Your Wednesday Morning Dose of Doom and Gloom
Yesterday, I warned you that “we’re doomed” because the latest Ryan plan to balance the budget is too timid. And longtime reader Neil added a thoughtful response in the comments:
I suspect that a target of zero deficit in 2040 will work. Here’s why: The problem we’re running into right now is that the deficit is projected to increase faster than economic growth, forever. Obviously, that can’t work and the currency markets will punish us for that if current policy becomes set in stone.
The dirty little secret here is that it is arithmetically possible to run a deficit forever, as long as the percent deficit is on average less than GDP growth on average. What Ryan’s plan does is to get the deficit down below GDP growth quick enough to satisfy the bond markets that our debt will be paid.
And, strictly speaking, that’s all that is necessary.
In normal times, this is absolutely true. Problem is, we’re not in normal times. In fact, the federal government of the United States of America is sitting on top of the world’s biggest adjustable rate mortgage — and the payments are set to radically increase.
Let me explain.
Historically, Washington financed most of its debt by selling 30-year Treasuries. But then a couple things happened during the Naughts:
• The Fed dropped interest rates to record lows, to keep the economy juiced in the aftermath of 9/11.
• The Bush administration began financing the debt with two-year and three-year Treasuries, to take advantage of those low interest rates. And, not coincidentally, to mask the true size of its spending problem.
As a result, we ran up the total debt to $10,000,000,000,000. But our interest payments — the mortgage payments, if you will — didn’t bust the budget, thanks to low rates on short terms.
Then the financial crisis of 2008 hit, caused in no small part by all that cheap debt made available by the Fed. Unemployment payouts skyrocketed. Tax revenues plummeted. The Obama/Reid/Pelosi “stimulus” added another near-trillion in debt, in one fell swoop.
Our “unsustainable” and “unpatriotic” borrowing soared from a measly couple hundred billion (“Hey, no problem, man — I can cover that in my sleep!”) to almost two trillion dollars in 2009 alone. That’s a two followed by twelve zeroes, like this: $2,000,000,000,000. And the next two years weren’t much better.
As an aside, the spending problem in 2009-2010 was even worse than it appears at first glance. Democrats love to remind you that Bush’s last deficit was $1.4 trillion — not much less than President Obama’s record $1.8 trillion the next year. However, Bush’s number includes $700 billion (half the total) in emergency TARP funds — most of which were paid back over the next two years. In other words, TARP shows up as an expense in Bush’s final budget, but the paybacks show up as income in Obama’s first two budgets. TARP made Bush’s spending problem look worse than it actually was, and it masked just how awful Obama’s spending problem was and is.
But let’s get back to the matter at hand.
Obama’s budgets added more debt in just three years than Bush did in eight. So now we’ve jacked the “mortgage” up to $15,000,000,000,000. Meanwhile, the Fed has kept interest rates even lower these last three years than it did during the Naughts. As a result, our mortgage payments have remained pretty low, considering the size of the debt.
Some, like Paul Krugman, will tell you it’s actually irresponsible not to run up more debt while rates are this low.
Here’s the problem: Obama has continued Bush’s shameful policy of financing our long-term spending problem with short-term Treasuries. We’ve racked up trillions in new debt, which must be refinanced each and every two or three years.
This year alone, we must re-fi $2,800,000,000,000 of existing debt, on top of the $1,000,000,000,000 or so of new debt we’ll tack on to the total.
But, hey, rates are low! Right?
For how long will they remain low? That’s the devil in the details.
The Fed has pumped trillions of free money into the system, to keep the economy buoyant. It’s done so largely by buying up debt from the Treasury to finance the spending orgy. Now, eventually, the economy will pick back up and the Fed will have to sell off all those Treasuries.
Why? Why can’t Ben Bernanke just keep the Treasuries under his mattress?
Well, when you have extra billions of dollars floating around during normal economic times, you end up with inflation. When you have trillions of extra dollars out there, and trillions more in deficit spending, you end up with hyperinflation. So Bernanke’s plan is this:
• Keep buying up Treasuries until he gets the desired stimulus (I know, I know) and the economy is growing again and people are working again.
• Then sell those Treasuries back to any willing buyers in order to suck those extra trillions back out of circulation.
