The US
Originally published 3.27.2010
Abstract: Our
government is spending us into unrecoverable debt and massive inflation. They
will NOT cut spending and will NOT lower taxes for businesses. We are at the
point where we cannot recover from the debt, the stimuli are failing to aid the
GDP and more spending is
envisioned by Obama and his leftists. Our currency is being debased by our
cleptocratic [defined as the government stealing from its citizens] government
using the obvious mechanism of inflation. Things are going to get a lot worse.
In
a previous blog entitled Deflation and Defaults: The Path Downward from Debt
and Excessive Spending,[1]
I outlined some potential problems concerning deflation, inflation and the
Fed’s printing of vast, and mostly unknown, amounts of money. In a more recent blog entitled Maximizing
Both Tax Revenues and Economic Growth: The Folly of Government and the
Generation of Phony Numbers and Class Warfare [2]problems with US Treasury bonds are emphasized. Our
credit rating is bound to slip. We face a crisis.
The
topics of inflations or deflation, in particular, always provoke a contentious
political and economic dispute[3]
consisting of those players who insist this phenomenon is in progress, and can actually
prove the existence thereof, in a fierce battle with the opposing forces who
insist we are inflating or other. The analysis process to solve this riddle is
seemingly wrought with technical difficulties because there are many varied financial
inputs and calculations that must be assessed by the jury in this trial until a
final verdict is returned. It appears that even identical economic elements can
be used to argue either case thus leading to a conundrum. The proof, however, that we have transitioned,
in part, from deflation to potential high inflation happens when we examine the
US Treasury bond auctions.
This
spending is what is driving our deficit into an ocean of debt[4] and we rank high amongst the list of
other losers who may soon default on their sovereign debts:
|
Country
|
Deficit
as a % of
|
|
|
15.7
|
|
|
12.7
|
|
|
12.6
|
|
|
12.2
|
|
|
11.2
|
|
|
9.6
|
|
|
8.2
|
|
|
7.4
|
|
|
6.7
|
|
|
4.8
|
|
|
4
|
|
|
3.2
|
* Figures from OCED forecast
in November 2009. [5]
The US
Overspending, to bribe voters to keep
socialists in power as we see in California New York California US
All along, we were reassured that
inflation was not a problem and that we could unwind the Fed monies used to
salvage our Zombie Banks, which are, to be frank, quite dead.
The Geithner Pledge:
"We have the
deepest and most liquid markets for risk-free assets in the world. We're committed to
bring our fiscal deficits down over time to a
sustainable level.
"We believe in a
strong dollar ... and we're going to make sure that we repair and reform the
financial system so that we sustain confidence," he said.”[16]--
Geithner tells China Monday
June 1, 2009 [Emphasis is mine in
all quotes.]
We are already past the limit of
sustainability of our currency values and the bond interest rates that just
shot up a few days ago show that inflation concerns are now affecting into the
market for US Treasuries. Inflation is on the rise.
US Treasury Sales:
“For
more than a year, analysts have been warning that record sized debt sales by
the US
Falling inflation [deflation, ed] , rising
unemployment, the housing market slump, the Federal Reserve’s policies of a
near zero overnight borrowing rate and its purchase of up to $1,700bn in bonds
have all helped keep Treasury yields near historic lows.”[17]-- Supply fears start to hit Treasuries By Michael Mackenzie
in New York March 26 2010 [Emphasis is mine in
all quotes.]
The
Fed has, we think, some 1. 7 trillion in bonds on their books and what not, but we cannot know what the
Open Market Committee is doing or what is happening in the Fed’s Off-Balance
Sheet operations. We do know that Fannie Mae and Freddie Mac hold some 3-5
trillion dollars worth of worthless mortgages of the Toxic Asset type. We also
need to understand that Barney Frank and other liberals want the banks to
readjust interest and principal levels for many home owners who are
‘underwater’ and cannot make mortgage payments. The banks are asked to take
massive loses. Mortgage defaults are still soaring and unemployment is still
too high. Where is this money going to come from? The printing presses? Probably.
US and state budgets are
out of control:
““The
spotlight on Greece only helped to reveal that the US’s kitchen – with Federal
and state budget balances – was itself full of cockroaches,” says William
O’Donnell, strategist at RBS Securities””-- Supply fears start to hit Treasuries [Emphasis is mine in
all quotes.]
More massive spending.
““The
environment for debt auctions has turned negative,” says Rick Klingman,
managing director at BNP Paribas.
“Long-term rates are rising and it is no coincidence that this has occurred
after the passage of healthcare reform and the end of Fed buy-backs.””--Supply
fears start to hit Treasuries
Social Security is going broke:
“Also rattling US investors this week was a report by the
Congressional Budget Office that falling payroll taxes due to high unemployment, means that the social security programme will pay out more in
benefits than it receives for this fiscal year.“”--Supply
fears start to hit Treasuries [Emphasis is mine in
all quotes.]
All
this was predicted by me and many others although Paul Krugman seems to think we can handle this and
9 trillion[18]
more dollars to spend.[19]
So,
what do we do about this?
