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Obama’s Secret Plan for Economic Revival
Obama’s strategy to extricate the US from its dire economic straights has been leaking out from Washington over the past few weeks. Clearly, the nation’s capital is a place where there are no secrets. How does he wean the country off of massive stimulus programs, zero interest rates, and ballooning deficits?
The former community activist from Chicago intends to let the economy do the heavy lifting, bringing the budget deficit down from a suicidal 10.6% of GDP today to 3% of GDP, which can then be sustained indefinitely with a 3% real economic growth rate. Some 60% of this incredible shrinkage will be achieved through tax hikes, and 40% via spending cuts, which together will generate the needed $938 billion in savings. Here is the breakdown:
$331 billion-“bank responsibility fees” designed to address “too big to fail”
$252 billion-expiring Bush tax cuts for couples earning over $250,000 a year
$250 billion-scaling back the wars in Iran and Afghanistan
$105 billion-already announced spending freezes
I have a few problems with this scenario. This is obviously a “best case scenario” which leaves no room for error on any front. What if the economy doesn’t grow at 3%? My own long term growth forecast is 2.5%, and there are plenty of lesser ones out there. That creates a shortfall of $710 billion right there. What if interest rates go up? Double short term rates and the government’s debt service leaps from $385 billion to $770 billion. That’s a hole and a half. And what if the terrorists don’t cooperate with the reduce defense outlays?
Are Republicans going to cooperate on any of this? Only when Hell freezes over. If the Obama plan falls short of expectations, where will he go to raid the additional funds? At the top of the list will be a national VAT tax, savings squeezed out of health care through a reduction of services, and cut backs in entitlements. If you think health care generated unbearable noise coming out of Washington, you ain’t seen nuthin’ yet.
To me it all adds up to a collapse of the 30 year Treasury bond market (TBT). Funny, it seems that no matter where I focus my research, all roads lead to the TBT. Use this dip to re-establish longs, and set yourself up for your fourth round trip this year. And if you have the brass cajones that should be required before reading this letter, strap on more leverage by shorting the 30 Treasury bonds futures.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out of consensus analysis, please visit me at www.madhedgefundtrader.com . There you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on the “Today’s Radio Show” menu tab on the left on my home page.
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None of this shit will matter once peak energy hits. I really hope it happens when republicans are in office... I wanna see the blank, dumb-stricken expressions on their faces.
If you believe the PPT manipulates markets and you believe the Fed or any agent of the Fed has ever purchased S&P futures to manipulate markets, you cannot reasonably believe in TBT as anything other than a short-term trade. The US is ultimate debtor nation on the planet, if not in all of human history. Normal market interest rates are the one thing that will bring the US govt crashing to its knees. Short stocks, commodities, corp bonds, and muni bonds before you short treasuries. The S&P will be at 400 before the 30 year hits 8%. I'll bet Bernanke himself would be shorting the S&P just to drive money into treasuries if it got that bad. Heck, guns and ammo are a better bet than TBT. If TBT doubles, there probably would be no functioning financial infrastructure in place for you to take out your gains.
This prez does not walk that is the "strut". You know the gettho walk with attitude that tells everyone that you don't give a f**k.
At least his pants are not down around his knees!
Obama walks like any other bottom when a strong top is done.
He is happy and sad at the same time.
Obama walks like he's performing in a Rap video, I hate that shit. He'll never make another term, the Dow will be at 3500 by the time reelection time begins.
Assuming the current framework of sovereign government (as opposed to a constitutional form) remains in place, the politicos will honor their promises for various entitlements in the years to come. The necessary shortfall means that not only will the ongoing program of inflation be continued, but will necessarily need to be ramped up. TBT is not necessarily a very long term play due to the nature of the ETF, but it is the right directional trade.