Presto, change-o — Bernanke turns a $15,000,000,000,000 problem around on a dime. The money goes out, the money comes in, and Bernanke the Magnificent saves the world.
If you’re thinking of the word “hubris” right now, well, I hope you’re not the only one.
There’s one other teensy little thing the Fed has to do: It must return interest rates to something normal, or those excess trillions will flow right back into the economy as “free” debt.
If rates bounce back up to just five percent — which is actually not high at all — then our interest payments get jacked up to $800,000,000,000 a year, every year, forever.
And that’s just on the money we already owe. Every additional dollar we borrow gets added to the total, and the interest payments go up even higher. Every year, forever.
We could balance the budget right now, and our interest payments would still be on a short slope to nearly a trillion dollars a year. Every year, forever.
So the problem isn’t balancing the budget by 2040, or 2027 or even tomorrow. The problem is, we need to start paying down the debt, and we need to do it very soon. Because thanks to our World’s Biggest and Dumbest Adjustable Rate Mortgage, we’re about to have a debt payment that’s bigger than our defense budget, that’s bigger than Social Security, that’s bigger than Medicare/Medicaid.
The only other options are default, or hyperinflation. Or, perhaps most likely: Both. Either results in the immediate destruction of our economy as we’ve known it. Say hello to your house that’s worth nothing, and gas you can’t afford.
So that’s our problem. That’s the brick wall we’re running into head first. Obama’s non-plan runs us into the wall sooner. Ryan’s plan gets us there a little later. But we’re still going to crash into that wall if we don’t start paying down the debt, and paying it down in a big way.
Yes, but even the Germans, the smartest people in the world, never saw it coming…
UNTIL IT DID!
I know one American Company that knows what’s coming, the largest bond holder in the world, Pimco, they hold Zero US Bonds,ZERO.
Ah, finally there’s an adult in the room.
a very minor point, but i think that you are mistaken about obama continuing “bush’s shameful policy of financing our long term spending problem with short term Treasuries”. the problem is real, but i don’t think the blame is on bush. i distinctly remember ross perot making the point that it is insanity to finance long term debt with short term money. unless you meant george h.w not W?
another point that i never see discussed about the changing nature of debt is to whom the debt is owed. i was actually taught in school that the debt was not a problem because we owed it to ourselves. the year was about 1960 and i was in the sixth grade. our debt was virually 100% citizen owned and the teacher was an idiot. i do believe, however, that the mindset among politicians never changed when our debt starting going overseas.
Sounds like the argument that Social Security doesn’t have an insolvency problem because of all the government IOUs it holds. (An argument I have heard several otherwise intelligent people make with a straight face.)
The big problem is any plan to pay down the debt soon would require an annual reduction of over $1 trillion in spending (in the immediate term, somewhere around $1.3 trillion). That has to get past 217 House members and 51 Senators who were, almost without exception, brought up on the concept of voting for somebody else’s spending plan only if that person promised to support the spending advocated by that Congresscritter.
Worse, in the short term, if one wants to hold Granny, Peggy the Moocher and Tom the Farmer almost-completely harmless, lest the inevitable “push Granny off the cliff” ads actually have some truth behind them, there would be no federal spending on anything else. That means no military, no highway funding, no Customs (ending the list of items that the federal government has at least a tenuous direct authorization to provide in the Constitution), no FDA, no Forest Service, no (insert federal agency here), which will make everybody at least as mad as Grandma, Peggy the Moocher and Tom the Farmer would be if you took them away from the government teat.
What is needed is a massive wind-down plan, and then hope that the markets are willing to wait until it can actually take effect. While the Ryan plan isn’t exactly a wind-down, nor is it fast enough, nor is it able to actually make it through the Senate, it’s a baby-step start and honestly all that can be done in the current climate.
As Monty would say if he were still doing the Daily DOOM at Ace of Spades HQ, “We’re senior members of the Loyal Order of the Terminally Boned.”
Hmm.
Has anyone ever seen Steve and Monty in the same room at the same time?
Just sayin’.
Monty?
Hall? Python?
Monty used to do a Monday-Thursday “DOOM” column at Ace, and a Sunday morning Book thread. He was lots of fun, ‘though the DOOM threads were filled with … doom. Kinda depressing after a while, ’cause there really is a whole lot of it going around….
