|
Posted on 02/14/2009 8:46:44 AM PST by An Old Man
As we put the first month of 2009 behind us, we are nearing Washington's great day of reckoning. On the not-too-distant horizon, we can already begin to see …
And just beyond that horizon, don't be surprised to see …
Before Washington's day of reckoning, the American people think that government resources are abundant and even unlimited; after the day of reckoning, those resources suddenly become scarce, often non-existent.
Before the day of reckoning, it's widely believed that the government has the power to prevent, end, delay or cushion this crisis; after , it's finally recognized that the government's actions merely deepen, aggravate and prolong the crisis.
Before, the government remains committed to doing everything it can to fulfill the people's belief; after, it begins to abandon its rescue efforts, allowing the economy to fall on its own weight.
Suddenly, government omnipotence is replaced by government impotence; generous largesse is replaced by miserly penny-pinching.
The Reason: Most of Washington's Big Credit Lines Will Be Severed!
If you or I spend hundreds of thousands more than we earn each year … and then borrow nearly every penny we need to pay our bills, it's called “insanity.” When Washington does it, nobody bats an eyelash.
Even before this new phase of the crisis burst onto the scene, Washington was living far beyond its means — spending hundreds of billions more than it earned each year; then borrowing hundreds of billions just to pay its bills.
Now, it's much worse. Due to massive federal bailouts, plunging tax revenues, and surging social costs, the Congressional Budget Office forecasts Uncle Sam will have to borrow $1.2 trillion in new money to fund its deficit this year, the worst of all time.
And that's assuming:
The reality is that just ONE of these three new burdens to the federal budget could double the already-exploding deficit.
Washington may have to borrow $2 trillion, even $3 trillion.
Right now, Uncle Sam's sources of funds to finance its folly are already showing signs of drying up; and therein lies the limit to our government's power to finance a recovery.
Why can't Washington simply print the money it needs to pay all its bills and finance bailouts to its heart's content? Because the mere FEAR of the consequences would turn Washington's creditors away and make it even more difficult for it to raise the funds it desperately needs to
The key: It's already hard enough to persuade creditors to lend Washington funds even in the absence of inflation. If they get wind of money printing and foresee inflationary consequences — on top of the bankruptcy of America's largest institutions — it could become virtually impossible for Washington to borrow all the money it needs.
$3 trillion dollars has a nice ring to it.
Good succinct article!
The end of Washington's futile attempts to stop the explosive collapse of the U.S. economy and stock market …
The end of the slow-motion disintegration we've seen in corporate earnings, stocks and bonds, plus …
The end of the slow, incremental rise in unemployment.
The Democrats never had nor do they currently have the intention of trying to save our capitalist economy. They want to see capitalism fail so they can facilitate the growth of socialism in our nation and then onto Marxism.
|
The lie is so big that it won’t matter that capitalism has never failed and socialism has never worked.
Yep and we’re all to blame. Look at what you have in your house or in the driveway or your credit card bills and ask yourself, “Did I really need this?”
As for me, it’s roll up the sleeves and trudge ahead - life isn’t fair nor is it easy. Our society (and to a degree) our own party has become a bunch of whiners blaming everyone else but own selves.
So to this article, hey great - the guy has his own fatalistic viewpoint - he should go and stuff his mattress and wait to pass away. For others, like me, I’m more determined now to do my part, wake up, rally those around me to vote/participate and voice up and not to go out and bite off more than one can chew because they have to “keep up with the Joneses”
“And since December 18, we have already seen a sneak preview of what could lie ahead: A massive plunge in the price of Treasury bonds.”
So they are basically admitting that their title is a lie. The title says “Underway.” But the text says, “could lie ahead.”
Personally, I think that the number of journalists worldwide who actually understand even the most basic economics can be counted on the fingers of one hand. Does this writer understand that when treasuries go down, all that is happening is that the interest rates are going up? But interest rates are at their lowest levels in recorded history, so that might be a good thing rather than a bad thing.
This reminds me of an old Broom-Hilda cartoon where she goes from shop to shop charging her purchases to her credit card and when asked how she will pay the enormous bill at the end of the month she boldly states “I’LL CHARGE IT.”
The government had already committed almost $8 trillion to bail out troubled entities and insure against losses, and that total was from November, 2008.
You’d have to add another trillion or two to have a clear picture of the total liability. So we’re talking $10 trillion or so, with more bailouts and “stimulus” bills probably coming down the road to address the next “crisis”.
http://www.nytimes.com/imagepages/2008/11/26/business/20081126_FED_graph1.html
Not really the fault of people who bought something on credit and paid their bills. That system has worked properly for a very long time.
But Wall Street sharpie types mixed low quality loans with the good, sold the whole package as good, and spun that bizzare market to insane levels. The problem was never with the truck in the driveway of the people who paid thier bills. It was with the sharpies who loaned to unworthy customers, then scammed investers into thinking the loans were good.
Now it will be a long brutal shakeout of the bad debt.