If the current framework doesn't hold, for example if the reconquista of the southwest is successful, or the Chinese decide to foreclose by taking California, then all bets are off, since the remaining red states will no doubt part ways with the parasitic urban areas that seem to be causing most of the troubles.
assuming the corporate system of governance stays in place, but the corporate supply lines are stretched too thin, the outposts too large, indefensible. the corporate system depends on manufacturing centers, where resources, human and otherwise are centered, to create uniform products for distribution.
as energy costs skyrocket, and smaller turn key solutions arise to crowd out the products formerly made in industrial centers. the uniform, continuous and homogenzied world of the last century will come to an end. now everything tends to be regional and diverse. projecting power across the globe depends on the corporate supply line, and when it is broken, the governments hold in various places in the world, the nation, the states, counties and cities, will evaporate.
Can someone please explain to the Obama administration that M3 is collapsing? It seems like this Government should have an economics advisor or something?
And collapsing money supply = what? Hyperinflation.
“When prices are going up faster than the money supply, the people begin to experience a severe shortage of money, for they now face a shortage of cash balances relative to the much higher price levels. Total cash balances are no longer sufficient to carry transactions at the higher price.”
The Government has an economic advisor. Therein lies the root of the problem.
Silly Rabbit! The US government are the terrorists. They can stop any time they want.
Er, or perhaps they can't as their terrorisim is what gives them the edge.
First of all I believe TBT is double-short 20-30yr. treasuries, not just 30's.
Second, everyone should be aware that the math involved in constructing a leveraged and/or short ETF works against you from the get-go. Run a year+ chart on TBT and notice that it's flat-to-down (depending on the exact time frame) even as long yields were rising (and prices dropping) over that period. TBT can work short term but the collapse of the 30yr is essentially a long term strategy.
Third, how about linking directly to the actual article please.
+10 Be very careful what you short. Lots of broken instruments out there. That's why God invented options.
331 BILLION...IN NEW TAXES...ON THE SQUID??? Oh, I see. I missed the "right after hell freezes over" clause in the fine print. Move along. Nothing to see here.
Is this leak real? It just does not make sense to me.
For example:
A 3% Deficit is not offest by 3% in GDP. GDP does not translate into revenue, and a deficit has a cost of borrowing.
The challenge is not the deficit, it is the ability to sell government debt at a low enough interest rate to allow an increase in borrowing. The assumption for an ever expanding market for debt at a 3% rate is not achievable.
Tax hikes do not promote growth.
The ability to grow presupposes completion of the de-leverage cycle and no aggregate costs incurred through funding government stimulus (waste).
Also, any analysis on GDP must now consider the issues at the state level. The states are what do the growing not the federal government.
Last but not least, is the fact that the proposal, if real, shows just enough knowledge to be dangerous. This is not what we need right now.
Mark Beck
Mark, what makes you think that what was "leaked" would make any sense in the first place? The fact that the plan outined in the supposed leak would never succeed does not mean that it's not the plan.
The "terrorists"?!?!?!
So that's why the fuck we spend $800B a year on "defense"?
Obama is not cutting war spending, he's going to expand the wars as he already has.
Everyone wants Iran. Russia wants Iran to control the oil and gas assets in the Caspian. China wants Iran to control the oil and gas assets in the Caspian. The US/EU want Iran to control the oil and gas assets in the Caspian. Iran wants nukes so that they can't be had.
We have thrown the Chinese client state Pakistan to the wolves because India is now a better strategic asset insofar as they serve as a regional counterweight to a rising China against the backdrop of a less-powerful Russia. In the Cold War years, we helped China and Pakistan against the axis of India/USSR. Now that the USSR is no more, and China has risen so swiftly, we must adjust our strategic posture. Militarization of India, including a big naval buildout, is necessary. Russia has its own issues with Chinese power and they are all too willing to help. Insofar as we desire to elevate India, we need to get rid of the headache for them that is Pakistan. Expect us to foster civil war there.
Also, Israel's aggression is an inhibitor of forming an arab coalition to take Iran. This is why zionists suddenly appear to be anti-israel. We need them to give ground in order to curry favor so that we can "unite" the Gulf states against the Persians. W and SE Asia are growing heavily multipolar with a lot of competing interests. The Neocon policy of "conquer them all" has proven unsuccessful, so we must now seek to forge other alliances. But the end goal remains and there will be no end to the wars.
Until 2007> our big export was debt. When that market faded, we exported more war to make up for lost revs. Gotta keep that money moving upwards.