He’s left for greener pastures (a paying gig, for one, if I remember correctly). But he was great with the links to various articles supporting his generally grim demeanor.
No, but our host knows me.
You’ve certainly put your fingers on the pith of the gist, Stephen. The danger is in rolling over the debt. That also has to be the primary goal of any serious budget plan–nothing else is possible until we leap that hurdle.
Let me just point out that if you’re right, that we must start paying down debt immediately in order for Treasury rates to stay low, then we really are doomed. Dead Greece walking.
Here’s why: Eliminating the deficit in the next three years would require massive economic dislocations of the negative kind. Either massive tax increases on the middle class or massive elimination of entitlement spending. Either one would suck money out of people’s pockets on the grandest scale ever seen in the U.S., and with no time for people to adjust. That means economic crash, a massive decrease in government revenue, and a drastic increase in the deficit with little hope of improvement. Bye bye, credit rating. If you’re right about the debt, we may as well just default now and switch the Treasury over to issuing NewBucks instead of dollars, ’cause there’s nothing we can do about it.
Ryan’s budget re-structures entitlements and increases tax efficiency, hopefully without drastically reducing the aggregate household discretionary income, with a target deficit of 3% of GDP in three years. That will either placate the bond markets or it will not. If it does work, then there’s little point in convincing Boomers to eat cat food so we can pay down the debt sooner. If it doesn’t work, then our primary concern needs to be re-establishing civil society after the crash, and forget about the green-eyeshades stuff.
Dead Greece walking? I fear we might be lucky to be Greece. Greece at least has Germany and the IMF to bail it out. When our time comes, there won’t be a bailout.
Could you put this text into an infographic YouTube video? I’ve seen this information plenty of times at places like Zero Hedge, but you (and the commenters above me) use a conversational and easy to follow style.
I despair because we need to make actual cuts, not just minor reductions in the rate of growth that are characterized as cuts. As Lincoln said (paraphrased), calling a tail a leg doesn’t mean a dog has five legs.
I’ve seen in several places that the size of the federal government has grown by around 26% since the Democrats took over Congress in 2006. I thought it was bloated before then, and have no idea how any of the recent growth can be considered as “vital” or constitutionally justified.
I doubt that we’re going to get any effective reductions, though, because any proposed reductions (whether actual reductions or just smaller rates of growth) will be characterized by groups riding the gravy train as “extreme” and “heartless,” and the media will dutifully parrot that to the public.
Congress Spinelessly Hands Over Power to the American Caligula: President sends money to Egyptian military that Congress denies. The only thing missing is the Horse Senator.
A journo asked Obama’ s dog a policy question the other day, that count?
Wag the dog.
This Congress is all about face-facing and putting the bad stuff on the other side. It has been so long since they actually attempted to accomplish anything useful, they have forgotten how.
So maybe a horse would do as well, if not better.
Interest rate risk on a bond refers to the risk that if interest rates go up, the price of the bond must fall to reach a market clearing price. This risk is measured by the figure “duration”, which is computed from the interest rate and the time to maturity. Vanguard’s Long Term Government Bond Fund has a duration of 15, so a 1 percentage point rise in interest rates would cut the price of its bonds by 15%. Two percentage points, 30%. The bond investors are taking more risk than they realize. Not only are they getting below-inflation returns on their bonds, they risk losing much of their principal when interest rates rise from their present rock-bottom rates.
On the heels of Ryan’s budget, Jay Carney has just declared Paul Ryan to be “aggressively, deliberately ignorant.”
(Jay must have been thinking of his boss in using that language)
Tax cheat Tim Geithner was asked today in a Congressional comm. to name a number for some debt ceiling amount that would cover all the bases forever and Timmy told him it would be “a lot” and the number would make the Congressman “uncomfortable”.
It’s great to be ruled by geniuses and their spokes-geniuses.
Getting the deficit below the GDP would be a bully good start. Having an enforceable and predictable budget is primary to any deficit reduction plan. Operating for the last 3 years on short term emergency allocations congress has assured an insurmountable crisis.
More simply, if I were in debt beyond my income, then I would reorganize the debt and be sure to pay it down at any rate below the income. There would be no more perks. The liabilites would be reviewed and eliminated. Anyone who has ever climbed out of debt knows how this works. Future borrowing would have to be subject to strict risk principles.
