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Centrist Think Tank Conducts Study, Finds US Default "Could" Push Country Into Recession

Tyler Durden's picture


And for today's second most surreal piece of news (the first being that Osama was a fan of RedTube and Adult Friend Finder, whose stock tumbled 25% after its IPO on news that such a loyal customer is now dead), we turn to Reuters which brings us news of a "report" by centrist think tank Third Wave, due out on Monday, which finds that "the United States
could plunge back into recession if inaction in Washington forced a debt
default, according to a new analysis that arrives as the country
reaches the legal limits of its borrowing authority....
Some 640,000 U.S. jobs would vanish, the housing
market's woes would deepen, stocks would fall and lending activity would
tighten if the country were unable to pay its bills, according to a
report by the centrist think tank Third Way due out on Monday." And yes,
first Dow Jones and now Reuters confirms what we have been warning all this week, namely that "the Treasury Department is expected to hit its
$14.3 trillion borrowing limit on Monday, making it unable to access the
bond markets again. Lawmakers from both parties say they won't approve a
further increase in borrowing authority without steps to keep debt
under control.
" Yet back to the topic at hand: which is that someone actually paid money to discover what will happen to America when it filed for bankruptcy. If this was a paper out of the San Fran Fed we understand, but private industry? If there is one margin hike we approve of it is for the CME to hike the margin to 1000% cash in trivial common sense BS.

And for those who don't have blood shooting out of their eye sockets at this point, here are the details of what the debtors prison circle of hell would look like for the US.

  • Treasury bonds would lose their aura of safety, leading to a half-point increase in their interest rates. That would push up the U.S. government borrowing cost once lending activity resumed, leading to a $10 billion increase in annual budget deficits over the short term.
  • The higher interest rates would ripple through the economy, causing gross domestic product to decrease by 1 percent and employers to shed 640,000 jobs.
  • Banks would curtail lending. Small businesses would have a harder time expanding and credit-card interest rates would rise. Student loans and car loans would become more expensive.
  • The S&P 500 stock index would lose 6.3 percent in value over three months, causing retirement portfolios to shrink, the report said, citing research by financial services firm Janney Montgomery Scott.
  • The U.S. dollar's status as the world's reserve currency could be threatened as investors move cash to Swiss francs, Japanese yen, or Euros. That could boost U.S. exports but raise the cost of consumer goods like gasoline and electronics.
  • Home mortgage rates, which are tied to U.S. Treasury rates, would rise. Homebuyers taking out an average mortgage for a new home, currently $221,900, would pay an extra $24,738 over the life of the loan, dealing another blow to an already struggling housing market.

"Defaulting on our debt is not an abstract idea that might affect a few institutions on Wall Street; it would harm tens of millions of Americans in profound and lasting ways," the report says.


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Fri, 05/13/2011 - 16:33 | 1272841 bankrupt JPM bu...
bankrupt JPM buy silver's picture

when did they get out of depression?

Fri, 05/13/2011 - 16:50 | 1272939 steve3828
steve3828's picture

Is this a joke?  The stock mkt would gingerly lose 6% over a three month period if the US defaulted?  Uh, yeah, I'll take the under on that.

Fri, 05/13/2011 - 17:08 | 1273003 6 String
6 String's picture

In the 90s the stock market went up when the U.S. defaulted. Stupid, eh? You just gotta love arbitrary numbers pulled out of a hat too: 6%, 640,000 jobs plus 1, etc.

But, sure, why not? No one is going to be afraid to EVER own stocks again since 1% declines are not allowed, 6% is off the fucking table.

What a circus show.

Fri, 05/13/2011 - 17:40 | 1273071 Landrew
Landrew's picture

I don't believe the U.S. Treasury ever defaulted. If you mean the government shutdown yes. However during that time all debts were paid. New debt was issued. The debt ceiling has never failed to be raised.

Fri, 05/13/2011 - 18:12 | 1273150 Popo
Popo's picture

So...I'm trying to understand the think tank's position... If we stop borrowing from ourselves, we're in danger of running out of play-money. Did I get that right?

Fri, 05/13/2011 - 19:47 | 1273330 eatthebanksters
eatthebanksters's picture


Sat, 05/14/2011 - 06:23 | 1273945 onthesquare
onthesquare's picture

Most people are forgetting the money the government saved in killling Bin Laden; His $25 million bounty.

He was killed by an American soldier so there is no pay off. The governmnet has an extra $25 million.

With saving like these the defishit will be gone in no time.

Happy daze.

Sat, 05/14/2011 - 13:37 | 1274408 A Nanny Moose
A Nanny Moose's picture

Spend billions, to find a guy, to kill him to save $25 million. Looking back, even $100 million bounty would have been a bargain.

Still, it begs the question, as to why nobody ever came to knocking on OBL's door to collect?

Sat, 05/14/2011 - 15:17 | 1274518 Cleanclog
Cleanclog's picture

1 US soldier in Afghanistan for 1 year =$1.2 million in US expense ($300-400,000 in costs associated with energy to get soldier there, move around, feed and eat).  How many soldiers, how many years?  That doesn't include the fake 9/11 response in Iraq.

Fri, 05/13/2011 - 23:04 | 1273670 jeff montanye
jeff montanye's picture

like the 6% decline, the 50 basis point yield backup seems "conservative".

