National Debt

[BigJon@Work]

It was a typo, but I liked it, so I kept it.

[Haggis@wk]

FINANCIAL TIMES: Exploding Debt Threatens America.

“Under President Barack Obama’s budget plan, the federal debt is exploding. To be precise, it is rising – and will continue to rise – much faster than gross domestic product, a measure of America’s ability to service it.”

I guess it is now official, negative news about Obama’s profligacy can only be obtained from the foreign press. That says a lot about our “free” and “critical” press

[dai bread]

All this money being printed by Northern Hemisphere banks (not just the U.S.) makes me think of the Weimar Republic. Does anyone know what's different this time, except for the size and spread of the operation?

I like the story of the German who took a wheelbarrow full of money to a shop, and left it outside while he went in to make his purchase. When he came out to collect his money, it was all there, but the wheelbarrow had gone.

[Haggis@wk]

All this money being printed by Northern Hemisphere banks (not just the U.S.) makes me think of the Weimar Republic. Does anyone know what's different this time, except for the size and spread of the operation?

I like the story of the German who took a wheelbarrow full of money to a shop, and left it outside while he went in to make his purchase. When he came out to collect his money, it was all there, but the wheelbarrow had gone.

Weimar is on my mind a lot these days.

[analog]

"All this money being printed by Northern Hemisphere banks..... "

i think they're desperately pulling on the "Reverse" lever.


i notice your NZ dollar is standing tall.

i think US is wrecking its currency in order to shortchange our creditors, ie pay them off with ten cent dollars...

I'm not sure what is up with others.

[dai bread]

We in NZ, and the Aussies, are very glad our (Aussie-owned) banks never got into debt derivatives the way Northern banks did.

Even so, our Govt. expects to run budget deficits for the next decade. We have not been told what happened to the surpluses allegedly salted away by the previous Govt. during recent prosperity.

[jamiebk]

We in NZ, and the Aussies, are very glad our (Aussie-owned) banks never got into debt derivatives the way Northern banks did.

Even so, our Govt. expects to run budget deficits for the next decade. We have not been told what happened to the surpluses allegedly salted away by the previous Govt. during recent prosperity.

Misery loves company Dai. what a mess we've all found ourselves in eh?

[Haggis@wk]

USA TODAY:Leap in U.S. debt hits taxpayers with 12% more red ink.

“Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows. . . . The latest increase raises federal obligations to a record $546,668 per household in 2008, according to the USA TODAY analysis. That’s quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined

. . . . Bottom line: The government took on $6.8 trillion in new obligations in 2008, pushing the total owed to a record $63.8 trillion.”

Buy gold and oil stocks while you can still afford them.

[piqaboo]

The dollar mess certainly takes care of the airfare savings on our trip this summer. Gonna cost more than I'd like it to. oh well....

[Haggis@wk]

The dollar mess certainly takes care of the airfare savings on our trip this summer. Gonna cost more than I'd like it to. oh well....

I bought 500 quid for our UK trip this Summer. The exchange rate today exceeded what I paid for the Pounds. Now I wish I'd bought a thousand....sigh.

[Shapley]

USA TODAY:Leap in U.S. debt hits taxpayers with 12% more red ink.

Technically, most of this debt only exists on paper. That is to say, the government has promised these payments to various individuals, but each subsequent Congress is not obligated to honour them. They are obligated to pay debts actually incurred, i.e., monies borrowed. However, if the 104th Congress promises government retirees a 10% increase in their checques, there is nothing that prevents the 105th from revoking that increase, or even cutting the aforementioned cheques.

Now, keep in mind, I don't foresee that happening, not as long as those retirees can vote, but it is a simple fact that they are not obligated by such promises.

[dai bread]

The dollar mess certainly takes care of the airfare savings on our trip this summer. Gonna cost more than I'd like it to. oh well....

Don't worry, Piq. So long as you stay away from possum and merino wool mixes in clothing, you'll be o.k. Mexicans with cellphones is us, according to Hollywood people who film here.

[Haggis@wk]

Don't worry, Piq. So long as you stay away from possum and merino wool mixes in clothing, you'll be o.k. Mexicans with cellphones is us, according to Hollywood people who film here.