Meh. Ace of Spades has a daily DOOM report every morning.
You obviously haven’t been over there in the last few weeks. Monty cancelled a while ago.
Steven and commenters: You’ve explained a complex dynamic in a way that makes it understandable. Scary, but understandable.
We have already sideswiped the iceberg. The rivets have popped bow to stern. But let’s pretend it ain’t so. And see what we can get away with before we steal the lifeboats. Treasury, the Federal Reserve Banks and dear friends are on the job. Nothing to see here.
We need to develop energy independence as quickly as we can. We also need to drastically cut government. If we do those two things, then whatever we do to debt payments including default will look a whole lot better to us and the world.
And in spite of all this (which is excellent stuff, btw), Many people are STILL hell bent on starting another expensive war in the Middle East with Iran…
Who are these people?
Visit any topic here on this site that deals with Iran and take a gander at the host of commenters that can’t wait to pull the trigger.
Opposition to war with Iran should be rationally based. Presumptions will have to be weighed. You have to lay out the pro and con scenarios and then guess which outcomes would be most likely. My take on the matter is that in the short run, war with Iran is a waste of resources and blood. In the long run, Iran holding Middle East oil hostage or beginning a nuclear arms race in the Middle East will negatively affect the viability of the American economy in ways not dissimilar to our debt crisis. It is reasonable to believe that 10 dollars a gallon will occur within the next ten years. Like inflation, high gasoline prices will sap our economy to the point of inanition. The difference is that inflation will cause Americans to become poor, while high gasoline prices will pauperize America, while enriching people who do not have our interests at heart. We should not be willing to place our future in others’ hands. Power corrupts even good people. What should we presume will happen if the people in charge of Iran who are not so kindly disposed to us mean what they say?
There’s a very large difference between “wanting to start a war” and discussing the probabilities of Iran starting one and figuring out how to respond. It’s a Progressive conceit that conservatives like to start wars. We don’t, but we do like to finish them properly.
“Now, eventually, the economy will pick back up and the Fed will have to sell off all those Treasuries.”
Righto, Steve. But at what price? If the Fed is thinking “par” I’d like to have some of what they’re smokin’.
You’re right. Not. Gonna. Happen. Which means the Fed won’t be able to soak up all the excess liquidity.
If they can’t get bids higher than 97, just how much money would they lose? The “smartest people in the country” have painted us into the mother of all corners.
$100 billion or more.
Does your ouija board put bounds on what fraction is likely to slip put to play havoc?
I don’t know if there is enough history behind the question to make an estimate.
I agree completely with almost everything except on two points:
1. Most likely scenario is not – improved economy leading to the interest rates increase. My bet is: continuing stagnation or accelerating decline in the US economy + rapidly raising interest rates = super-stagflation (Carter was a genius comparing to Obama Administration).
2. We do have a (small) window of opportunity to save the day by doing much tougher version or Ryan Plan + drill very fast everywhere; turn most of our car-fleet to use natural gas as fuel and establish credible positioning for the US to become “the new Saudi Arabia” (as a source of energy for the world) within the next 5-10 years.
— This approach would have to be implemented, full-steam, immediately after election and I’m pretty sure that Romney and Obama are both (almost equally) not up to the task — but Gingrich and maybe Santorum might be.
Producing things of value at a much higher rate than now is the only hope.
Thank you Mr Green. It is Econ 101, but Mr Bernanke seems to have forgotten the basics. The day of reckoning or Jubilee is definitely in our future.
Interesting how Obama’s new budget doesn’t even address the debt. Heck, it increases it! What do you call a person who understands that he is driving this country off of a financial cliff yet doesn’t care anything at all about it? Oh yes, I know. You call him a liberal.
November. Vote him out in November. At this stage of the game I don’t care who the Republicans nominate. Anything would be better than Obama.
Budget? What’s a budget?
Oh calm down. We still have “American Idol” don’t we? Life is sweet.
Do I even need to add a /sarc tag to the above statement?
UGH
The writer needs to continue the train of thought; what is the source of finance allowing unlimited debt to be rolled out again and again ? It is the corrupt Saudi Petro Dollar system.