We will pay directly as taxpayers, some will pay with our jobs, others will pay through inflation and declines in retirements. Elite level bankiers are the only ones assured of safety.
The Democrats never had nor do they currently have the intention of trying to save our capitalist economy. They want to see capitalism fail so they can facilitate the growth of socialism in our nation and then onto Marxism.
::::::::::::::
If they had any interest in restoring stable capitalism, the “stimulus” bill would have been loaded with TAX REDUCTIONS, BUSINESS INCENTIVES, GOVERNMENT COOPERATION WITH BIG CORPORATIONS, NOT DICTATES, INCENTIVES FOR INDIVIDUALS TO GROW SMALL BUSINESS, ETC. The list goes on. I think we know what we are dealing with.
But i think you are dead-on about something. No matter what the cause, (hell, im no economist!) the only answer for most people is to to roll up sleeves and trudge ahead.
You are exactly right. And those are the people who will make it through this intact.
And though i dont think my good credit use caused this. Im not buying anything else on credit. So shoot, maybe you have a point after all.
On a more practical note, somethings we as a nation should start to become prepared for:
1) The end of largesse. The big four items in the US federal budget are Social Security, Medicare, Medicaid, and Defense. The first three are going to have to be reduced to bare bones, if not eliminated altogether. Defense will have to return to just being defense of the United States. We can no longer project strength to defend other nations, unless are interests are attacked.
2) In the short term, the creation of State scrip currencies. Along with the collapse of the US Treasury bill market, and the likely default of the US national debt, the US dollar will encounter severe fluctuations. By the States issuing scrip (not legal tender), like a more developed version of California’s ongoing IOUs, States will make available a tightly controlled, debt free “complementary currency” to the US dollar. This will keep the State and local governments, as well as the retail markets, functioning, as a stable currency working side by side with the dollar, be it deflating or hyperinflating.
3) The return of Federalism. Right now, individual States are already reasserting their constitutional authority as separate from the federal government, not just subordinate to it. As of yet, this is only seen in the rejection of “unfunded mandates”. However, there is much more involved. The vast federal territories taken from the West will have to be returned, excepting Indian Reservations, military installations, and the few “crown jewels” of the national park system.
The States may also demand that federal laws redundant and overlapping with State laws and authority be eliminated. An end to the War on Drugs, as beyond federal authority. Perhaps even the repeal of the 17th Amendment (direct election of senators). There might even be a move to limit federal taxation to just import duties and direct taxation of individual States with the repeal of the 16th Amendment (the Income Tax).
They want to see capitalism fail so they can facilitate the growth of socialism in our nation and then onto Marxism.
Yes, we did. But we have no debt and have never had a mortgage on our house or loan on our car. We have no *toys*.
I don't know how you're blaming, but if it's people who are irresponsible with their money, then don't include us in *we're all to blame*.
I don't buy into group guilt, either.
People including some FR do not understand that the gov 8 trillion only cover the bank and insurance company losses from RESIDENTIAL mortgages, but looming in 2009 is the 5 year balloon COMMERCIAL mortgages due in mid year. Many mall and office developers/owners are facing vacancies as retail and business slowed down and closed many outlets and offices. They are unable to refinance and meet their mortgage obligations. We will see a commercial mortgage collapse with losses equal to the residential mortgages. Add to the banking woes, is the rise of credit card defaults as unemployment continues to rise. The feds will be hardpressed to sell more bonds or print money to raise the cash to keep our banks from insolvency as these additional losses are added to their existing losses.
The boys and girls in Congress know as well as anyone that the US dollar is at risk of collapsing, but they count on the voters' ignorance to cover their fiscal sins. Neither party cares that the copper metal in a penny will eventually be worth more than a paper dollar in actual value as long as they can stay in office by blaming it on the other party.
If these prediction come true, Barney Frank and his ilk will be running for their lives, and I don’t think many of them can run very fast.
In the town that I grew up in (upper middle class, suburban), 50% of the houses had huge additions installed over the past 10 years...yet has family size really increased to require these mods? I doubt it...but financing flowed.
People splurged on fancy, new cars and plasmas and exotic vacations...did they pay cash (from earned money, as opposed to cash-out refinances)? I doubt it.
All of that would have been fine...if it had been supported by a society capable of producing the goods needed for the above lifestyle. Our society wasn’t...because the libs have managed to pretty much wreck that capability (and Obama is trying to insert the final knife). So we borrowed...and borrowed...and borrowed, and now we find that the jobs and pay necessary to start paying back these loans are not necessarily available.
The way out of this mess is to turn the United States back into a producing country...which means doing lots of things that the Democrats HATE, and the even a lot of Republicans don’t really believe in.
So...do we pay back this debt (and live a VERY meager lifestyle for years to come), or effectively declare bankruptcy by massive inflation? I know where I’d place my bets, particularly with this administration.
Fortunately, Texas has other options...
http://www.freerepublic.com/focus/f-chat/2180357/posts
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
