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David Stockman: "Both Parties And The White House Are Advocating A US Default"
Last week David Stockman was on Tom Keene, making the usual media rounds (sometimes we marvel at his patience and endurance), as one of the few voices of fiscal prudence available to TV producers who seek to hold a balanced debate on the topic of US insolvency. Today, Reagan's budget director was again on Bloomberg TV explaining the reality of the situation to Matt Miller for the nth time (by now even a 2 year old will understand the cul-de-sac facing the US), although presenting a new spin on the situation, namely that we have gotten to a point where both parties are implicitly pushing for a US default, while though their inability to reach a political compromise, blaming each other for this inevitable outcome. "The real problem is the de facto policy of both parties is default.
When the Republicans say no tax increases, they're saying we want the
U.S. government to default. Because there isn't enough political will in
this country to solve the problem even halfway on spending cuts. When
the Democrats say you can't touch Social Security, when you have Obama
sponsoring a war budget for defense that is even bigger than Bush, then I
say the policy of the White House is default as well...That
is the question that really needs to be understood better and appraised
by the bond market. Both parties are advocating default even as they
point the finger at each other."
On the debt ceiling negotiations in Washington D.C.:
"Between now and November 2012, it is virtually certain [Congress] can't pass a large, permanent increase in the debt ceiling. We'll have periodic short-term fixes, a month, two months, and then they'll back to squabbling and this enormous political battle we're having over the major components of the budget: revenues, Social Security, Medicare and so forth. It will be back to the same old gong show.”
"I don't have any hope they'll come to a substantive agreement on the big things that need to be done because both parties have ruled off the table the essential things that are necessary.”
“We have to raise revenue, there is no doubt about that. We have to allow the Bush tax cuts to expire for everybody, not just the rich. We have to reset Social Security if we're doing to make any headway in denting this massive, $6 billion a day borrowing spree we're on… Neither [political] party is facing up to the real truth or telling the public."
On broadening the tax base through VAT taxes or taxes for Wall Street:
"At the moment it is very unlikely [that any of these taxes will be implemented], but that is simply a measure of how unrealistic the debate is down in Washington today."
"If they were realistic, they would be discussing what are the new revenue sources we can possibly tap in order to fill this gigantic $1.5 trillion hole in the budget. What are the pros and cons, what are the tradeoffs? You hear none of that discussion. They're whistling past the grave. They should be talking about new sources of revenue and possibly increasing some of the existing taxes we have in place today."
On when Washington will get to the point of discussing raising taxes:
"I think [Washington will discuss raising taxes] only when we get a major, thundering conflagration in the bond market."
"For the last 10 years, Congress has been lulled to sleep by the central banks that keep buying all the debt and therefore holding down the real cost of interest on the middle and long term debt that we are issuing every day.
"And frankly, bond fund managers who somehow think that the tooth fairy is going to arrive and fix this problem, when it's clear that is not going to happen, and that we have sovereign risk on the debt of the United States, just as clearly as the world is now discovering there are sovereign risks in the European debt issues and so forth."
On whether there will be a 9/11-style crisis in the economy:
"That kind of crisis would be a vicious sell-off in the global bond market. That could come sooner than people think, because the Fed is getting out of the market with QE2 ending.”
"For the last six months, the Fed has bought nearly 100% of this $6 billion a day that's been issued. Once they are out of the market, where is the new bid, where is the new demand going to come from? The Chinese are getting out of the market because finally they are having to deal with the rip-roaring inflation they have had. The people's printing press of China will not be buying as much U.S. debt because of its own internal problems.”
"When we get to real investors, what are some of the real investors saying today? PIMCO is short the bond, they're selling, they're not buying.
"When we get into a two-way market when real investors began to look at real risk, begin to look at the gong show in Washington and the magnitude of the gap that we are borrowing, I think we're going to get a re-rating of sovereign risk. We're going to get a huge dislocation in the global bond market, and then maybe the wake-up call will finally come."
On political problems in solving the debt problem:
"The problem is not the debt ceiling. When push comes to shove, at the 11th-hour, they will do it for a couple of weeks or months and we will have a little more borrowing headroom and will be back to the same impasse where we are now."
"The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they're saying we want the U.S. government to default. Because there isn't enough political will in this country to solve the problem even halfway on spending cuts.
When the Democrats say you can't touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well."
"That is the question that really needs to be understood better and appraised by the bond market. Both parties are advocating default even as they point the finger at each other."
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stockman says there will a bond market fiasco and a wake up call...and then what? massive cuts to every entitlement program and massive tax increases and all will be well? so we sell our gold the minute there is a "wake up call" because this epiphany by congress will save the dollar? anyone, anyone???
When did they announce the new season of Who Wants To Be a President?
Neither US political party can lose in this stand-off. Their respective sides (support bases) will applaud each for standing their ground regardless of the real world implications. Everyone is looking toward the 2012 election cycle and gaining talking points, nobody is thinking past the elections.