The creation of this system by Kissinger and President Nixon in the early 70′s provided the escape route desperately needed to continue funding welfare state expanding since the 40′s…the petro dollar provided (at that time) unlimited credit markets to out of control US spending. Nobody predicted multiple trillion yearly deficit, or depending on what figures are used the near 100 Trillion entitlement debt accruing that would be reached today.
The problem then shifts to the article this writer has expressed; the draw downs on the credit expanded exponentially faster than the lines of credit available to the US government. The problem has never been the President, Congress controls the purse strings. It is theirs and theirs alone to bear the burden of our wrecked economy.
The Origin of our woes is this petro dollar system with Saudi Arabia. Saudi Arabia is the Largest funding source of global terrorism, the greatest promoter of Sharia law, funding source of Hamas, the exporter of Terrorism in India, Pakistan, Afghanistan, and points in between.
And the USA must bow and also walk hand in hand with them as they now control the fate of the US dollar.
NAH! A Financial Apocalypse ain’t the big problem .
It’s really a race between WW3 and American Civil War v2.0!
Which gets here first. Or does one cause the other? Which?
This nation has experienced hyperinflation twice: the Continental Dollar in the Revolutionary War, and the Confederate Dollar in the Civil War. We have the resources to fight a nuclear WWIII, but a conventional WWIII could overwhelm us.
How much needs to roll over how soon?
What’s the amount of the breaking point, any guesses?
The exact numbers are a bit hard to calculate because not every Treasury security is tracked as part of the Monthly Statement of the Public Debt (and also because it is nigh impossible to differentiate between publicly-held debt and intragovernmental debt, with the latter automatically rolled over and over again in a “Fletch” move unless the “trust fund” it supports needs the cash), but we can do an approximation using the marketable securities as that is fully-tracked by maturity date, and it is the vast majority of the publicly-held debt (and vice-versa). Not counting the effects of interest, here’s what is maturing soon:
Debt maturing before the end of FY2012 – $2.217 trillion (including almost all of the sub-0.3% T-bills)
Debt maturing before the end of FY2013 – $3.624 trillion
Debt maturing before the end of FY2014 – $4.784 trillion
While that is a bit different than what Stephen has above, it does not count the non-marketable debt that is publicly-held and thus also, if expiring soon, would need to be rolled over.
George Orwell only missed the date for his book 1984 by about 28 years….
BIG BROTHER IS WATCHING YOU
WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH
I think of hyperinflation as a form of default. Once the dollar is worthless, the Treasury can just print up a batch of Billion Dollar bills and pay off our national debt. The pissed off bondholders can use it to weep their tears.
Trillion Dollar Bills are already in circulation in Zimbabwe.
Somalia and Zimbabwe are contenders for World’s Most Failed Country title.
More precisely, hyperinflation is a form of jubilee, because it wipes out the value of not only the public debt, but also all other debts, secured and unsecured.
All these analyses ignore the fact that our economy has been overstimulated for 50 years and the decrease in money creation must be accompanied by a loss of non-essential jobs that are really just the result of ever increasing gobs of fiat money flowing through the system. On top of this we have allowed millions of low-wage, but productive, essential, jobs to leave the country (funny how all those garment workers failed to become computer programmers – whodathunkit).
The idea of keeping deficits below the rate of growth of GDP would work great if we were all “rational” automotons, but we are not. We, and our elected representatives are human.
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” Von Mises
James Wesley Rawles has written two excellent novels about how the economic collapse plays out and how things would (will) be when that happens. It is not a pretty picture. “Patriots” and “Survivors” are both available at Amazon. I read “Patriots” a year and a half ago – it was a life changer.
Plata y plomo…soon to be the law of our land.
Oops. Plata O Plomo.
Excellent piece, Stephen Green. Excellent.
Would be nice to mate the Ryan plan with Rand Paul’s $500bil in budget cuts. We might actually get somewhere then.
There is going to be a default. My generation and the generations after will not see anything from Social Security or Medicare. So be it. The scary part is that we have a rather sizable portion of our society that is utterly dependent on welfare (EBT cards, Section 8) and are basically a drain on society.
When the EBT cards stop working.. expect violence.. lots of it.
A formal default is unthinkable. The proportion of the population that could survive deflation is so small that it is politically negligible. The nation is totally dependent on the wheels of commerce creaking along regardless of how much power the government must usurp to keep the wheels turning.