Fri, 05/13/2011 - 20:09 | 1273372 steve3828
steve3828's picture

Agreed, the U.S. didn't default in the 90's. If you want to see what happens to an equity market when a sovereign defaults, look at Russia in 1998.

I think the US market would be down more like 60%-80% than 6%.

Fri, 05/13/2011 - 21:09 | 1273481 weinerdog43
weinerdog43's picture

"Centrist" think tank is bullshit.  This is a neo liberal goof ball organization that thinks offshoring is great and the war in iraq/afghan/libya, etc... is great.  It is not 'Centrist' unless you think the Fed is fantastic.  Screw this report.

Sat, 05/14/2011 - 11:48 | 1274267 Popo
Popo's picture

And Russia is a great example of how *not* fucked a country can be after defaulting.   A couple years later they were kicking ass.

Fri, 05/13/2011 - 20:59 | 1273462 Milestones
Milestones's picture

By chance is the author's name Henney Penney??     Milestones

Fri, 05/13/2011 - 17:12 | 1273017 camaro68ss
camaro68ss's picture

This is bullish then right? Should i buy Netflix now?

Fri, 05/13/2011 - 17:41 | 1273074 bankrupt JPM bu...
bankrupt JPM buy silver's picture

AMZN puts up the ying yang over here.

Fri, 05/13/2011 - 16:54 | 1272959 jus_lite_reading
jus_lite_reading's picture


"Overturning a common law dating back to the English Magna Carta of 1215, the Indiana Supreme Court ruled Thursday that Hoosiers have no right to resist unlawful police entry into their homes."

OHHH SHIIIIT! TPTB have lost control!!!

Fri, 05/13/2011 - 17:05 | 1272993 ursus.peracto
ursus.peracto's picture

Damn. I knew I should have kept those Claymores hanging around for a rainy day!

Fri, 05/13/2011 - 20:35 | 1273426 cossack55
cossack55's picture

There are some nice "perimeter defense" items for sale on the net using trip wires and 12 gauge rounds. They send you a blank with the device. I guess you can reload with sabot or ooBK.

Sat, 05/14/2011 - 07:55 | 1273991 ColonelCooper
ColonelCooper's picture

You gotta link for that?

Sat, 05/14/2011 - 12:17 | 1274303 serotonindumptruck
serotonindumptruck's picture

I purchased a couple of these back in the mid-'90's. They are simple, yet highly effective devices.

Sat, 05/14/2011 - 13:20 | 1274383 ColonelCooper
ColonelCooper's picture

Thank you.

Fri, 05/13/2011 - 19:56 | 1273350 1100-TACTICAL-12
1100-TACTICAL-12's picture

Equipment check.. The time to lock & load draws nearer by the day..

Fri, 05/13/2011 - 19:57 | 1273359 Coldfire
Coldfire's picture

The ruling is a consistent extension of the 20th century erosion of the Fourth Amendment (cf. the faux "War on Drugs"), but it clearly violates the Fourth Amendment proper. It will be overturned, if appealed, on the dissent's basis.


Fri, 05/13/2011 - 22:59 | 1273666 jeff montanye
jeff montanye's picture

imo you are an optimist; i hope you're right.

Fri, 05/13/2011 - 20:37 | 1273430 cossack55
cossack55's picture

Another reason to "Vote for Mitch in 2012".  Little sawed-off shithead.

Sat, 05/14/2011 - 05:07 | 1273912 Urban Redneck
Urban Redneck's picture

The legislature can return the right to the people, bitch slap the justices, and corner the governor in a single move.  Will the people demand action by their legislators?   

Fri, 05/13/2011 - 23:21 | 1273700 trav7777
trav7777's picture

this is odd because the SCOTUS has ruled that there is a right to resist unlawful arrest, even by deadly force.  Several state courts have so ruled as well.

This notion that you can just arbitrate all this crap post-facto through the courts is bullshit.  The police will fucking lie their asses clean off

Sat, 05/14/2011 - 06:36 | 1273950 onthesquare
onthesquare's picture

a right to resist an unlawful police entry into a home is against public policy and is incompatible with modern Fourth Amendment jurisprudence

The cop is breaking the law ergo "unlawful"

When is a cop not a cop? When he/she breaks the law.

Your actions to defend are against public policy; POLICY has no place in a court. Courts only look at written law and maybe regulations. Policy is not passed by governments.

Actually this is more of a statement against cops and their past practice of planting evidence to support their actions.

Or I watch too much TV.

Sat, 05/14/2011 - 08:05 | 1274004 ColonelCooper
ColonelCooper's picture

Just one more little nitpicking, back of the neck hair tweaking, grab you by the left nut and give a quick squeeze just to make sure you know who's really in charge, infringement of personal property rights. 

One puff of wind on a smoldering fire.

It is little events like this that are going to result in this entire country going up in flames.  Someday, the wrong fucking guy is going to get pushed just a little too far, and a city block or two is going to look like Beirut.

Keep fucking pushing.

Sat, 05/14/2011 - 12:27 | 1274311 serotonindumptruck
serotonindumptruck's picture

Only when that guy has nothing left to lose except his life. There may be quite a few of these people already.

BTW, I recommend a high-power/magnum rifle for such endeavors. Virtually all body armor is useless against such muzzle velocity.

Fri, 05/13/2011 - 18:51 | 1273228 NOTW777
NOTW777's picture

i think this was written by timmy

Fri, 05/13/2011 - 16:33 | 1272851 Silver Bug
Silver Bug's picture

Could push the US into a recession?? what is this nonsense hah, we are already in a depression!