Traditional economic growth is based on population growth and free and limitless resources. In the US anyway we have reached a plateau of sorts. Despite these trends which cannot continue, there may be social and psychological reasons why people would not continue to participate in the current economy. (We assume the human response is rational, taxes go higher, consumers and producers migrate to underground economies, barter and exchange) but there is another response, one which denies materialism all together.
Some evidence of this societal change first appeared in the 60's, but lately the anti-material economy has gone rural, and was represented by Bush's red state (electoral college) majority. Sure these people like their pickup trucks, and their hunting rifles, but aren't willing to cozy up to the federal government, even if (he) is promising them free health care. As their needs are fewer, their psychology changes. The improving quality of goods has slowed the turnover rate, in things such as automobiles. Wonder why restaurant stocks are so hot? You get hungry every day. In the future you might have one car to last a lifetime. Like advertising, the products themselves become the victim of their own success. walmart continues to destroy the profit motive in retailing. Think about that. Bernanke does his part as well, he is more of socialist than Obama. Free credit? Come on down.
Forget free healthcare, (an insurance solution) how about free consumer credit? Then we could afford healthcare. Everyone knows credit and money are synonymous. (Cash is the poor mans credit card) all of which denies the notion of a debt as a moral obligation.
In a purely socialist system, the person who creates a need, which is supplanted by government spending, is just as vital to the economy as the person who supplies that need. The patient is the client of the doctor, the prisoner is the client of the jailer. The symbiosis is evident.
Obama has been so incredibly successful, at meeting this moment in time, with his own socialist tendencies, that he is in reality in the second term of his Presidency right now. The notion of society being less material, is actually part of the plan. Socialist societies are less materialistic than capitalist societies, and communist societies the least materialistic. Notice the organic garden at the White House? sure the man paid almost two million in taxes, (most of it from book sales) which is obscene, it's only one percent of what he took from Goldman Sachs, which is the steam engine of the socialist economy. We know they packaged those crappy CDO's and sold them to foreign investors, while Americans lived large, and foreign workers paid with their sweat. The person who creates the need is an equal partner remember.(see how Republicans thought for a moment they would come to the rescue of poor Goldman Sachs, those evil SEC liberals want to punish the wellhead of our economic prosperity? Oh wait a minute. I guess we do have to punish them a little, I mean after all we were against the bailouts. Like George Bush's post 9/11 conversion, they can change their ideology in a moment. Bush went from orthodox conservative notions, to a full blown FDR war Presidency, without anyone noticing. That's how powerful the trend has become.)
The financial oligarchy continues to suck the vital resources from the global economy, (we reap, or is that rape- the benefits) and Washington recycles the profits to us. The U.S. continues to create that need, in global economic terms, which implies a lower standard of living, but the prisoner lives as well as the jailer, that much is implied.
Should the financial oligarchy be smashed, then all bets are off, but all the planets are aligned, short of something that looks like the French Revolution on steroids there is no reversing the trend. The wheels are in motion, "As we begin, so shall we go.."
Not to be really nit-picky, but...
You're saying that $2 million is 1% of what GS (employees) paid into his election campaign? I'd like to see the numbers on that. Source? Or is that a simple glitch in your post? I thought the total in contributions was $1 million total. The best reference I can come up with is: Goldman Sachs $994,795
I missed the sign for the turn to Galt's Gulch ... did you see it?
Have you ever wondered why someone from a disadvantaged background, who most definitely benefitted from the America of days gone by, is now so fixated on fundamentally transforming that same country? It is because the socialist master, accustomed to dealing in shortages and scarcity, naturally assumes that once he is aboard the lifeboat he must necessarily draw up the ladder so that it does not take on more people than it can support.
The above analysis have a major problem: up to the date, neither the president nor the Congress either identified or addressed the issues responsible for the present crisis.
These issues are
The bottom line: the Greece example clearly shows that the present economy is NOT sustainable and is destined for a catastrophic failure. One cannot generate more taxes and/or prosperity by endlessly increasing wasteful government spending.