Inflation is the only available path.
BOTTOM LINE: THE OBAMAS, FELLOW POLITICIANS, AND WEALTHY CONNECTED ARE WELL AWARE OF THIS SITUATION AND ARE WILLFULLY SELLING THE REST OF US OUT. THEIR ONLY AIM IS TO KEEP THEIR OWN JOBS AND GOVERNMENT CONNECTIONS AT THE EXPENSE OF EVERYONE ELSE. THIS WON’T CHANGE. OUR CHILDREN AND GENERATIONS OF GRANDCHILDREN WILL BE SLAVES TO GOVERNMENT DEBT AND TAXES (EXCEPT THE 50% WHO PAY NO TAXES).
STEPHEN GREEN STATES THE OBVIOUS AND HAS NO SOLUTION FOR THE AVERAGE SCHMUCK .
THANKS A LOT STEPHEN. NOW DO A COLUMN ON THE SOLUTIONS FOR THE POOR SCHMUCKS WHO ARE PAYING THE WAY FOR THE DEAD BEATS AND THE FREELOADING POLITICIANS.
Don’t shout.
DON’T WHIMPER.
Solution for the “average schmuck” as requested by KRC:
Own a house with some land free and clear. Learn how to produce something that others might want. When things get really bad you should be able to add some space to rent out or raise chickens or grow something – without worrying about the local authorities shutting you down. It may not be easy, but you wont be out on the street without a place to make a stand.
Another factor to be considered is that the a large percentage of our debt is held by China. Gordon Chang at Forbes (http://www.forbes.com/sites/gordonchang/2012/03/18/chinese-leader-cultural-revolution-coming-to-china/) has written extensively on this, and is a regular co-host on WMAL’s John Batchelor show (http://www.wmal.com/showdj.asp?DJID=9992), a very insightful source of analysis and news that you don’t hear elsewhere (it’s not a call-in show).
China is doing two things now that should cause concern: 1) buying huge amounts of gold to back its currency (http://www.forbes.com/sites/gordonchang/2012/01/29/why-are-the-chinese-buying-record-quantities-of-gold/), and 2) trying to replace the U.S. dollar with the yuan as the international currency of trade. Gordon pointed out that China has run into some trouble, since a large proportion of their funds are tied up in low-interest U.S. treasury securities and they need to either get a higher interest rate or dump them. There is also the matter of their faltering economy, which isn’t growing at present.
I can’t recall all of the details of his argument, but there is a very real probability that China will endeavor to use our national debt against us in an effort to both reduce our economic influence in Asia, bolster their own hegemony in the area, and help their economy and world standing. Interesting times.
The Chinese do not really have to dump our debt to hurt us. Enough of it is short enough maturity that all they have to do is stop buying fresh debt. This is effectively the same as calling in the note, just spread over a little longer time.
I cannot recall the numbers, but we have shortened our average maturity a great deal in the last few years. We are borrowing short and obligating ourselves way long – never a good tactic in uncertain times.
BTW, have you seen the news on a possible coup attempt in China?
Mr Green suggests that it is imperative that the US start paying down it’s debt. OK let’s say that as of now, 2012, the entire expenditure of the Federal Govt. will be limited to that which is collected in taxes, and further that a small sum, say $500M a year be set aside to retire the accumulated debt, how long would it take to pay off? Try 30,000 years.
This is not going to happen, so what will happen? We already see a group of apologists for reckless spending, AKA Modern Monetary Theorists,(MMT), say that the debt is irrelevant and need never be paid off, and even if it did need to be paid off the US can create the notes to pay it. I am sure the holders of the debt are very interested in this theory. Ultimately the US will be unable to sell debt because it is obviously never going to be paid back, I believe we are close to this point now, we can see this by the increasing number of bilateral deals whereby other currencies are being used for trade instead of dollars, and dollar holdings are being used to buy hard assetts. When this happens we will be unable to pay for imports, so the price of any imported goods will skyrocket. Fortunately we are a food exporter so mass starvation (see Egypt) will not happen, and whatever we need in the way of manufactured goods will have to be made in the US. This will trigger an export boom (dollar almost worthless) and massive inflation inside the US, but don’t worry, unless you are on a fixed income or pension (you are going to be wiped out) wages will rise, there will be full employment and happy times will be here again.