Fri, 05/13/2011 - 16:35 | 1272862 TheTmfreak
TheTmfreak's picture

So that means we should celebrate because our situation would IMPROVE!

Go ahead and default then woooooo!!!

Fri, 05/13/2011 - 16:51 | 1272943 Sudden Debt
Sudden Debt's picture

TO  BOLDLY GO WHERE.... so many others have gone before....



Fri, 05/13/2011 - 19:25 | 1273292 magpie
magpie's picture

There is only one rule, to default first is to default best.

(Motto on the new Drachma Notes)

Fri, 05/13/2011 - 16:37 | 1272869 wandstrasse
wandstrasse's picture

statement during the Titanic sinking process: If the Titanic sinks, the clothes of some passengers could get wet.

Fri, 05/13/2011 - 17:04 | 1272990 White.Star.Line
White.Star.Line's picture

This could very close to the sinking of 1912.
You either came out of it a bit wet, or drowned.

Fri, 05/13/2011 - 20:39 | 1273429 Mec-sick-o
Mec-sick-o's picture

Please restrain from wearing wool.  Prewashed cotton only.

Fri, 05/13/2011 - 16:59 | 1272979 Thomas
Thomas's picture

I bet rocket surgeons don't come cheap.

Fri, 05/13/2011 - 16:36 | 1272852 King_of_simpletons
King_of_simpletons's picture

"Defaulting on our debt is not an abstract idea that might affect a few institutions on Wall Street; it would harm tens of millions of Americans in profound and lasting ways," the report says.


What tens of millions are we talking about here ... ? Tens of millions of Americans are already in the shitter....


Fri, 05/13/2011 - 17:06 | 1272997 ursus.peracto
ursus.peracto's picture

If the disease won't kill you, the cure probably will.

Fri, 05/13/2011 - 21:05 | 1273465 Mec-sick-o
Mec-sick-o's picture

The other tens of millions...

Fri, 05/13/2011 - 16:36 | 1272854 Atch Logan
Atch Logan's picture

WTF,I thought we were already in Recession???

Fri, 05/13/2011 - 16:55 | 1272965 Keri at Bankste...
Keri at Bankster Report's picture

No, no, no.  Blinder told us last year he "ended the recession," and that is why we need QE3 right away.

Fri, 05/13/2011 - 16:34 | 1272856 Dr. Engali
Dr. Engali's picture

And the world will blow up and we all will be dead.

Fri, 05/13/2011 - 16:37 | 1272857 NOTW777
NOTW777's picture

ha - raise the debt ceiling or we'll start bombing

Fri, 05/13/2011 - 17:06 | 1273005 ursus.peracto
ursus.peracto's picture

We could nuke ourselves. That could be bullish.

Fri, 05/13/2011 - 18:15 | 1273156 docj
docj's picture

Yea - that's a tad more subtle that "Raise the debt limit or we start skinning puppies on live network television", but same sentiment, really.

Fri, 05/13/2011 - 16:35 | 1272863 clymer
clymer's picture

redtube? he was getting that kind of bandwidth in a cave in Pakistan?

Fri, 05/13/2011 - 16:36 | 1272864 TheTmfreak
TheTmfreak's picture

Fiber optic is hot these days. Granted I can't get verizon to send that shit my way...

Fri, 05/13/2011 - 16:44 | 1272894 wandstrasse
wandstrasse's picture

I like your avatar, but at first glance it looks like hamy wanger's. Was Laden in a cave?? Wasn't that Hussein (Saddam, not Barack)? 

Fri, 05/13/2011 - 19:44 | 1273332 sun tzu
sun tzu's picture

They told us he had no phone or internet at the compound. Now they tell us he had gigs of porn on the computers and was spamming out terrorist directives daily. Does anyone belive a word they say? Was there an adult video store down the street? Was he going to the local Fedex Kinkos to rent the internet ready computers?

Fri, 05/13/2011 - 19:54 | 1273342 magpie
magpie's picture

next up, his profile at some dating site turns up like Julian Assange's

Fri, 05/13/2011 - 20:52 | 1273450 silvertrain
silvertrain's picture

He had 5 wives, played Nintindo Wii fit while wearing a snuggie, now we find out he time warner triple play where he downloaded milf scenes all day while drinking coke and pepsi..Dude was living like hugh hefner at the playboy mansion..

Fri, 05/13/2011 - 16:39 | 1272866 lizzy36
lizzy36's picture

hahahah s&p lose 6.3% over 3 months. try 3 hours.

Fri, 05/13/2011 - 17:40 | 1273080 Nathan Muir
Nathan Muir's picture

Junked for telling the truth huh.  Thx for your comments Liz, always appreciate your insights.

Fri, 05/13/2011 - 18:11 | 1273135 Hephasteus
Hephasteus's picture

You just gotta love lizzie.

Sat, 05/14/2011 - 08:16 | 1274009 ColonelCooper
ColonelCooper's picture

My favorite bar used to be a smoky, dark, tiny shithole, full of cribbage boards, 1 pound burgers and cold ass beer.  They have since rebuilt, made it shiny and flashy, and serve JagerBombs out of a machine while Lady GaGa ass type shit spews out of a juke, and yuppie office fucks try to hook up.

They still have the burgers and the cold beer, but the rest is "junk". 