They are clearly betting that the crisis will come after the elections, when the problems then fall into the lap of someone unknown at the moment. It is to everyones' mutual advantage to have it work out that way, and they will collude (deliberately when they have to) to make sure it does.
It seems like they are also assuming that the American people are so far gone that when the SHTF any explanation or casting of blame will simply work, without question. Both parties plan on blaming both the Chinese and the climate scientists for starters, I'm sure of it. They may also blame the Arab nations, and Mexico and of course Canada. They won't have to explain the link nor the rationale, nobody will care about the details.
They cannot lose, playing this game. Nobody is watching, and nobody will call them on it later.
Oh halleluyah!
This means we really are going to default! This has been a tea party wet dream! It ends the welfare state due to high risk premiums!
Yea, except that what follows won't be the libertarian utopia that those tea party buffoons envision. Governments provide various neccessary services to their people that markets never would and have the potential to facilitate real growth and prosperity when managed properly. Just because the current government in this country sucks doesn't mean that the solution is anarchy.
Sorry, already tried the government.
Let's try the anarchy for a while.
Yep! 44 million apes coming to a door near you in search of food! Not to mention, the 10 million unemployed! Don't worry, they will be peaceful in nature!
What are these "necessary services" you speak of? I'm intrigued.
Highways and defense from other nations just off the top of my head. Those are two things that wouldn't exist at all without a government, and then there's stuff that would exist but wouldn't be available to all, such as education and healthcare. Don't bother responding if you plan on telling me that free markets are going to supply us with a modern interstate highway system, defense from foreign militaries, or quality education & healthcare for all. That's just neo liberalist BS, and part of the propoganda machine that allowed banks to ruin our economy.
My reading of the Constitution shows that the Federal Govt has no mandate re: "Quality" Education or Healthcare!
"If Congress can employ money indefinitely to the general welfare, and are the sole and supreme judges of the general welfare, they may take the care of religion into their own hands; they may appoint teachers in every State, county and parish and pay them out of their public treasury; they may take into their own hands the education of children, establishing in like manner schools throughout the Union; they may assume the provision of the poor; they may undertake the regulation of all roads other than post-roads; in short, every thing, from the highest object of state legislation down to the most minute object of police, would be thrown under the power of Congress... Were the power of Congress to be established in the latitude contended for, it would subvert the very foundations, and transmute the very nature of the limited Government established by the people of America." - James Madison
Sorry, but if the state YOU live in wants to pursue a "Socialist Utopia", live there (or NOT!), just quit volunteering me and my loved ones into paying for it!
Questionmarkowned goto EU.
I don't care if the hill folk and rednecks make their kids attend public school or not, just that they have the option in the first place. No public schools to offer at least a basic level of education means that the literacy rate plummets and we return to the ages where simply knowing how to read made you indispensible.
You and your family can't have it both ways. If you enjoy the benefits of modern urban life, you have to resign to paying taxes in order to make it possible. Otherwise, feel free to go live out in the boondocks and be a farmer. Nobody will care if you pay taxes or not so long as you're off the grid, and that's what your life would be like if you got your way anyway.
"Don't bother responding if you plan on telling me that free markets are going to supply us with a modern interstate highway system, defense from foreign militaries, or quality education & healthcare for all."
Whoa, way to trot out those strawmen.
Since government does not, and can't possibly, supply "quality education for all" (at least not without totalitarian control over its subjects as well as control over the very definitions of the words "quality", "education" and "for all") - then what gives you the right to demand the free market conform to your bizarre 'standard'?
like last time.. let the crisis fall just before the election so the new crew can say it wasn't their fault and they have to have years to fix the last guys mess... the formula is set and the cattle is led to slaughter
Perhaps at this point a prudent political goal would be to throw the election to the other guy so you can keep collecting the paycheques but not wear the heat of whats to come.
If that were my goal, I would make some ridiculous demands that would never be supported whilst looking like I had my constituents best interests in mind.
default ooh, I'm scared. I better buy some worthless stocks instead. lulz
That didn't sound all too sincere there, patriot. We recommend another week at the Peoples' Retreat for Thought Clarification and Purity of Reasoning. Be sure to drink the special koolaid, it will really help straighten you out.
"special koolaid"
Ouh, are you referring to a component even more sinister than fluoride?
Something that is currently a part of what is called the complex component fluoride but still undetectable.
Think about it. Think.
OK, small hint 4u:
http://www.ncbi.nlm.nih.gov/pubmed/8611524
The US WILL NOT DEFAULT..We own a printing press..They WILL however at some point in the very near future make our dollars worthless and we will reset this party and do it one more time for old times sake..
I think they mean "inflate our way out" == soft default.
People rarely make the technical distinction.
Also, there are lots of ways to soft default besides inflation (e.g. not honor previous promises to people other than bond-holders, like citizens).
no need for price controls... as more and more can't afford food, they will go broke and onto SNAP.. they will keep raising SNAP payouts so that is the best inflation hedge as it makes JPM rich and also pushes the country deeper into debt...
A default is the only real outcome. I think Tyler mentioned this earlier; there is nearly 6 trillion in debt 'off balance sheet' via GSE's.