There is no way out.
Unlike real companies, operating in the real world, the is no world bankruptcy court to wipe out liabilities, and the likelihood of completely voluntary forgiveness of debt wouldn’t do the trick.
Our national FICO score would be about 450 at the moment. Since Obama is on his Three Credits Tour (run up credit, damaging credit, taking credit), it is likely to go down, it shows absolutely no signs of going up.
He takes credit for domestic oil production, while blocking every single federal program…and stomping around state programs as if he had a drop of that production stemming from his small c communist overthrow. Quite the contrary.
He also is small c communistizing small business, (except for when he is ripping off taxpayers with green energy black holes), so that hiring is stunted, growth is nearly impossible and regulations are strangling investment.
Debt, of course, is the sword of Damocles. Treading water on growth, stagnating natural resource development, and trading worthless paper for increased debt…and then OPENLY LYING to the American people about it all, is a sinister plot, even if it is not fully intentional.
But, it does fit with the collapse/replace manifesto of the anti-capitalism types. There is no denying this. It is there to read in black and white.
The denial comes in saying that “X” is executing that collapse/replace overthrow.
You can’t prove it, because incompetence and “politics as usual” provide the perfect cover.
You also can’t “prove” it to sheeple who are brain damaged by a conspiratorial media.
But it sure has the stench of an overthrow. Especially because if you add up all the “coincidences” from the Socialist Scholars convention, the radical professors at college, the Bill Ayers, George Soros, Van Jones, Anita Hill, Frank Marshall Davis, Jeremiah Wright, Derek Bell, ….”transform”, “redistribute”, clues….the incompetence theory starts to lose in a romp to the intent theory.
No matter. We can pee all we want in Paul Ryan’s cornflakes. He’s the only guy STARTING the conversation. Everyone else is running from it.
Instead of US putting this out in a viral way….we have 35 little comments with sub-comments on the topic. That ain’t going to cut it as a resistance movement, I’m afraid.
We need to do more. Much more.
But, will we?
Let’s imagine the first few steps of a collapse though. There will still be a group of people who will sincerely believe that everything is happening because the 1% is stealing. They will seek help from organizations external to the country that will opportunistically take this chance to provide “help”. The media will be aiding all this.
Look at the NAACP’s plea to the UN Human Rights commission as a model for this.
The US has more small arms than the Chinese army, and thousands of scientists and engineers with intimate knowledge of chemical and nuclear weapons. Some are rich enough that they could convert their assets to silver or gold and skip the country for more stable shores with a low cost of living. Many, however, are a potential proliferation risk. When the Soviet Union collapsed, we instituted Megatons to Megawatts in order to keep Soviet scientists on the payroll so they wouldn’t go rouge. Would China do the same for us?
You are right, that Ryan is starting the conversation. He did last year, too. This is his 2nd (3rd?) budget proposal. He does all this nasty budget work, that sadly, is doomed to go nowhere.
How do we get out of this mess? Well, Ryan’s budget is the first step. He had some help from Dems with it. That’s the key. Gotta find a few Dems who are not radical revolutionaries. Gotta pry them away a bit.
Do some good things, like this budget, then build upon that. Gather momentum. It can’t be done all at once. “The journey of a thousand miles begins with the first step.” The first step is to find some loyal Dems. (No, they are not quite as rare as unicorns.)
This is not a debt problem, it’s a political problem. “Your greatest strenght is your greatest weakness”, capitalism’s is debt. Revolving credit helps business to expand, to grow, as long as it is kept under control. That’s a business model, crushing debt will eventually crush the company. It will then either cease to exist or it will be sold off in parts, game over. But this an idealogical hostile takeover. The irresponsible spending of the past and present, the financial calamity in the future is being carefully orchestrated for the systematic collapse of the credit markets worldwide, and out of the ashes will come the intellectual elite and uber-wealthy’s one-hundred year old dream. Whether it’s called Utopia, New World Order or United Nations it’s all the same, total control. Them at the top of the food chain and us at the bottom. The debt bomb will be used to destroy capitalism and this form of governmnet, that’s always been The Plan. The People who have caused it will be there to fix it and We the People, frightened and confused, like sheep, will cry out for a shepard to lead us to the safety of the corral to be either sheared or eaten or both.
