What Both Sides Are Missing In The Debt Ceiling Debate

George Washington's picture

Washington’s Blog


The blood pressure of the patient in the emergency room drops precipitously.

The ER docs have already given 15 pints of blood over the course of many hours. But the patient is still on the verge of dying.

Medical rules and regulations say that more than 15 pints of blood should never be given, as too much transfusion can cause other fatal problems.

"liberal" doctors want to give the patient more blood. After all, this
is a life-or-death emergency ... and if they can just buy more time,
they might be able to figure out a way to save the patient.

"conservative" doctors want to stop with the transfusions. After all,
giving too much blood could kill the patient ... and maybe he'll be able
to pull out of it on his own.

Who is right?

Well, the
"liberal" and "conservative" doctors are so busy arguing their point of
view that they haven't noticed that one of the patient's legs has been
half chewed off. He's bleeding out through the huge open wound.

Unless the doctors suture up the wound, the patient will bleed out no matter how much blood they give him.

I've previously explained this fact using water as an analogy:

hawks" like top economic historian Niall Ferguson says that America's
debt will drive it into a debt crisis, and that any more quantitative
easing will lead our creditors to pull the plug. See this, this and this. Indeed, PhD economist Michael Hudson says (starting around 4:00 into video):

the problem that is grinding the economy to a halt is too much debt,
and if no one in the government - in either party - is looking at
solving the debt problem, then ... we're going to go into a depression
as far as the eye can see.

Yet the U.S. hasn't reined in its profligate spending. While modern economic theory shows that debts do matter (and see this), the U.S. is spending on guns and butter.

As PhD economist Dean Baker points out, the IMF is cracking down on the once-proud America like a naughty third world developing country. (As I've repeatedly noted,
the IMF performed a complete audit of the whole US financial system
during Bush's last term in office - something which they have only
previously done to broke third world nations.)


Indeed, economics professor and former Senior Economist for the President’s Council of Economic Advisers Laurence Kotlikoff wrote yesterday:

Let’s get real. The U.S. is bankrupt.




Last month, the International Monetary Fund released its annual review of U.S. economic policy.... The IMF has effectively pronounced the U.S. bankrupt.




Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt.




This is what happens when you run a massive Ponzi scheme for six decades straight....




Bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.

On the other hand, as I also pointed out last month, the government isn't even stimulating in an effective way:

"Deficit doves" - i.e. Keynesians like Paul Krugman - say that unless we spend much more
on stimulus, we'll slide into a depression. And yet the government
isn't spending money on the types of stimulus that will have the most
bang for the buck: like giving money to the states, extending unemployment benefits or buying more food stamps - let alone rebuilding America's manufacturing base. See this, this and this.

(Yes, Congress has just thrown twenty billion dollars at jobs and the states, but it is a tiny drop in the bucket compared to the many tens of trillions of dollars in handouts to the giant banks.)


implemented his policies in an era of much less debt than we have
today. We're now bankrupt, with debt levels so high that they are dragging down the economy.


if Keynesian stimulus could help in our climate of all-pervading debt,
Washington has already shot America's wad in propping up the big banks
and other oligarchs.


More important still, Keynes implemented
his New Deal stimulus at the same time that Glass-Steagall and many
other measures were implemented to plug the holes in a corrupt financial
system. The gaming of the financial system was decreased somewhat,
the amount of funny business which the powers-that-be could engage in
was reined in to some extent.


As such, the economy had a chance
to recover (even with the massive stimulus of World War II, unless some
basic level of trust had been restored in the economy, the economy would not have recovered).


Today, however, [politicians] haven't fixed any of the major structural defects in the economy [update].
So even if Keynesianism were the answer, it cannot work without the
implementation of structural reforms to the financial system.


little extra water in the plumbing can't fix pipes that have been
corroded and are thoroughly rotten. The government hasn't even tried to
replace the leaking sections of pipe in our economy.

Quantitative easing can't patch a financial system with giant holes in it.

(Note: If you're sure that your side of the aisle is right and the other side is wrong, please read this.)

What are the giant holes?

Some of the biggest are:

  • Focusing on policy objectives other than reducing unemployment (which has the net effect of actually increasing unemployment)

course, the loss of America's manufacturing base, encouraging jobs to
be shipped abroad, out of control derivatives and other shenanigans are
giant holes as well. And the government has been throwing money at the big banks instead of the little guy, which - as Steve Keen as demonstrated - is not an effective way to stimulate the economy.