1 in 6 are on food stamps.
We're bombing countries we're giving monetary aid to.
This is a joke.
And you bad mouth gold and silver holders?
You are a pathetic joke Bob.
Bobby and Texas Guano slinger got the same memo today.
You're a dribbling thunder cunt, and a waste of human life.
I never bad mouthed gold and silver holders. I bad mouthed tmosely who was confident in ridiculous predictions based on nothing but hot air. I've never seen someone so wrong yet so confident they are right.
I don't know how many times I have said I liked PM's, but I have problems with hysterical lunatics spouting off bullshit when they have no idea what they're talking about.
While silver was approaching $49 I said on numerous occasions that silver in the mid-low 30's was a decent area to phase back in appropriately. But you fucking idiots expect a parabolic blow off to continue forever, and ever.
It's not even worth arguing about it anymore because you and your little posse are ignorant, have proven yourselves wrong on numerous occasions, and even though I continue to post accurate predictions with valid reasoning I am called an idiot. It's a moot discussion at this point.
*there remains significant downside risk to silver....significant
Ha ha...I never said ANY of that.
Please inform us Mr. PM Expert on JPM, the COMEX, CFTC and other assorted issues that you bypass all the time. I've never seen you address anything.
So come on BOB, tell us how it's all done. It all legitimate according to you. On that alone, you are beyond help. Accurate and valid are two words that would never describe you. On Mish's board maybe, but not here.
Figure it out for yourself.
I'm done with your bullshit.
lol, like you are done "making money by fading tmosley". Right, because that shit doesn't work. Your whole fundamental premise is flawed, and you will lose EVERYTHING because of it, just like the rest of the 95% of short term traders.
I figured it out a long time ago Bob. You on the other hand, just lob grenades from the peanut gallery, never stating anything worth of substance on gold or silver, or the price action your trumpet so loudly.
Your shit is weak on PM's. It's pretty easy being an armchair QB isn't it?
Confuscius say: "Better to be silent and appear a fool, than to open mouth and remove ALL doubt!"
More than 50 trillion in debt as a nation - most 'owed' to the banker-gangsters via their Fed racket.
It's about time for them to announce a Jubilee and destroy their respective charters.
You are too kind. I'm down for seizing their personal property and enslaving their young!
Here's some News you can Use, downwiththebanks: nobody "jubilees" the RedShields and gets away with it. These people arrange world wars. By the way, members of the RS - financiers of both Hitler and Churchill - were crawling all over Nazi-occupied Europe during the last WW. And not one of them got stood up and shot or jammed into a gas chamber. Not one.
fed charter was for 100 years. it's due to expire in 2013
Collapse will happen when the next "thing" is ready to take the old systems place. It really is that simple. Us, them, we are always making plans for the next event. There are those who will be positioned and ready for the hand off.
the people suck cock too well for the banksters & government to pull out and leave
+8 Trillion, especially when Bush was re-elected (I officially knew the stupidity of the average American)!
Anyone got an update on the number individual local government operations. Last I heard it was in the range of 174,000 as of 2007. Thats a lot of Comprehensive Accounting Financial Statements.
we need more mergers, acquisitions, and hostile takeovers. It would help improve schools and local government.
Well darn i guess that means big government dont work out so well
Feds take down Philadelphia reputed mob boss http://yhoo.it/jgnnqI
Top comments....
* Now if we could get the feds to take down the wall street mob. Now that would be news.
* A much bigger prize would be Wall St. and the criminals that caused the 2008 crash.
* Excellent!! now if the feds can only crack down on the other crime syndicates in our cities, our politicians then they would really be doing something. Honestly....what's worse...these guys taking bets from people or our politicians raping us with their taxes and abusing their authority and wasting the money they take from us?
nearly all the comments express the same sentiment, some 250+ and growing.. insane.
maybe we can chop down this government and limit it again, if this sentiment continues.
Holder's taking down Guido fo a couple mil as the banksters steal tens of bils. Gotta' love those emergency powers. As ZH discussed earlier :
http://www.bloomberg.com/news/2011-05-23/prosecutors-faulted-on-failing-to-catch-credit-crunch-bandits-.html
Holder's taking down Guido fo a couple mil as the banksters steal tens of bils. Gotta' love those emergency powers. As ZH discussed earlier :
http://www.bloomberg.com/news/2011-05-23/prosecutors-faulted-on-failing-to-catch-credit-crunch-bandits-.html
the country actually ran more efficiently when the mob/mafia was an actual force! 60's, 70's and 80's!
Actually, defaulting is probably the best solution for "The Cartel", as it seems to have worked fairly well for them - since the "United States, Inc." defaulted not only in 1933 under Roosevelt, but also under Nixon in 1971 - when the gold window was closed - and we all became "Keynesians".
"The Cartel" is CLEARLY running the show.
All of us who populate this site are aware that a severe and audacious crime is being perpetrated upon our entire nation, but seriously folks - who is going to stop this crime. Bart over at the CFTC? Tom Fitton at Judicial Watch? Ron Paul? Jim Rickards? Eric King? Tyler? WB7? CogDis? George Washington?