Fri, 05/13/2011 - 20:41 | 1273434 IEVI
IEVI's picture

3 hours? I would bet a nice flash crash could take it down farther than that in 3 wait.. what am i saying ...more like 3 seconds 

Fri, 05/13/2011 - 16:37 | 1272873 clymer
clymer's picture

I do love the MSM description though.. "AND he watched PORN!! That's how BAD he was!"

Fri, 05/13/2011 - 16:44 | 1272895 pods
pods's picture

There is no truth to the rumor that he was a contractor for the SEC.


Fri, 05/13/2011 - 16:45 | 1272915 willien1derland
willien1derland's picture

Bwwwwaaaaahhhhh!!!! Bin Laden was assigned all of the sh*tty deals from Goldman Sachs to evaluate!

Fri, 05/13/2011 - 17:10 | 1273011 knukles
knukles's picture

And had herbal Viagra, multiple wives, probably a few of those small butt boys, killed people, didn't pay back debts, kept a journal that would indicate substantial meglomania, paranioia, delusions of grandeur and plain downrightbatfuckingcrazy as a popp bug. 

Woulda been safer as a Senator, blend right in.

Fri, 05/13/2011 - 18:56 | 1273239 NOTW777
NOTW777's picture

LOL whats next - he wasted energy, he violated michelles lunch guidelines, he didnt recycle, he smoked (oh wait - scratch that)

Fri, 05/13/2011 - 19:50 | 1273338 sun tzu
sun tzu's picture

He didn't recycle and used incandescent lightbulbs. 

Fri, 05/13/2011 - 20:47 | 1273445 Mec-sick-o
Mec-sick-o's picture

He drove a Hummer.

Fri, 05/13/2011 - 20:58 | 1273457 silvertrain
silvertrain's picture

The HOA stayed on his ass all the time for burning his trash in the yard..

Sat, 05/14/2011 - 06:43 | 1273956 onthesquare
onthesquare's picture

didn't use toilet paper

Fri, 05/13/2011 - 16:37 | 1272874 legal eagle
legal eagle's picture

Insightful observations as:

If price drops, you pay less

If debt isn't repaid, creditors dont recevie the payments

If spent nuclear fuel rods are exposed to air radiation will leak


Fri, 05/13/2011 - 20:59 | 1273460 Mec-sick-o
Mec-sick-o's picture

If you pay less, you save

If you save, you dont need credit

If you dont need credit, you are unpatriotic, yet,

"If spent nuclear fuel rods are exposed to air, radiation will leak"

Fri, 05/13/2011 - 16:46 | 1272875 divide_by_zero
divide_by_zero's picture

The Third Way think-tank, "centrist"?!?!?! What a joke, thanks. This group is just another attempt by progressives to obfuscate who they really are.

Fri, 05/13/2011 - 16:50 | 1272938 JW n FL
JW n FL's picture

I hope the progressives dont save you and your kind from me and my kind!


and thats realer than PM's, BITCH!

Fri, 05/13/2011 - 17:13 | 1273032 knukles
knukles's picture

Wait a moment!
One of my progressive (far left even by CA standards and BTW now call themselves optimists) buddies tells me that they're going to save the whole bloody lot of us from ourselves whether we like it or not.  A Utopian society based upon openness, friendship, tolerance, love, freedom from want, kindness.... and if you don't like it, even if you just speak out about it, you'll be punished.

What's wrong with that?

Fri, 05/13/2011 - 17:25 | 1273051 Long-John-Silver
Long-John-Silver's picture

This sounds like a Star Trek episode

Fri, 05/13/2011 - 17:33 | 1273062 divide_by_zero
divide_by_zero's picture

Probably had "Something something Soros" in the title

Fri, 05/13/2011 - 18:22 | 1273169 ursus.peracto
ursus.peracto's picture

Tried once before.


Branch Davidians. Janet Reno did the punishing.

Sat, 05/14/2011 - 04:35 | 1273906 StychoKiller
StychoKiller's picture

Something like this?

Sat, 05/14/2011 - 06:46 | 1273958 onthesquare
onthesquare's picture

try the grape juice

Fri, 05/13/2011 - 16:37 | 1272876 Atomizer
Atomizer's picture

The fear mongering threats are slowly migrating to the surface.

FACTBOX-U.S. Treasury's tools to delay hitting debt limit

Fri, 05/13/2011 - 16:41 | 1272880 hedgeless_horseman
hedgeless_horseman's picture

Maybe if our .gov keeps sending up all these trial balloons, then there won't be any airspace for black swans?

Fri, 05/13/2011 - 16:56 | 1272957 Arius
Arius's picture

one can always hope...but again, no need to look for black swans...white will do....everyone knows the endgame by now...except the blind leading the blind crowd...but they can't see anyhow...

Fri, 05/13/2011 - 16:39 | 1272882 101 years and c...
101 years and counting's picture

in other words, no real effect since higher rates, another leg down in housing and job losses are already accelerating.

Fri, 05/13/2011 - 16:44 | 1272898 Atomizer
Fri, 05/13/2011 - 16:45 | 1272884 bob_dabolina
bob_dabolina's picture

The national debt has increased 5 trillion or so under Obama.

Where has it gotten us?