I've used a third analogy to describe these problems.

As I wrote in 2009 in a post called "Why the Patient Is Not Getting Better: Government is Strengthening the Parasite and Poisoning the Real Economy":

isn't the economy getting better, even though the government is
pumping trillions of dollars into bailouts and stimulus packages and
intervening in markets left and right?


Because the government is treating the wrong patient.


say you travel to the tropics and pick up a parasite. You go to your
doctor who gives you very powerful drugs that make you sick. You go
back to the doctor, he looks you over, and then adds more potent drugs
to your prescription.


You go back a third time and say "Doctor, I'm getting sicker and sicker, why isn't it working?"


He responds "Oh, I thought the parasite was the patient. The drugs are making it healthier".


The Government is Strengthening the Parasite


The real economy is:

(1) People making things or providing real, useful services


(2) People saving money




(3) People investing the money they saved into productive businesses which will make more things or provide needed services.

According to top federal reserve officials and economists, the government's actions will encourage big financial players to make even riskier gambles in the future.

Indeed, the government is in the process of giving
hundreds of billions - if not trillions - of dollars and guarantees to
hedge funds (hedge funds are some of the biggest speculators of all).
Indeed, the various bailout programs are giving huge sums to companies
that make money by pushing paper around without actually producing any
useful goods or services.


The heads of the big banks and
financial companies are also getting huge bonuses even though they have
driven their companies so far into the ditch that they need government
bailouts. Even Paul Volcker says
the incentive system is broken. Indeed, the government is making the
CEOs richer by giving them billions of dollars of bailout money with
which to feather their own nests.


And credit derivatives [at least to the extent they are naked, unregulated and opaque] act as a parasite on the real economy: credit default swap buyers bet that the referenced company will go down the tubes (see this and this).
And yet the government is allowing the credit default swap trades to
increase, driving CDS spreads against many companies and governments to
reach all-time highs.


The Government is Poisoning the Real Economy


Not only is the parasite being boosted by government actions, but the patient - the real economy - is being poisoned.


Manufacturing has been shipped out of America for decades, and the government is still actively encouraging companies to move manufacturing abroad.


Taxpayers will be on the hook for trillions of dollars of obligations through taxes/or inflation (even Bernanke has admitted
that inflation is a tax, because people have less money in their
pockets after buying necessities). So Americans will be able to save


And government has not only failed to require that companies
accurately report their finances - so that investors can know which
companies are stable and productive - but it has actually thwarted such accuracy. For example:

  • A government agency prevented the SEC from investigating multi-billion dollar Ponzi-schemer Stanford
  • As of 2006:

    George W. Bush has bestowed on his intelligence czar ... broad
    authority, in the name of national security, to excuse publicly traded
    companies from their usual accounting and securities-disclosure

  • One or more treasury department officials actively allowed banks to "cook their books"

The government has been strengthening the parasite and poisoning the real economy. No wonder the patient is getting worse.

I noted a couple of months later:

Hudson is a highly-regarded economist. He is a Distinguished Research
Professor at the University of Missouri, Kansas City, who has advised
the U.S., Canadian, Mexican and Latvian governments as well as the
United Nations Institute for Training and Research. He is a former
Wall Street economist at Chase Manhattan Bank who also helped establish
the world’s first sovereign debt fund.

Hudson has frequently described Wall Street as "parasitic". For example, in a 2003 interview, Hudson said:

problem with parasites is not merely that they siphon off the food
and nourishment of their host, crippling its reproductive power, but
that they take over the host's brain as well. The parasite tricks the
host into thinking that it is feeding itself.

Something like
this is happening today as the financial sector is devouring the
industrial sector. Finance capital pretends that its growth is that of
industrial capital formation. That is why the financial bubble is
called "wealth creation," as if it were what progressive economic
reformers envisioned a century ago. They condemned rent and monopoly
profit, but never dreamed that the financiers would end up devouring
landlord and industrialist alike. Emperors of Finance have trumped
Barons of Property and Captains of Industry.

