. Merchants in my area are beginning to offer “alternative arrangements” to payment in dollars. I’ve participated in the attempt to popularize a couple of these. That sort of quasi-barter might be clumsy and marginally inefficient, especially given the prices of the precious metals today, but we’re learning to adjust. It indicates both awareness of the dangers and a willingness to be flexible in the face of accelerating predation by Washington.
Beyond that, I note the rise of several local cooperatives, particularly for fresh foods such as milk, eggs, and vegetables. A gentleman down the street from me has bought a 1951-vintage commercial plow, and has taken to clearing our street after a snow fall; the rest of us support him with donations. Several of my neighbors have inquired whether I’d be willing to conduct some small-engine repair and firearms training courses.
Don’t bet against the American spirit. We come from good stock, and we’ve got more fiber than most commentators are willing to admit.
The 21st century Web-enabled equivalent of barter is easily realized;
Remove the no longer necessary intermediate step of pricing goods
in currency, and the equally unnecessary Banksters who perform
that function – for a small fee.
Wash it down with a liter of cheap whiskey in effort to forget that we have let our country be purposefully destroyed.
Could somebody please explain that economagic chart? (the economagic site appears to be gone). What are the pink bands?
Those are recessionary periods.
Some believe that Greenspan’s and Bernanke’s policies of continuing very low interest rates were partially responsible for fueling the “housing bubble”, without which the financial crises would have been impossible. The low interest rates made mortgage loans attractive and kept inflating the bubble. Some have asserted that Greenspan was warned of the bubble but believed it would stabilize.
The chart graphs Interest Rates vs. Date. It indicates that under Volcker and his policies interest rates started dropping around 1982, at a high of over 15%, and continued to drop to around 4% in 2006.
Until all the ‘people’ get off the bandwagon of ‘Obama did this and Obama is doing that’ long enough to understand that its they…the people…who have for decades been contributing to the decline of America, nothing signficant is going to change.
Obama, GW Bush, Clinton, GH Bush, Reagan, Carter, Ford, Nixon, didn’t create the mess America is in! An ideological shift in the American people at-large created the mess America is in and presidents and congress’ only help to perpetuate that shift from time to time.
The forces ‘around’ the government are far, far more powerful than government itself. You can produce all the charts you wish, to signify this or that, or point blame to a specific person or president but, it is the forces outside and around the government that create social shifts and events that really counts…..and directs the true blame.
The federal government is NOTHING more than persons elected by the people of the nations many electorial districts to represent the social, economic and political interests of those districts.
STOP blaming the federal government, presidents and congress’ for what is factally the creation(s) and fault(s) of the people! The constitutions give ONLY to the people, the ultimate power and authority over government. You don’t like what the country has become…. then, look within each of yourselves, effect the changes you wish and prepare for the consequences past dereliction will reap….change or no change!
What rose to national greatness ‘by the people’ and is falling from greatness by the people, can again rise to that same or even greater greatness if a ‘majority’ of the nations folks are willing to make the necessary changes, bite the bullet and suffer the consequences of the errors of the past few generations…..most still live, to participate.