-1 in 7 are on food stamps

-Labor rate is stuck at a 25 year LOW

-Housing has double dipped

-The U6 underemployment rate stands @ 15.7%

-Inflation is ridiculous

-Foreign countries & banks were bailed out (to oddly include ones we're at war with)

I find it quixotic at best to suggest borrowing another $2 trillion is going to do a fucking thing but put us in a ever more precarious and outright laughable level of debt.

If this is what 5 trillion buys than it's time to pull the plug.

Fri, 05/13/2011 - 16:42 | 1272902 XenoFrog
XenoFrog's picture

I'm told by my Keynsian friends that there are two possibilities for what that 5trillion accomplished:

1. It wasn't enough spending. ie: we need to spend a whole lot more and then it'll work!


2. It did work, and without that 5 trillion we would be looking at 30% unemployment, everyone on food stamps, etc.


Neither one seems particularly compelling.

Fri, 05/13/2011 - 16:49 | 1272922 bob_dabolina
bob_dabolina's picture

You can tell your Keynesian friends that their line of thinking got us in this position to begin with.

Fri, 05/13/2011 - 16:59 | 1272969 Id fight Gandhi
Id fight Gandhi's picture

I'm still waiting for the helicopters. Will they dump $100 bills from the sky before or after the riots start here?

Fri, 05/13/2011 - 17:00 | 1272987 XenoFrog
XenoFrog's picture

They would never do that. It would risk some of that money reaching the hands of people who don't work for the TBTF banks.

Sat, 05/14/2011 - 05:38 | 1273925 Urban Redneck
Urban Redneck's picture

The notion of "sterilized" monetary injections directly implies that they must remain within the confines of the TBTF banks and out of the hands of the dirty peasants, otherwise inflation wouldn't be "transitory."

Fri, 05/13/2011 - 17:32 | 1273058 tmosley
tmosley's picture

Helicopters will only offload where there is a landing pad.

Fri, 05/13/2011 - 20:16 | 1273384 rocker
rocker's picture

+1  They have a target.

Fri, 05/13/2011 - 16:55 | 1272948 dick cheneys ghost
dick cheneys ghost's picture

We will soon find out as the federal stimulus dollars are gone and as the states cant print money, the teachers, cops, firefighters, nurses, municipal employees et al will soon be "unemployed".......30% here we come.....most state budgets are due May/June..........its game on.......


Fri, 05/13/2011 - 17:04 | 1272999 bob_dabolina
bob_dabolina's picture

It would happen sooner or later, just much worse later as more become reliant on government support.

If we have to borrow trillions and print trillions to maintain those jobs, than that is a paradigm that is unsustainable and destined to implode. It has in EVERY instance it has ever been tried in history and it will be no different in this experiment.

You can't borrow and print your way to prosperity.

Fri, 05/13/2011 - 19:52 | 1273345 sun tzu
sun tzu's picture

Maybe they'll swap out pensions for 401k's and get rid of some of the wasteful spending. 

Sat, 05/14/2011 - 07:43 | 1273981 Urban Redneck
Urban Redneck's picture

When my little brother was preparing for his second tour in Iraq, I told him that the principal difference between Washington and Baghdad was about 35 points in the unemployment rate, due to the utterly counter-productive counter-insurgency thinking of the clown acting as circus ring master.  Since time immemorial leaders have understood the importance of keeping the masses fed and occupied as a key to preventing rebellion.  Long before Adam Smith was scribing the first dogma of what was to become the (pseudo) social science of economics, the guardians of social order preached in chorus that idle hands make the devil's work.  When he returned from Iraq my brother had seen what I meant, but as sibling rivalry also dates to time immemorial, he couldn't quite muster the words, "You were right and I was wrong."  

Fri, 05/13/2011 - 17:16 | 1273038 knukles
knukles's picture

Absolutely amazing how deeply so many have been absorbed into the far propagandized wings of the Hegelian Dialect.

Fri, 05/13/2011 - 18:26 | 1273176 ursus.peracto
ursus.peracto's picture

Looks like we're going to find out if Hegel was right.

Fri, 05/13/2011 - 18:02 | 1273116 NOTW777
NOTW777's picture

u forgot its not about jobs created but "saved" like in banks, unions and detroit

Fri, 05/13/2011 - 16:50 | 1272913 TheTmfreak
TheTmfreak's picture

The claim is that if they hadn't done it, it would be "much worse." Even though they never say "if we hadn't done it, it would be worse now, better later"

I will state without a doubt that the unemployment would be much much higher without all of that government spending. There are ALOT of gov jobs and a lot of contract jobs at stake with that money. All of those people would be gone, and those who had it in private hands would more than likely NOT have used it to pay for much much more extra labor in a time that doesn't seem prudent to do so.

Fri, 05/13/2011 - 16:59 | 1272960 bob_dabolina
bob_dabolina's picture

It would have been worse but for a short period of time. If the bad debt was written off and repudiated there would have been a larger deflationary episode. However, the recovery would have been much swifter and organic in nature as the responsible people took over from the irresponsible people...irresponsible lenders would have been wiped out and lending would have been picked up by those more prudent.

Also, deflation isn't the evil monster it is made out to be. Filling up your tank at $1 didn't make you cry, lower food/clothing costs didn't hurt you, the price of homes falling to affordable levels would certainly be appealing to those who could afford them. Instead what do we have? What's the level of people not paying their mortgages that ZH just did an article on? Gas is becoming unaffordable to the less affluent as is food/clothing. People still can't afford to purchase homes because the idea that keeping prices high will spurn more buyers. The level of servicing our debt is becoming atrocious and the enabling of municipalities has not only done nothing but it has become another episode of throwing good money after bad (BABS) and kicking the snowball down the mountain.