More recently, Hudson said:

can think of the financial sector as being wrapped around the real
economy, almost like a parasite, and that's why it's been called
parasitic for so long. The financial sector extracts interest from the
economy, the property sector extracts economic rent, as do monopolies.
Now the key thing about parasites, is that it's not simply that they
extract nourishment from the host. The parasite takes over the
host's brain, to make it think it's part of the economy, to make it think
part of the host's own body, and, in fact, that's it almost like a
child of the host, to be protected. And that's what the financial sector
has done today.

You have Obama coming out and saying, "We have
to save the banks in order to save the real economy". The fact is, you
can't serve both the parasite and the host.

And see this.

On August 10th, Hudson went even further. Specifically, he said:

  • The giant financial institutions have already killed their host - the real American economy
  • Since
    they realize that the American economy is dead, they are trying to
    suck as much blood out of America as possible while the corpse is
    still warm
  • Because the American economy is dead, their plan is to soon jump to another host. They will ship all of their money overseas

come back to my original analogy, the dying patient has a horde of
leeches inside the gaping wound in his leg, and the transfused blood has
done nothing but fed the leeches. [Sorry for the gross analogy.] The
doctors have been helping the parasites, not the patient.
Unless the doctors clean out the parasites and close the gaping wound, the patient has no chance.

As Dennis Kucinich writes today:

have to realize what this country's economy has become. Our monetary
policy, through the Federal Reserve Act of 1913, privatized the money
supply, gathers the wealth, puts it in the hands of the few while the
Federal Reserve can create money out of nothing, give it to banks to
park at the Fed while our small businesses are starving for capital.


my words -- Wall Street cashes in whether we have a default or not.
And the same type of thinking that created billions in bailouts for
Wall Street and more than $1 trillion in giveaways by the Federal
Reserve today leaves 26 million Americans either underemployed or
unemployed. And nine out of ten Americans over the age of 65 are facing
cuts in their Social Security in order to pay for a debt which grew
from tax cuts for the rich and for endless wars.


There is a
massive transfer of wealth from the American people to the hands of a
few and it's going on right now as America’s eyes are misdirected to
the political theater of these histrionic debt negotiations, threats to
shut down the government, and willingness to make the most Americans
pay dearly for debts they did not create.


These are symptoms of a government which has lost its way, and they are a challenge to the legitimacy of the two-party system.

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aleph0's picture

@George Washington .. Excellent article ... as usual.

Mike Hudson explains things beautifully and is 100% correct.

Thank you once again for your great contribution.

Kreditanstalt's picture

You are sounding very mainstream here, you know...echoing those on Bloomberg and CNBC who loudly claim that the world will end if the "debt ceiling" isn't raised, etc.  Sounds a lot like you are looking for a villain - just one, ANY one! - and finding it in anyone who takes competitive advantage.

(BTW, the AFL-CIO is hardly a reliable source...but Michael Hudson would approve.)

You have quoted a lot of individuals who line up on the "I want more activist government!" side of the equation.  They would like to see more, and more effective regulation.  The more extreme would like to see stronger border enforcement, higher minimum wages and punitive taxation.  These people, economists and others, are in effect calling for more stimulus.  They see government as part of the ANSWER, as some sort of impartial arbiter, regulator, and playing-field leveller...These people don't like the free market (or anything moving in that direction) because they see it as "unfair"...

Which it IS.  And should be.  That's what free market capitalism is all about.  Inequality is NEEDED if risks are to be taken, business opportunities seized and perceived advantages and the passivity of others exploited.  Why didn't you quote any free market economists or libertarians? 

Before anyone misunderstands, fraud, government propping up banks or businesses and theft SHOULD be prosecuted fully.  But much of what has happened to Americans is because they didn't prepare, didn't think ahead.  They forgot to SAVE.  They forgot that houses are not ATMs.  They didn't do the math re: borrowing and debt.  They don't understand the mechanics of inflation in fiat currencies - but they SHOULD have!  they got greedy, wanting everything NOW, instead of building up savings through delayed consumption...

Saying that "China manipulates its currency" (AFL-CIO) is ridiculous: the US has, through the Fed's manipulation of interest rates (which is in itself only possible through COUNTERFEITING) kept its own currency artificially low for years and has exported inflation to the rest of the world.