Who cares they are all whores at this point, better to limit them than hand them any power. We were founded by people that understood that giving any power over an individual to someone will eventually turn even the most pious into unrelenting ass-hats.
Were we? I would argue that the country has been refounded at least 4 times, after its original founding as a colony of the British monarchy:
1. Articles of Confederation.
2. These United States - The original limited republic as intended by the Constitution.
3. The United States (1865) - Centralized federal power, born from the War of Northern Aggression.
4. THE UNITED STATES OF AMERICA (1913) - all caps, a corporate entity controlled by the Federal Reserve.
Strider:
The game plan is same as it ever was: raise the level of chaos via the wedge isssue game to confuse people and implant disabling levels of fear. You know the drill: bang on gays, and abortion, and gun rights, and immigration, and foreign threats to the empire. Attack political opponents personally and attempt to de-humanize them. Pound on the fact that, because of the dire nature of the situation, more civil liberties must be surrendered.
Because the stakes are so high you should also expect high profile outbreaks of carefully orchestrated civil violence between false flag, ad hoc political groups.
That leads us to the 'end game'. Once people are sufficiently confused and fearful as to the real causes of their misery expect loud, pronounced calls for an 'official end' to the carefully calculated social disorder 'that threatens what we hold dear'.
Remember, though, that all of this is simply a shadow play intended to deflect the vox populi from truly understanding events and demanding real acountability.
All of this liberal-conservative, democrat-republican, communist-socialist blather is a cover for the con. Anyone who attempts to expalin things in those terms is part of the problem and not the solution.
+ !!!
"All of this liberal-conservative, democrat-republican, communist-socialist blather is a cover for the con. Anyone who attempts to explain things in those terms is part of the problem and not the solution."
Oldest crowd control mechanism known to man. Divide and conquer.
Right you are hangemhigh, but you can't hangemhighenoughforme. The two party system is a sham designed to fool the sheeple. In reality the two parties need each other to run against. They are symbiotic. Just look at James Carville and Mary Mateline. What a farce!
I am waiting to move to Utah once it goes back to Mexico and watch the implosion from there.
Political correctness is the next best thing to godliness...just ask Blankfein?
I don't understand why we can't just eliminate 60% (randomly determined large percentage, 50 or 80 would be just fine too) of the departments in the Federal Government, including defense, education, agriculture, welfare (H&HS), etc. Suffer a very deep, and short lived depression, let asset prices collapse, raise interest rates, reduce taxes across the board, say, 15% for all individuals and corporations (and give NO DEDUCTIONS/CREDITS FOR ANYTHING), no taxes on investment income, tell people aged 45 and younger that Medicare and SS will not be there for them, eliminate payroll taxes for those younger than that age (since they will no longer benefit), and tell public sector employees their pensions start at age 70 (along with those under age 55 for SS/Medicare potentials). Wouldn't that let the private sector do the heavy lifting? I know it's probably too radical and too politically unpopular, but it would move more of the economy to the private sector and far, far away from the public sector.
Yes, I did suggest FIRING hundreds of thousands of federal employees as an economic solution (could be millions, but it's the only long term solution).
Thoughts?
How 'bout something simple? Businesses use it and it works for them.
Use the LIFO inventory system: LAST IN, FIRST OUT. The last thing the government did, law passed, measure taken, tax levied, or fart in the wind -- gets reversed. By a methodical way you de-govern and de-screw the country. There would be some glitches but those could be taken care of by popular consent, not Legislative, Judicial, or Executive fiat.
LuFa that's a good list to start with. Sign me up.35
While your plans make sense, you would need a total societal collapse/military dictatorship to enact them. And then you would have to hope you got an elightened despot instead of the Hugo Chavez variety. The entrenched power structure knows only too well how to manipulate public opinion to defeat any of your proposals as long as we still have elections.
+1
Agree on most, except I would be for a fair tax instead of 15% across the board, because a flat tax leaves room for lobbyists to carve out exemptions.
"The former community activist from Chicago"
I propose we shorten "community activist" to simply "communist"
Save yourself a few keystrokes
The miscreants in the Bomma admin apparently misunderstood the purpose of the Oval Office and use it as a giant circle-jerk trying to cum up with the most ridiculous/disruptive/invasive/costly policies imaginable.