Gimme a break. Look at what they're doing to DSK...look at how they eliminated JFK...geez.
What most average, everyday Americans FAIL to realize is that the past and present Secretaries of the Treasury and the Fed chair-satans are actually just managing our nation's bankruptcy - where the taxpayers of the US are indebted and indentured servants to "The Fed" for the rest of our lives.
Our lifetime labor is the collateral...and our SS numbers are proof that we're all each individually one share of stock in the corporation to pay for the malfeasance of those at the top.
I ask each of you this question: Why would our elected representatives choose not to default? A default strategically serves their purpose to spread the consequences of close to a century of unsound monetary policy decisions amongst the masses - and noone can be blamed directly for the calamity.
Personally, I'm pissed that my two beautiful and innocent children may suffer because our elected represntatives feel "obligated" to "do something" - when they have a sworn obligation to do nothing other than "PROTECT OUR RIGHTS OUR FREEDOM and OUR LIBERTY".
As far as I'm concerned, the best option for all Americans is to STIFF THE FED - F*** THOSE A**H*LES!
good stuff..........
Well written thoughs. I would recommend relocating yourself to somewhere more safe for your children's sake. There are more healthy environs.
Thanks for the kudos. Where can we go that is safer? All of our family and friends ARE HERE in the US. I'm all ears...
raise your kids to be gypsies and join the carnival ... do the wallet on ground trick to tourists.. etc
Huzzah!
I know nothing's gonna fly that will work, but the reality is, if you're taking in $2 trillion in ONE YEAR, you don't have a REVENUE problem.
Simple two-step solution:
1) rescind Bush tax cuts
2) cut spending ack to 2000 levels adjusted for BLS inflation
Everyone gets what they want. Democrats cry about Bush tax cuts. Republicans cry about too much spending. Wasn't the 2000 budget the last surplus we had? Nobody was complaining that taxes were too high or there was a lack of federal government back then.
I'd vote that........once my unenjoyment benefits run their course!
bring back the pre-Teddy weed laws.. as in none
that's a start! but can you imagine all the kicking & screaming that the MSM would do over the rising unemployment numbers!? deflationary death spiral?! In the past ten years our economy has been driven by the financials and the military industiral complex but now the two have merged into the perfect storm: the government industrial complex. now almost every industry is influenced by government aid or demand. how would you like it if you were sucking on a teet of a well endowed woman and then she had to unexpectedly depart?
1) Expenses
cut the defense budget in half. this would also cut the current deficit in half. of course, the military (and Brown&Root/Haliburton) would have to leave Iraq and Libya and maybe even Italy. Or, god forbid, leave Iceland undefended.
2) Revenues
$1 tax per trade on WS. This wouldn't bother me or you at all. It might make HFT a little more problematic. The average holding time of 22 seconds might increase. Are those negatives? Would politicians' constituencies mind?
Income tax back to Clinton levels? Why not?
this solution would only work with a hard cap that keeps total federal spending at 18 percent of the economy. Otherwise the government just keeps growing and we have another "revenue shortfall" in the future.
I like 5 percent myself.
I resent your implicit indictment of our fine community of All American, true Red White and Blue defense contractors. Surely they wouldn't meaningfully scale down the vital services and products they provide to the US War for Peace. They'll do some serious belt-tightening to continue the Fight For Right, I just know it.
As for the Tobin Tax, how about 1 cent per share? That would more than wash out "liquidity rebate" incentives, iirc.
1)
Your maff is off by a few hundred billion.Defense is $964 billion for 2011. Half of that is roughly $500 billion. The deficit is $1.5 trillion. You stil have a $1 TRILLION deficit. Rescind the bush tax cuts. That brings in another $100 billion per year. Now you have a $900 BILLION deficit.
2)
Income tax back to Clinton levels? Sure, as long as spending is back to Clinton levels. That means $1.5 TRILLION in budget cuts per year.
"Income tax back to Clinton levels? Sure, as long as spending is back to Clinton levels."
AND only as long as property taxes are ALSO rolled back to "Clinton levels".
Those cheerful idiots who get on TV and try to imply that going back to the "Clinton income tax levels" is no more burdensome for the average taxpayer than it was during Clinton's time, must have failed to notice the N-hundred-% increase in our average property taxes over the same time period.
Because of this some of us are paying more, not less, in taxes to the government, in spite of the Bush tax "cuts". But notice, not a word is mentioned of this. It's just the same old line, a variation of "anyone who can't handle going back to those maaaaw-dest Clinton taxes which brought endless prosperity is just a Republican meanie looking for a free lunch".
No mention is made of the 18-course free lunch banquet, desert buffet and smorgasbord that our munis and states are dining on at our expense. One has to wonder where all the money comes from for all of that useless, wasteful spending on new infrastructure like traffic lights with LEDs, surveillance cameras and the rest. Who pays for all that crap? Who pays to run all that infrastructure once it's set up? Forget the fixed costs for a minute, would that level of ongoing expenditure, that municipal 'footprint' as it were, have been remotely plausible back in the early 90's for instance? If not, why is it suddenly plausible now, in an era of supposedly unprecedented monetary shortfalls? Yet the traffic cameras keep going up, one by one / four / eight at a time...