One of the primary drivers of this is mess is the behmoth our government has become and the notion they can centrally plan and manage every aspect of our lives. This has also been propogated and enabled by the FRB which is unconstitutional for the very reason that Central Banks create the very problems we are currently facing.

Fri, 05/13/2011 - 17:27 | 1273050 Keri at Bankste...
Keri at Bankster Report's picture


Build America Bonds.  Ug.  Should be called "And Using Crack is a Good Idea Too Bonds."

Fri, 05/13/2011 - 17:00 | 1272966 Caviar Emptor
Caviar Emptor's picture

US GDP grew 10.8% in 1934, 8.9% in 1935, 13% in 1936, 5.1% in 1937.

Total US GDP was in 1936 equaled the 1929 peak. 

All the rest you've heard is propaganda. Bottom line: creative destruction opened the door to new entrants, new ideas and new companies with meaningful competition. The New Deal avoided the worst of human suffering (and fascism or communism) during the time it took. It set the stage for the greatest expansion in US (and world) history. It was well underway before 1942 

In 2008 the choice was made to take the easy way out which turned out to be the hard way in the long run. A Republican administration bailed out Wall Street and a Democratic one continued the work. Two heads of the same monster


Fri, 05/13/2011 - 17:05 | 1272985 bob_dabolina
bob_dabolina's picture

It takes 5 trillion to make our gdp grow 3 or 4 percent? Thanks but no thanks.

As per the politic innuendo, I feel like large numbers Repubs/Dems both made massive mistakes but instead of correcting the mistakes I feel like we have really poured gas on the fire.

Fri, 05/13/2011 - 17:11 | 1273015 Caviar Emptor
Caviar Emptor's picture

TO them it wasn't a mistake because they lined their own pockets directly and indirectly by keeping the Wall Street casino open and their banker overlords were able to keep their yachts painted and shiny

Fri, 05/13/2011 - 18:40 | 1273204 11b40
11b40's picture

If a good fraction of that $5 Trillion actually reached Main Street America, instead of going to prop up insolvent banksters all over the planet, our economy would look much different today.

Trickle down is a totally de-bunked economic theory sold by a bunch of wack-jobs to a nit-wit Congress.  Percolate up is the only real way to sustained growth.  A rising tide may lift all boats in an ocean of water, but not an ocean of FRN's. I am not an economist, but I do know you can't build anything that requires a foundation from the top down.

Fri, 05/13/2011 - 19:25 | 1273293 bob_dabolina
bob_dabolina's picture

You painted on a broad canvas with that brush stroke. 

If you study the history of Wall Street from it's inception (under a Buttonwood tree) you would know that Wall Street was a good place for small companies to raise capital and become bigger companies. However, now Wall Street is a different animal. I'm sorry but I don't see how buying 10,000 shares of TZA helps a small company become a big company. 

You're completely right though. You need to have fundamentally strong small to mid-size business to have a strong and sustainable economy. It seems as though now we have a predatory plutocracy enabled by our government that is sucking the lifeblood out of the very people it is supposed to be helping.

I could go on, and on about this topic but I'll just leave it there.

Fri, 05/13/2011 - 23:41 | 1273724 OldTrooper
OldTrooper's picture

Don't be too hard on em.  They did pretty good, for a bunch of idots that don't even know where Main Street is.

Fri, 05/13/2011 - 17:03 | 1272995 XenoFrog
XenoFrog's picture

Breaking windows is not economic stimulus.

Fri, 05/13/2011 - 17:14 | 1273021 Caviar Emptor
Caviar Emptor's picture

Stimulus implies a loss of faith in the economy itself. It implies that without it everything would just shut down. Failed Businesses should have been allowed to fail. And new ones would have replaced the old immediately like new trees after a forest fire. With better growth. 

Fri, 05/13/2011 - 17:20 | 1273042 XenoFrog
XenoFrog's picture

The New Deal was like swimming in a pool. You have the illusion of moving forward, but you aren't going anywhere.

Fri, 05/13/2011 - 17:39 | 1273068 Caviar Emptor
Caviar Emptor's picture

There was explosive growth after the process of creative destruction ran its course. The numbers show it

Fri, 05/13/2011 - 18:30 | 1273178 ursus.peracto
ursus.peracto's picture

That growth was stolen from the future...which is now.

Fri, 05/13/2011 - 18:34 | 1273183 bob_dabolina
bob_dabolina's picture

Yea...except no. The only thing that got us out of the depression was WWII. What FDR did with his socialistic policies was spurn the idea for the government run nanny state. Don't even get me started on the destruction of our society at the hands of Lyndon Johnson, whom rates right up there in the contender position for the most terrible job ever done by a US president.

Fri, 05/13/2011 - 19:16 | 1273281 TheTmfreak
TheTmfreak's picture

The reason this is the case because the entire industrial world was destroyed. Funny because we then had a monopoly on products.... For decades.

Fri, 05/13/2011 - 20:03 | 1273353 bob_dabolina
bob_dabolina's picture

I'm not arguing you point. We had the only infrastructure left to rebuild the world. There was also something else though and I did a lengthy post on it the other day. 