Slow
spending? Lower he deficits?
Actually,
none of the above as the Obama Administration, Congress and many states will
NOT STOP SPENDING. Thus, we are crashing
into a debt limit barrier that we cannot reverse without massive inflation. Soon,
nobody will buy our debt.
Many
bonds are ‘insured’ by interest rate swaps, a very complicated process that is
mostly confined to sovereign bond markets.[20]
Before such ‘insurance’ on debt was available in world markets, a bond holder
was at risk of a default or a currency debasement, two favorite avenues for
governments to take when they overspend and cannot meet their debt obligations [known
as cleptocracy] as we read in the new book This Time is Different: Eight
Centuries of Financial Folly[21]
by Carmen Reinhart and Kenneth Rogoff. This tome reviews this very common
process of overspending, massive debt, bank crises and inevitable defaults that
plague California Greece New York US
Now
bonds for private issuance are now sold at lower rates than US 10-year bonds—a
signal that the current notion of ‘safety’ of the US Treasury is not accepted:
“For the first time since swaps emerged in
the mid-1980s, the
10-year swap rate traded below that of the “risk free” 10-year Treasury yield.
Analysts say this reflects how government debt issuance has altered the
dynamics between “risk-free” yields and swaps, which reflect borrowing costs
for non-sovereign borrowers.”--Supply
fears start to hit Treasuries
Money
markets and capital acquisition operations are now global and it appears that
the massive spending and huge, unsustainable deficits in the US
This
starts off a spiral: if interest rates are trending higher then businesses will
suffer in earnings and will not hire more people. They may have to lay off more
workers to keep their bottom lines reasonable. The new Obamacare costs are now
being incorporated into business plans and many companies like ATT, Deere and
others have publicly given notice that they will have to raise prices. Fewer
employed workers will buy less and default more on mortgages and the problem
will become worse in time. Higher prices means inflation.
Spending
must be halted at this time and new spending on illegal aliens, weird green
things that may be only asset bubbles brewing[22],
and avoiding massive tax increases like the Cap and Trade Taxes are all
mandatory. There is no way to solve this problem with more spending as Krugman
and other Keynesian economists advise. Tax cuts to allow businesses to hire
more employees are the only way out of this and that avenue is not acceptable
to the far left and their lackeys.
This
massive spending by liberals, intoxicated by their own phony rhetoric, will
sink our economy and we will return to the depression days of the 30s.
We MUST cut
spending and furlough several government projects and reject EcoNazism[23][24] and
Cap and Trade and other phony nostrums.
rycK
Comments:
ryckki@gmail.com
[1] Deflation and Defaults:
The Path Downward from Debt and Excessive Spending.
[2] http://rycksrationalizations.blogtownhall.com/2010/03/27/maximizing_both_tax_revenues_and_economic_growth_the_folly_of_government_and_the_generation_of_phony_numbers_and_class_warfare.thtml
[3] Deflation, Inflation,
Politics and Insanity Stewed to Perfection.
[4] The Debt-Deflation Trap
and the Psychosis of Government Spending
[5] http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7269629/Britains-deficit-third-worst-in-the-world-table.html
Published: 10:00AM GMT 19 Feb 2010
[6] The Fed Thinks of Ways
to Claw Back Some of the Stimulus Money: This Will be A Disaster as Congress
Will Continue to Spend and Spend.
[7] The Fed Thinks of Ways
to Claw Back Some of the Stimulus Money: This Will be A Disaster as Congress
Will Continue to Spend and Spend.
[8] California
[9] The Road to Social
Success, Peace and Justice: California
[10] As Predicted: California
[11] Copulating
with Coprolites: The Unveiled Mechanism of Governance by Progressive Liberalism
in California
[12] The
Proud March of the Financial Lepers: Greece California
[13] California Becomes the National Leper like Greece
[14] 650,000 Strawdogs Bark at the Moon. The Obama ‘Recovery’
is a Numerical Monkey Circus
[15] Belligerent Ignorance, Phony Economics and the Clunker
Crusaders: Washington
[16] Geithner tells China Monday
June 1, 2009 , By Glenn Somerville
[17] Supply fears start to hit Treasuries By Michael Mackenzie
in New York March 26 2010 19:18
| Last updated: March 26
2010 19:18 [Emphasis is mine in
all quotes.]
[18] How big is $9 trillion? By Paul Krugman
The Conscience of a Liberal, August
23, 2009 , 5:54 PM
http://krugman.blogs.nytimes.com/2009/08/23/how-big-is-9-trillion/
[19] Inefficiency in California Greece
Krugman
Offers an Essay on Misdirecting Political Power. We can Control the Banks and
prevent the Next Crises, but No Details, Just give us Power.
[22] Spain California
The
Bursting of the GanGreen Bubble II A Prediction
coming True in Gooey Green
The
Bursting of the GanGreen Bubble.
[23] 300 Years of British
Inbreeding Brings us Flop Ears the EcoNazi
Prophet of Doom
[24] Reprinted from a
previous blog: The Dollar Sags in Full View of the World This Invites a Run on
the Dollar. Inflation Threatens US.
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