The shills who get on TV and talk about going back to the Clinton tax burden, without mentioning a godd-mn word about the nation's enormous property tax liability, must be living in a f-cking plastic bubble.
Smoke heavily and die of cancer.
Pay no more taxes, and grab free healthcare for those final months.
Hint: no habla Englais
absa fucking bingo.
FUCK RAISING TAXES!!! Stockton's just as bad as all the rest. If he wants to raise revenue, that's ok, but FUCK RAISING TAXES, it doesn't work. Congress has got to slash the budget, pull out of Afghanistan, Iraq, and cut the proactive military policy of Wolfowitz. I have no problem with a strong military, I just think we need to be much more selective on how and where we use it. That'll save $400 billion. Medicare? Big diet, old people falling down and going to the emergency room and ordering the most expensive treatment the government will pay for; we've got to put some monetary incentive to exercise some personal common sense. We also need to invest and organize stem cell treatment so we can cut medical costs BIG TIME. I'm with Gingrich on this one, he's the only one talking about it. SS? If you don't need it your not going to get it, its that simple. Taxes? 20% across the board, no deductions. Federal Reserve Bank? Out of business. Replaced by the classic gold standard and a new Suffolk style bank that steps into the FRBanks shoes. Wall Street? Most of them are guilty of violating Federal RICO criminal laws and are going to jail along with Hank Paulson, B. Baranke, T. Geithner, J. Dimon, L. Blankenfein et al. What happens? 2B2Fails go BK along with some others, which frees up capital. No inflation means people start to save. Savings become investments in new businesses and new business means a whole raft of new jobs. Bingo, America is back on its feet with a balanced budget fed by big cuts and a lot of new revenue.
FUCK STOCKTON, THE REPUBLICANS, AND THE DEMOCRATS AND THEIR BULLSHIT GAME!!!
HERE'S TO THE NEW AMERICAN REVOLUTION
I have to agree.
The more money you give government the greater the acceleration in spending above and beyond the new income stream.
Yep. The insanity of baseline budgeting.
>I have no problem with a strong military
If you received an itemized bill, you might change your mind.
>We also need to invest and organize stem cell treatment
Again, if you received an itemized bill, you might change your mind.
Here's one guy who's got no problem with genocide in the name of austerity...
if you read thru the banter of.. guilt. all of these would be conservatives that discuss pennies (as if that is what will save them in the end) and ignore the quality of life of the bottom 20%, 40% and very soon.. sooner than later, 60%.
this back and forth bullshit will in the end be the same bullshit that goes on in Washington.. which will bring this once great country to its knees.
the part that bothers me, other than the total fucking stupidity that I am stuck swimming in.. is that the powers that be want a meltdown.
there is no way that this ends well, we have been in a nose dive.. which is turning into a flat spin that we simply will not be able to recover from.
all of these faux negotiations that get batted back and forth everywhere will be a fond memory when the hungry people show up demanding to be fed.
cut the 40 hour work week to incorporate the 20% unemployed and watch what it does to the health of the average American. I've barely worked the last 14 months and I feel phenomenal!!!!!!!! Deadlifting 500 pounds now and running 6 minute miles, all while drinking 3-4 days a week! No way was I going to do that with a 55 hour work week! 2 years ago.....health was an issue. Now, I laugh at everyone else supporting this system at the expense of their health.
People tend to do some amazing things when they have skin in the game. Require fees be posted, give everyone $___ per year for health care, and figure out a way that they can periodically withdraw the unspent balance. It would then be in everyone's interest to be a wise consumer of health care.
exactly
I was working out, that including my and my firm's contributions for my family comes to about $1,000+ per month.
That's $12k A YEAR. work for 40 years and that's $480k excluding any growth. Using even a modest 5% return, that's $1.4m after 40 years (or roughly $700k if you halve its value for inflation).
Now think, do I get to save that money in an account that I can move with me when I leave my employer? NO
Do doctors compete for my business? NO. THey have mandated 'fees' they charge (bill $8,000 to insurance, who pays $4,000, but if I want to pay cash they charge me $6,000).
What does Obama do to the ONE avenue we have to SAVE independently for health care... cuts the HSA allowance in half. No saving allowed. You will depend on the government! we mandate it.
FSAs are stupid. Why do you lose your FSA savings if you don't use it? THat's free money to the insurance companies, and a loss to me.
Have you ever asked a doctor what they charge for a procedure? they'll have like 5 different prices for the same procedure depending on what insurance you're on, how you intend to pay etc.
Isn't it funny how cosmetic procedures, such as teeth whitening, lasik etc. have come down in price, because its competitive. Health insurance generally doesn't pay for it. Yet for regular things like a fucking health exam from a doctor runs $600 for a 20min checkup.