?????

[dai bread]

Possum fur is delightfully soft and warm, and when mixed with merino wool for strength, can be knitted into garments that feel absolutely terrific to wear. Unfortunately, you need your own private oil well to afford them.

As for the quip about Mexicans with cellphones, I assume that refers to the cheapness of making movies here, but there may be some American nuance that I've missed.

[analog]

looks as if debt is still a viable export for US, though i don't understand why.

world is still buying treasuries.

any of you folks understand these charts? I'm not at all sure i do.
http://www.cfr.org/content/publications ... -05-26.pdf

a.

[Haggis@wk]

url=http://www.businessinsider.com/chart-of-the-day-deposit-insurance-fund-balance-2009-6] CHART OF THE DAY: The FDIC Is Going Broke[/url]



Hmm the right side of the chart's cut off. Go to the link to see the complete chart

[dai bread]

looks as if debt is still a viable export for US, though i don't understand why.

world is still buying treasuries.

any of you folks understand these charts? I'm not at all sure i do.
http://www.cfr.org/content/publications ... -05-26.pdf

a.

I wouldn't say I understand those charts, but to me they say that BRIC countries don't think the U.S. is going to go broke. Neither do I, and I would happily invest in U.S. Govt. securities if I didn't have other fish to fry closer to home.

[Haggis@wk]

When political opposites like Barack Obama and Eric S. Raymond agree on something, that gets my attention.
Here's Barack Obama in a CSPAN interview reported by Drudge the other day:

...we are out of money now. We are operating in deep deficits, not caused by any decisions we've made on health care so far. This is a consequence of the crisis that we've seen and in fact our failure to make some good decisions on health care over the last several decades.
So we've got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it's putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.

So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don't reduce long-term health care inflation substantially, we can't get control of the deficit.
So, one option is just to do nothing. We say, well, it's too expensive for us to make some short-term investments in health care. We can't afford it. We've got this big deficit. Let's just keep the health care system that we've got now.

Along that trajectory, we will see health care cost as an overall share of our federal spending grow and grow and grow and grow until essentially it consumes everything..

(Emphasis added.)

And here's what Eric S. Raymond (no supporter of Obama, BTW) said in September:

The fundamental problem is that income-transfer programs (and the interest service on the debt purchased to keep them running) are spending wealth in higher volumes than the economy can actually generate, and demand for that spending is rising faster than the economy is growing. Thus, raising tax rates is no longer a way out, if it ever was.

At some point, the U.S. government is going to lose both the ability to increase revenues and the ability to sell bonds. At that point the entitlements system will crash. Transfer checks will either stop issuing or become meaningless because the government has, like some banana republic, hyperinflated the currency in order to get out from under its debt obligations.

Unlike the oncoming European demographic crash, the entitlements crash will be survivable in that there will still be people around to make things and trade things with. But it's going to be ugly. probably rioting-in-the-streets ugly. People dependent on income transfers will starve or die of preventable diseases in large numbers, unless they can find work or private charity. Since many of those people will be old, work will be unlikely unless they are exceptionally capable at something. Families will have to re-assume the burden of caring for their elderly; retirees without children will be in especially severe jeopardy.

Violent revolutions have been fought over less wrenching economic changes than this one promises to be.

I think the country might be approaching a turning point of sorts. We've gone about as far as it's possible to go with the socialist-flirtation, welfare-state mode without plunging over the abyss into the irreversible, tyrannical, full-blown variety. Obama wants to be remembered as the president among presidents; regardless of how it turns out (and I think it will be a disaster) he will be.

[Haggis@wk]

Timothy Geithner has been killing them in China, Reuters reports:

A major goal of Geithner's maiden visit to China as Treasury secretary is to allay Beijing's concerns that Washington's mushrooming budget deficit and ultra-loose monetary policy will undermine both the dollar and U.S. bonds. China is the biggest foreign owner of U.S. Treasury bonds.
"Chinese financial assets are very safe," Geithner said. His response drew laughter from the audience.

[Haggis@wk]

Get Ready for Inflation and Higher Interest Rates




Dai, your Weimar comparison gets more accurate daily.