We also had the most concentrated pool of brilliance that has ever been coagulated behind the same flag. The brilliance that emigrated out of Europe, and into the United States during that time period was MIND BOGGLING. You had people like Einstein, Oppenheimer, Edward Teller, and entrepreneurs from all walks of life and industry flooding America. The technological and innovative genius that swamped America gave us an incredible edge in creating new industry and making existing industry more efficient in almost every facet of American life. 

The thing that should be noted however, is that the relative hands off approach and freedom America once represented attracted those types of minds. It's a completely different ball game now. If you want an example, look at CERN. CERN is the modern day equivalent of the technology that was created at Area 51, which was built where it was and for it's purpose in the footprint of Oppenheimer. Yes, Oppenheimer chose that location for Area 51 with the explicit permission from General Graves, for the purpose of advancing the power of nuclear energy. Have you ever wondered why CERN wasn't built in America, like Area 51 once was?

America is no longer the epicenter for this type of magnificence because of the envrioment our government has created, which in all frankness is quite repressive and toatalitarinistic.

Sat, 05/14/2011 - 00:38 | 1273785 NuckingFuts
NuckingFuts's picture

Wow, I obviously missed your previous post.  What was the topic thread?  I would like to check it out.  Good point.

Sat, 05/14/2011 - 00:42 | 1273787 YouBetYourLife
YouBetYourLife's picture


Well said.

Sat, 05/14/2011 - 16:42 | 1274643 Hephasteus
Hephasteus's picture

"people like Einstein, Oppenheimer, Edward Teller"

Funny all the people you call brilliant are nuclear fuck jobs that should mine the lead and throw the fucking uranium back into the goddamn ground.

I'd stab you with a fork but you'd give me Oneida peace prize.

Sat, 05/14/2011 - 19:32 | 1274918 TheTmfreak
TheTmfreak's picture

I'm not really sure what your full argument is, but at least on the surface I'll say, It is pretty ridiculous to criticize nuclear scientists considering nuclear has (in my opinion) changed the word significantly better than the remote ounce of making it "worse."


Nuclear no questions asked is one of the most political over exagerated things in modern society. "The worst thing that could happen to the US is a terrorist with a suit case nuke." (I'm not saying you believe that but its a common statement). Which is absolute and total bullshit.

Fri, 05/13/2011 - 23:45 | 1273730 OldTrooper
OldTrooper's picture

There was explosive growth after the process of creative destruction ran its course. The numbers show it

Then you won't mind if we start the 'creative' destruction at your house?

Sat, 05/14/2011 - 06:59 | 1273962 onthesquare
onthesquare's picture

when you start seeing guillitines being built then you know the corner has been turned.

Fri, 05/13/2011 - 18:00 | 1273120 NOTW777
NOTW777's picture

what about smashing cars like in cash for clunkers

Fri, 05/13/2011 - 18:39 | 1273200 ursus.peracto
ursus.peracto's picture

Especially if the windows you broke weren't paid for yet.

Fri, 05/13/2011 - 17:38 | 1273075 Keri at Bankste...
Keri at Bankster Report's picture

"The New Deal avoided the worst of human suffering (and fascism or communism) during the time it took." 


The New Deal was two heads of the same monster---fascism and communism.  The New Deal was a massive theft and transfer of wealth from the people (communism) to the banks (facism).  That is not good, and that does not "avoid human suffering."

Fri, 05/13/2011 - 18:13 | 1273146 Caviar Emptor
Caviar Emptor's picture

yeah right

Fri, 05/13/2011 - 19:54 | 1273352 Keri at Bankste...
Keri at Bankster Report's picture

That is your response?

Good, I won't blame you for not defending it.

Sat, 05/14/2011 - 01:54 | 1273786 blunderdog
blunderdog's picture

Your conclusion is 100% correct, but your leading premise is stupid and partisan-motivated.  Obama sucks, AND spending is insane, but spending isn't insane because Obama sucks. 

The single biggest reason the national debt has increased so much under Obama is because mandatory spending has increased significantly over the past few years.  Obama isn't the President, for example, who made sure the Feds would start paying for geezers' prescriptions.

If you look at the chart, it's not easy to find a good way to blame our current debt situation on Obama.  If McCain had been elected (or Barr, or Ron Paul, or whoever), what would have been different?  Would he have found a way to cut taxes, thus decreasing revenue?  Would he have dramatically cut back on discretionary defense spending?  Would he have stopped paying interest and defaulted in early '09?  Would he have cut Medicare, or given up his own SS checks?

Obama's a lousy President, but if you're informed, you should be able to explain why.  The burgeoning national debt is pretty much completely out of his control. 

Hate him for the right reasons, at least...

Fri, 05/13/2011 - 16:39 | 1272885 cxl9
cxl9's picture

The junkie is really starting to cry for his debt fix.

Fri, 05/13/2011 - 16:42 | 1272886 Dr. Engali
Dr. Engali's picture

6.3% loss on the S&P over the next 3 months. Wonder what computer model they used to get a forcast that accurate? Why don't they use it to enrich themselves instead of writing garbage like this.

Fri, 05/13/2011 - 16:40 | 1272891 Seasmoke
Seasmoke's picture


Fri, 05/13/2011 - 16:45 | 1272892 Boston
Boston's picture

Here's a thought:  what if Timmy suddenly could NOT issue more Treasury paper?  

Supply constrained => Upward pressure on Treasury prices


But there's more:  investors losing confidence (due to the debt limit scare) could react in their usual way---selling risk (stocks, high yield, etc.) and rush to buy......Treasuries.