Someone help me out here. if the Chairsatan's Fed is the left arm of the US Govt and the Bernank records the US Govt IOUs it holds as assets on the Fed's balance sheet - i.e. the US Treasury bonds/notes/bills purchased as a result of all the POMO from QE2, thereby monetizing the debt/liabilities issued by the right arm of the US Govt (the Jeethner's US Treasury), can the two positions (one an asset on the Fed's B/S and the other a US Govt liability issued by the Treasury) simply be netted off by canceling the debt and reducing the Fed's B/S accordingly? Does the logic hold that if FIAT money can be created out of thin air by the Bernank's helicopter, can the resulting Treasury IOU be made to disappear - literally by pushing the DEL button, if the Bernank agrees to shrink the Fed's B/S by a similar amount and extinguishing the relevant ISINs? A return to the gold standard is sorely needed.
When the Fed purchases treasurys from primary dealers the treasurys are counted as assets, but Fed liabilities, in the form of newly created reserves, increase by the same amount. If you extinguish the assets, the Fed balance sheet would no longer balance, and liabilities would remain constant.
Reserves were created to pay the primary dealers who traded their bonds of long duration (treasurys) for bonds of short duration (FRNs or reserves), and you can't extinguish FRNs you no longer own. So you could extinguish the treasurys and the Fed's treasury assets, but you cannot eliminate the debt (liability.)
I will go one better and in far easier terms for all to understand...
The FED is a Private Corporation.
The Share holders who get paid 6% no matter what.. will be paid forever and NO! debt forgiveness will ever happen! ever! never! ever! ever! ever!
The US govt gets 94%.
If you borrow $100 dollars.. and the FED Members are paid 6%.. that means they earn %6 of the Money Created in interest! for every dollar created the FED Members earn $0.06 cents. do you understand?
For historical reference: Jude Wanniski's comments re: Stockman
Nothing should be done about David Stockman's "outyear" budget deficits because they are simply figments of his diabolical mind.
http://www.polyconomics.com/essays/esy-830202.htm
And Alan Reynolds op ed from 1985 post resignation:
Stockman never grasped the enormous power of monetary policy, particularly its impact on the budget. In February, 1982, the administration forecast that real gross national product would rise by 3 percent--scarcely a ``rosy scenario``--but the economy instead fell by 2.1 percent. On Stockman`s own numbers, the hangover from that single year of unnecessary recession continues to account for $198.6 billion of the current budget deficit.
http://articles.chicagotribune.com/1985-07-16/news/8502160231_1_budget-d...
My question is why does'nt this guy run for president?
He has no chance of winning votes from USSA's brainwashed chattel.
The media cabal's plan is to select Obama in 2012.
I wonder if it is a coincidence that the "Great Society" programs of LBJ were pushed through CONgress on the waves of Kennedy martyrdom; whilst we were escalating a war in Vietnam?
Trillion schmillion - doesn't really matter as long as I have my 300 channels of cable TV, DSL internet service and 5 fast food eateries nearby.
Next problem..??
Chili's doesn't have my ribs on special and I can't afford to outsize my neighbors 3D flat panel or pick-me-up truck.
The real US defense budget is 1.2 trillion, gotta lop 3/4 of that out for at least 4 years. Sorry, same goes for Social Security and all pensions for all three branches of Federal employees. Sorry stenographers and janitors but the cuts don't stop at your level, all pensions all the way up to the Supreme Court Justices and the President are cut by 75% for at least 4 years. Immediately rescinded are: Bush tax cuts, all tax cuts for offshoring of skilled technical work, all farm subsidies and all subsidies for fossil fuel energy production. Tax rates from 1958 will be applied to all personal and businesses and the tax code will be stripped to 1 page for personal and 3 pages for business.
And that's just the start, don't let me get wound up!
How much does the EPA cost in lost opportunity?
10 trillion? Does not LA still bitch about their air and water?
What does NIH do other than process grants to their buddies?
All goobermint is a waste rat hole.
One dollar in some polluter's lost "opportunity" to externalize his cost often translates to a cost saving of several dollars the gubmint pays everytime some poor uninsured citizen takes his baby to the ER with an asthma attack.
Subsidizing polluters is penny-wise & pound-foolish
Lawnmowers and BBQs, dick?
Cow farts?
Next will be your farts, moron.
Fuck you to the working people, says kinetik. Who says capitalists care about the Law of Contract?
No interest in touching the banker-gangsters for him, it seems.
David,
Thanks for tellingsometruth
Donald Trumps hair just defaulted. The racoon has repoed that bitch.
Forget trickle down economics. What actually trickles down is morality. This is the me-generation who knows in order to get ahead you have to cut corners, leverage, over-promise/under-deliver and then default. You know shit's bad when most know their "credit score" like it actually means something. Credit score??? WTF.
So bring that shit on and continue leading by example Uncle Sam. US defaults? Fuck it, we all default. No more taxes no more bullshit. Let's do this. I really don't care. Fight or fuck off and leave me alone.
duped
O/T, and not to be mean, but these midwesterners that come to winter in FL leave to avoid hurricanes, only to get slammed by tornados or floods. Cracks me up.