Cuba and Venezuela are wards of Russia….The rate the US is selling bonds to fund all these fucked up programs we are soon to be a ward of China. When will they learn that communism/fascism doesn't work....... except for the few oligarchs.
You know that actually works.
Commun...ity Activ...ist
Commun....ist
commie
Shorten even more to 'commie'
Lets just say Obama is a one term president. Do republicans think they can take credit for anything after that? Re instate tax breaks to the upper incomers? Cut taxes? No they will be handed a live grenade just like Obama was with no moves left on the board that wont sink the economy again. Check-mate. Their best move is to just shutup and stay out of the way till the dust settles,may not.
There are alot of things that the Republicans can do. The changes have to be incremental and numerous.
These changes will ease the transition to from a consumer based economy to a more balanced economy that includes manufacturing.
I'd go one further. Just abolish corporate taxes altogether. 2/3's of corps pay no tax anyway. And who really pays corp taxes anyway? The consumer.
Look for a November bloodbath on both sides of the aisle. There will be many new faces.
you don't really believe that there wil be an election in November do you?
"O" doesn't really care, he will have done what he was elected to do.............he will just be handing off the Nuke.
Even with the most drastic measures we can imagine, it would take decades to right this ship.
Bama was handed a grenade, but he has purposely turned it into a Nuke.
Once his ass is out of the picture, and the mixture of Heinz 57 dogs that surround him, the attitudes of Americans will improve greatly,and immediately.
Unfortunately, it will take time to reverse the destructionist policies of his tenure.
With 28% of Americans against BOTH parties,their will be some major changes.....
Wistfully thinking, maybe this will make the pain, and unbelievable distress coming, worth fighting for............
MHFT, props for the info and analysis!
Obama, you are fucked! Why did you ask for this job, you crazy mother fucker!
If you think health care generated unbearable noise coming out of Washington, you ain’t seen nuthin’ yet.
Distrust, Discontent, Anger and Partisan Rancor by Pew Research | April 18, 2010
Quote
By almost every conceivable measure Americans are less positive and more critical of government these days. A new Pew Research Center survey finds a perfect storm of conditions associated with distrust of government – a dismal economy, an unhappy public, bitter partisan-based backlash, and epic discontent with Congress and elected officials.
Rather than an activist government to deal with the nation's top problems, the public now wants government reformed and growing numbers want its power curtailed. With the exception of greater regulation of major financial institutions, there is less of an appetite for government solutions to the nation's problems – including more government control over the economy – than there was when Barack Obama first took office. …
Perhaps related to this trend, the survey also finds a rise in the percentage saying the federal government has a negative effect on their day-to-day lives. In October 1997, 50% said the federal government had a positive effect on their daily lives, compared with 31% who said its impact was negative. Currently, 38% see the federal government's personal impact as positive while slightly more (43%) see it as negative.
http://pewresearch.org/pubs/1569/trust-in-government-distrust-discontent-anger-partisan-rancor
Couldn't be a MORE "Perfect Storm" for "O", exactly what he wants.
All it will take is one unbalanced McVeigh type, and the real party for "O" begins................he's hoping for it, even has lackeys stoking the embers.
Nothing would suit him better than a reason to Declare Martial law.
Besides, with only 58+/- million people actually working, and producing for 300+, Houston, we have very serious problems.
Add Cap N Trap,Wall Street Controls(meaning private sector hire 'n Fire at will),bypassing the Congress,and a VAT tax on top of those two, and all hells going to break out.
Dr's are finally getting into the fine print, and are going to stop taking new Medicare patients, and/or Drop the one's they have now.
The loss of Co-Pay's, and reduced bennies on Medicare/Caid, and no controls on Lawsuit "TORT" reforms, has left them wide open for fiscal ruin.
Whe you have 60% of the employed in the Gv't sector( producing nothing), the rest cannot carry the load..........
Government agencies are going to have to be cut by at least 60%.
Under "O" never happen G.I., to quote an old phrase, "I fear we are in a pickle".
What a clusterfoxtrot...................