Demand spikes => Upward pressure on Treasury prices


It's counter-intuitive, but it's exactly what Gundlach (DoubleLine) and Minerd (Guggenheim) predicted could happen.

Fri, 05/13/2011 - 16:48 | 1272926 hambone
hambone's picture

But wait, there's more -

Timmay can't issue more T's til ceiling is lifted...but Fed's POMO will continue buying up another approx. $200B in T's now til end of June regardless.

Constrained supply + big, dumb Gov. buyer = yields dropping through the floor?  Hmmm, wonder if that's how Gross saw this going???

Fri, 05/13/2011 - 16:52 | 1272947 citta vritti
citta vritti's picture

does Pimco have a ZH account?

Fri, 05/13/2011 - 16:59 | 1272968 hambone
hambone's picture

Only thing I can guess is Gross is preparing for the restart of Treasury's issuance after debt ceiling raised at nearly the same moment QE ends...will be quite a rush of issuance without many Fed as buyer and at yields that could start awfully low...<KABOOM>...and finish at QE3 inducing heights

Fri, 05/13/2011 - 17:00 | 1272988 Caviar Emptor
Caviar Emptor's picture

QE3 is absolutely in the bag. The clincher was CPI and PPI: the Fed's cover is "There is no inflation"

That will let them deflect all criticism. And they can print till they drop

Fri, 05/13/2011 - 17:13 | 1273018 Boston
Boston's picture

Yup, but Gross is simply way to early to get flat, nevermind short.

I can't wait to short Treasuries, but that's going to happen right AFTER Bernanke formally releases hints of QE3.


Fri, 05/13/2011 - 18:37 | 1273187 Keri at Bankste...
Keri at Bankster Report's picture

Phew--good thing the Greenspan-Guidotti rule doesn't apply to the world "reserve" currency.

Fri, 05/13/2011 - 16:41 | 1272893 tmosley
tmosley's picture

What makes a man turn centrist?  Lust for gold?  Power? Or were you just born with a heart full of centrality?

Fri, 05/13/2011 - 17:06 | 1273006 XenoFrog
XenoFrog's picture

I am indifferent on this.

Fri, 05/13/2011 - 17:11 | 1273012 tmosley
tmosley's picture

If I don't make it, tell my wife "Hello".

Fri, 05/13/2011 - 17:15 | 1273029 XenoFrog
XenoFrog's picture

Let's just hope the Fed doesn't try to cut the ribbon on QE3 with the ship's laser.

Fri, 05/13/2011 - 21:27 | 1273508 RoRoTrader
RoRoTrader's picture

you obviously have talent

Fri, 05/13/2011 - 16:41 | 1272896 cowdiddly
cowdiddly's picture

1. T-Bonds would lose their aura of safety. Check

2.Cause High Unemployment. Check

3.Banks would curtail lending. Check

4. Stocks would go down 6% OMG

5.US reserve status threatened. Check

6. Housing would falter. Check

And this is supposed to instill fear How? Its what it is now morons. These guys are going to have to get more creative than that for crying out loud we only have about 45 days left before the end of the world.

Sat, 05/14/2011 - 13:16 | 1274372 serotonindumptruck
serotonindumptruck's picture

45 days sounds about right.

"Comet" ELEnin (brown dwarf star) is expected to achieve perihelion between Earth and the Sun in September. Pole reversal/pole shift should be complete by then.

The elites are very close to moving to their underground shelters.

Sat, 05/14/2011 - 15:22 | 1274521 Cleanclog
Cleanclog's picture

Billboards along freeways in Northern California proclaim May 21st as Judgement Day.

Sat, 05/14/2011 - 16:32 | 1274627 serotonindumptruck
serotonindumptruck's picture

Yeah, May 21st, 2011 is when The Rapture (thank you, L. Ron Hubbard) is expected to occur. There's quite a bit of money to be made wrt this date. The "Rapture pet rescue" scam is particularly amusing.

As to ELEnin, it may seem like total moonbat nonsense to many, and yet NASA is acknowledging the projected orbital path. Perhaps I am reading too much into this celestial event, but one doesn't have to dig too deeply to discover compelling scientific data that concludes of an ominous effect on the Earth. The recent theory that the Mayan "long-count" calendar was not translated properly due to the chronological error produced when Leap Years are not factored in is interesting.

A 3,600 year cyclical event is about to occur, whether we like it or not.

There are no coincidences.

Fri, 05/13/2011 - 16:44 | 1272899 willien1derland
willien1derland's picture

Wall Street, TBTF Banks, K Street, & Washington DC are the beneficiaries QE2 & the Federal Reserve's exploitation of the US Taxpayers' wealth - I mean WHO ELSE received RECORD BONUSES - SCREW THEM ALL - BUFFET, MUNGER, BLANKFEIN, DIMON - IF THEY WANT THE DEBT CEILING RAISED LET THEM PAY FOR IT - ENACT A SPECIAL TAX FOR THESE SECTORS! End the PONZI - LET IT BURN!

Fri, 05/13/2011 - 16:52 | 1272946 Id fight Gandhi
Id fight Gandhi's picture

Yep I agree. They put the fear of god in everyone for tarp and qe and all the bailouts they do. I say let it go. We used to have capitalism, the best survive, the weak fail.

If they can't survive without government money they shouldn't exist

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