It's because God hates them. Which also cracks me up.
"Cracks me up" -- it's funny until it happens to you.
Hypocrite!
nah it's funny.. been funny even back when cave men used to laugh at their neighbors getting eaten by dinosaurs.. and yes they were there at the same time.. people forget history from 10 years ago but we know everything 4000 to 400000000 years ago..
This guy honestly thinks that QE2 will end and there won't be a QE3? Hmmm....
+1
Gold is a must have in any portfolio.
Sometimes there are tiny specks of honesty and integrity in corporatist Amerika, and this is a glimmer.
We've done potential scenarios about what a default will look like on ZH, but I doubt it is coming soon while the rest of the world drips blood into the diluted USD and slowly starves to death by being priced out of staple foods.
One thing I can predict - with cheap borrowing and liquidity in the markets like nothing on earth, there will be US global brands with failing business models which will scour the world to buy profitable regional companies. Like rats leaving a sinking ship, it's already being done by US firms in sectors as diverse as confectionery and energy supplies, and I predict a lot more takeovers before the dollar becomes tp. Why not? Corporate America already owns the government, thanks to the Supreme Court ruling last year on direct corporate campaign contributions (Whereas in the old days one had to be indirect), so it's only reasonable for them to buy everything that is honest, profitable, and necessary around the world and turn it in to shit like they do everything else. It's not just the US either, other fiat countries are at it like gangbusters. This is global corporate incest at its most prolific.
Democracy is wonderful when it empowers the majority. It is also the tool with which Corporations can enslave, steal, and murder for a bit of black ink on the ledger.
Well, they’ll default you and say that it’s the end
Then they’ll default you and then they’ll come back again
They’ll default you when you’re riding in your car
They’ll default you when you’re playing your guitar
Yes, but I would not feel so all alone
Everybody must get defaulted
++ Spoken like a poet!
+Dylanenke
They will default on the debt or lose an election; which would a politician choose?
Look for a phoney bill around election time that claims to pay the debt, balance the budget, keep Medicare and SS, and put a chicken in every pot and a GM or Chrysler in every garage.
All you will have to sacrifice is your savings, IRA, 401K, Pension, liberty, and property rights and unreasonable search and seizure (oops...we already lost those last two).
what bullshit, all we've done is spend, spend, spend, and the answer is to raise the debt ceiling and tax more, buuuullllll shhiiiiiiittt, starve the out of control beast
cut every budget line item by 10% immediately, start there, every single line item
Only if at the same time they rescind the bailouts and clawback speculative money going back ten years from the banks and hedgies and employees.
Otherwise, it's a push-me/pull-me teeter-totter that involves a lot of motion but never goes anywhere.
"Liquidate education. Liquidate public health! Just don't touch the parasite banker-gangsters."
By now, it should be obvious to anyone that US spending is out of control and that default (via inflation) will be the ultimate result. But somehow the bond market just doesn't seem to understand.
Interest payments were $414B in 2010 which was only 14% higher than the $362B in 2000, despite the fact that US government debt is much higher now. In real terms, interest payments are lower now than in 2000. When the bond market panics, they could easily shoot up by 3X, 4X, 5X, who knows?
I just cannot understand why anyone would lend money to the US gov. now. But then, I couldn't understand why anyone would be making 110% home loans to subprime borrowers with no documented incomes a few years ago.
Not default - a Jubilee forced upon the parasite banker-gangsters. And not just for the Feds, but also for ALL debt.
The banker-gangsters get nothing. Sucks to be them.
Based on previous experience, I suspect that the banksters will be the only ones who will actually benefit from the collapse.
The problem is that you are being rational and using reason.
The new paradigm in Washington and Wall Street is to dispense with reason and substitute perception. One can make a great deal of money off of perception.
Magicians and Exotic Dancers ply their trade using similar devices.
Exotic dancers = Washington..
reverse ATMs.
I think the first paradigm shift the average American needs is to realize that gov't is not a business! If it they run a deficit, out come the guillotines! No more "cushy" jobs.
It's not my debt. I didn't ask for any of this social bullshit. I don't like the product of the federal government, it has no value. So we can waste a lot of people, meddle in everyone's affairs, promise everything and deliver crime. You idiots know fuck all about life if you want government in it.
Don't ask me to pay for this horseshit.
+1040
So you agree the $1.2 trillion in US defense budget can be cut by 3/4 for at least a few years? Do that and get out of Iraq and Afghanistan and you'll save $5 trillion in 5 years.
I agree.
!Mas Desempeño por favor!
Get in your time machine and go back and kill FDR.
Then make sure Kennedy isn't assasinated so LBJ can't pass all the social programs.
While you're at it, make certain the bailout vote stays "NO" the way it was the first time around in 2008 (a Dodd/Frank "event"?).
Then restore bondholder rights, shareholder rights, property rights, and the gold standard.
Finally, resuscitate amongst the masses the spirit of the Magna Carta, the Constitution, and the great slave rebellions across history.
+1099
+ repeal of the 26th amendment!