Of California, Crucifixions, and Cleopatra – California Teachers Unions decide they want to organize parents (so they can direct fundraising cash into union coffers) after I arrange for some non-PC programs. The employee unions do herald the apocalypse if anything does. I also look at the plight of Egypt’s Christian community and update the status of Angelina Jolie’s Cleopatra
Stephen- the only way out that may be possible that avoids widespread ruin is to quit deficit spending and adopt very strong pro-growth policies so that we can grow our way out of debt. Low regulatory burden, low taxes and ease of entry for business could trigger compounded growth and thus provide the revenues that could pay off our debt much more quickly than presently expected. I said this is possible- not likely given the intelligence and integrity of our ruling class and the ignorance of the typical voter.
Out if Romney, Rick, and Newt, who do you think is most likely to see such a policies through, if elected? And who so you think is least likely?
I hate mobiles. That should be “out of”.
This will be a disaster unlike any the world has ever seen.
Make friends with a farmer far away from any cities.
Hold on to precious metals: Lead and Gold. Meantime, drinks all around.
Hey, Steve. Could you do me a favor, please? Could you please see about getting me off the PJM block list? Not everyone blocks me, but most do. Or at least have them tell me why I am blocked? It’s not like I violate the rules. I suspect it is just that they have so many new writers who are much more moderate, too moderate for my red-meat style.
I know that you and I do not always agree on things, but you just tell me I’m full of it. You do not block me, just because you do not like my views. I would appreciate the help. Thanks much.
Of course, it’s fine to… block this post.
Each of us maintains his own blacklists.
Ok, thanks. It seems strange to me, though, because I have never been able to post with some of these new writers (Spengler, Baehr, couple others). Oh well. Thanks again, Steve.
The only way ‘out’ is for the US to ramp up its oil exports to the tune of say 10 million barrels per day and convert cars to natural gas as quickly as practical (by govt tax credits or?)- THAT would generate the huge dollars needed to pay down the monster – and the oil and natural gas is there in spades, but, inflation would still be on a gallop – as it has started already despite what is said by the govt Dept of Lying Stats (newly reformed for transparency in this administration). But, during the ten years it will take to get there, there will be blood. Praise Jesus and keep the ammunition close by.
The only politically acceptable solution, by BOTH parties in Congress, is kick the can… Yes we can… kick the can… Yes we can…kick the can…
The problem is we have PASSED peak can kicking and further attempts to boot it down the road will only buy as months then at the very end, days then hours minutes, seconds… mushroom cloud…
Whats even more terrifying is the fact that allowing hyperinflationary collapse to occurr on your watch is LESS politically damaging than trying to turn the ship around by taking away peoples “entitlements”.
Under the socialists Argentina in 2001 went Zimbabwe and underwent hyperinflationary collapse. 8 years later they REGAINED power WITH MAJORITIES all sections of the executive branch. And they are still in power to this day.
America is finished as a first world country, sometime in Obama’s second term (or god help the Republican’s of you win the Presidency Term 1 under Ronmey, Santorum, Gingrich or even Paul) the implosion will arrive and the US dollar will become Zimbucks.
That’s the change Obama has in store for America and it will be here very soon (2013 maybe early 2014 at the latest).
Buy gold and silver coins and keep them in your possession and control AT ALL TIMES you will need them to get out of the country when the time arrives.
A republic if you can keep it, the Disunited States of Argentina/Bananastan if you dont.
Party and prepare like it’s 1929, because it is…
Roger In Florida – Just like Australia, the United States is food, resource and energy independant (coal, natural gas but NOT oil) if a gun was to your collective heads (and it WILL BE) you could keep people from starving and the lights on.
That and you have Canada and it’s resources to call upon, but you will also have OPEN BORDERS with a FAILED THIRD WORLD NARCO STATE, in the form of Mexico to content with.
Good luck with that one, it will get very ugly, very fast…
Australia and New Zealand share many of the advantages of the US/Canada situation but the isolation afforded to us via the Pacific Ocean gives us a significant buffer, but then again we have a 1/10 of your firepower to bail us out of regional conflicts so…
Interesting times ahead… bring popcorn, gold/silver and ammo…