Well done.
It's not my debt.
Therein lies the rub! First off, that should be a bumper sticker.
But also a T-Shirt and Campaign slogan. Shit, a textbook!.
The good news is more and more are becoming educated about this "debt" and this is a veil that once lifted will jerk many to their feet. But, will a leader emerge capable of fostering the next step?
Oil poised for another leg down over next few weeks?
http://deadcatbouncing.blogspot.com/
NO. NO. NO.
No more taxes. That is NOT the solution.
The solution is to MASSIVELY, MASSIVELY, MASSIVELY reduce federal spending. Cut federal spending by 90%... 80%... at least 70%.
To raise taxes significantly would make millions and millions and millions more of the most creative and productive people in the USSA do what I did... namely permanently leave the USSA.
The solution is NOT to turn the USSA into the USSR per Stockman or the other statists.
DEFAULT IS GOOD. Stop borrowing, stop spending.
Never forget the Squirrel included the last 2 year's of one time expenditures in the baseline for the budget. Can you say BS to Libs?
BS to the neo-libs. BS to the neo-cons. BS to democrats. BS to replublicans. BS to government. BS to central banks.
And most importantly.
BS to ALL fictions, including "government", "corporations" and all other organizations.
BS to everyone and everything... except those honest, ethical, productive human beings who I wish to voluntarily interact with, and who wish to voluntarily interact with me.
There, that almost covers it.
This wasn't on CNN!
There will be a QE3, and a QE_. Because they have decided to allow inflation/hyperinflation to happen. And when this happens we may see something that hasn't been seen since ever, and that is Hyperstagflation.
So much for the getaway car...
http://www.popsci.com/cars/article/2011-05/new-federal-rules-could-require-cars-black-boxes-record-driver-activity
Piss on them. Not in my cars. Barrett .416 to enforce my decision.
Has anyone been monitoring what is going on down in Haiti? A bird on the wire has informed me there is massive development, way beyond Haitian needs.
Bush/Clinton comes to mind.... Devastate it with HAARP. Buy it for peanuts. Set up your control and command center.
Yes, but what will they do when they need potable water and a blood transfusion?
Desalnation and an island of clones bred for human body parts. You have just won the lottery!
"The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they're saying we want the U.S. government to default. Because there isn't enough political will in this country to solve the problem even halfway on spending cuts. When the Democrats say you can't touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well...That is the question that really needs to be understood better and appraised by the bond market. Both parties are advocating default even as they point the finger at each other."
__
a sane voice.
how unusual
No money left to tax.
Please, quit bouncing!
"Both Parties And The White House Are Advocating A US Default"
and ultimately most (but not all) Americans who believe in the entitlements they were promised and who don't understand that they were lied to and stolen from (are being lied to and are being stolen from)
+(Lied to and stolen from)^2.
The lies were always in plain sight for anyone paying attention. I don't feel sorry for anyone who didn't prepare. In a free society, nobody should be forced to pay a tax so corporations or able-bodied adults get a free ride.
Listen folks. All this deficit talk is just more of the same red vs. blue fight that's been going on for decades. Everyone in DC knows very well gov spending is a direct addition to GDP. They all want the other party to have to start austerity, because it means a depression... and getting trounced at the next election.
Nobody in power will EVER voluntarily cut spending. Every administration since Reagan/Stockman has been manipulationg the spending portion to juice GDP on "their watch". Of course that means the borrowing has to grow every year because the real economy is being outsourced at warp speed.
None of them care about mom, apple pie or the flag. It's all about "vote for me".
Joe Biden is ON the Debt Ceiling Problem
BAH-HAH-HAH-HAH-HA-haha-hah-ha-ha-hah-ha..
Fucking-hah-ha-ha...ah-ha...
He was nervously rubbing his rosary in the situation room during the tense 40 minutes of Operation Kill Osama. He was so worried.
http://www.ritholtz.com/blog/2011/05/federal-reserve-posters-1920s/
Federal Reserve Posters from the 1920s.
Im especially partial to the "The Federal Reserve System is the keyston of America's financial structure" statement.
The War on Ron Paul...
http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/05/war-on-ron-pa...
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
Not like anyone lets the constitution get in the way these days but doesn't this passage essentially lock the USA into paying it's debts even after default?
There was a breakthrough in that part of that "Piece of paper".
Debts are valid. But default is valid too! Things change.
Stiffing and dumping the Fed is my dream answer. We would cut $1.5 trillion right off the top of our debt and another $500 billion per year in interest payments.
Prospects of becoming prosperous again without them hodling us down, and with a gold backed currency, would make selling new government bonds easy. China would love to buy bonds in our new American colony, especially if we hook up with them to start a new WRC to put the old world banking cartels out of business.
We'd have the gold and the military so what could the banks do? Send the cheese eating surrender monkeys after us?
Unfortunately, it is difficult to argue with this man. However, should anyone feel badly about defaulting on debt owed to nations whose own economies are shams? http://liquidinvestor.blogspot.com/2010/12/thinking-it-through.html