IF the Republican "hardliners" stick to their guns (which I HIGHLY doubt...!) they are on the right track, though they don't go nearly far enough.  What we really need is a hell of a lot LESS regulation, a massive, massive cut in government spending AND taxation, withdrawal of all military from overseas and a drastic shrinking of government.

Then the U.S. might start to create jobs again.

anony's picture

Much of what you write makes sense, some of it is flat out wrong

What is punitive taxation?  If the very wealthy are paying in effect 15% of their incomes and gains and the middle classes on the whole are paying 30%, is that punitive?  A simple ratchet up of the most prosperous, and wealthy who are getting wealthier by the minute, seems not in the least punitive. And would go a very long way to reducing the deficit and the national debt. (provided the politicians don't use that money to increase spending).

2) creating jobs in the U.S. or anywhere else for that matter is not the result of too much regulation per se.  One could even conclude that regulation CREATES jobs, do-nothing jobs granted, but let's save that for another day. e.g. Tax codes require more tax accountants in the private sector; environmental rules require corporate employees that are environmental engineers; OSHA requires safety departments in companies that have potentially unsafe workplaces.

The pathetic dearth of well paid employment opportunities has more to do with a woeful lack of  innovation, original thinking, and a paucity of impactful solutions to a great many problems that would succumb to more creative approach. And with those solutions would come more employment and career choices. Somewhere along the line everyone is avoiding risk not just because of government but because they are bereft of the ability to create their way out of them.

That may have more to do with our incentives, the deployment of our human resources.  The incentives, the huge financial and political payoff for the best and brightest to move from high school, thru university and then to Hedge funds, Investment banks, and finance is a complete waste of human capital, our best brainpower seeking out ways to "Create" complex risk to reward themselves is tantamount to a crime.

It's not entirely about government interference in the marketplace.

As of now we have globally 2 billion or 3 billion people with NOTHING TO DO, and the pandemic inability to invent jobs for themselves. That needs to be the focus of private, entrepeneurial individuals doing a Steve Wozniak, or a Bill Gates, or the like.  Too few of these wizards exist or can be manufactured, duplicated, or assembled.  I don't think government regulation would stand in their way.   

AnAnonymous's picture

No needs to endless debate what is established.

Job creation/destruction is the result of the tension between the level of activity available and the amount of manpower required to meet up the level of activity available.


AnAnonymous's picture

Before anyone misunderstands, fraud, government propping up banks or businesses and theft SHOULD be prosecuted fully. 


Why so? If inequality is needed for people to take risks, how is that?

Should it be obvious that inequality is required so that people can task risks without fearing the results of failures?

If one can, thanks to inequality, push down the costs of failures onto others, one shall take more risks.

US citizenism or the art of making no sense.

Maybe time though to realize that the US propaganda has sunk so low nobody gets bamboozled by it. Too old, not good enough quality, already debunked, not enough renewed... Time for propagandists to spend resources to build up a better propaganda. But they would conflict heads on with a fact they know: it would be spending rarer and rarer resources on something unreal. Big, big troubles for propagandists...

And the lower and lower quality of propaganda is a sign in itself of the state of the world resources.

US world order.

Kreditanstalt's picture

Why so? If inequality is needed for people to take risks, how is that?

Not quite sure I follow you...

Capitalism works only with inequality  of education and of access to knowledge and with "who you know"...with unequal perspicacity, assessment of risk, eye for an opportunity and with some having saved up capital and others not.

A system where no one is allowed to fail, where none can "fall through the cracks", where tax-funded social safety nets become moral hazards, where oppressive levels of redistribution-at-gunpoint reward failure and irresponsibility AND where the "TBTF" are bailed out by government is NOT conducive to job creation!

If I were to spot a used car which I KNOW could be cheaply repaired by a friend of mine and sold later at a good profit, who is being exploited?  Who is being taken advantage of?  Obviously the seller of the car didn't do his homework, and for that the reward should go to the distinguishing risk taker, shouldn't it?

No one is being defrauded of something they already know they own in this example.  Fraud, cheating, extortion and theft are offenses against private property and should be fully prosecuted, but merely seeing market opportunities moves society forward.

I just can't see where government meddling in the markets helps this happen.

AnAnonymous's picture

As confirmed  the nth time by the US world order of today, inequality as an environment is conducive of risk taking. The US world order is inequal at heart and a lot of risk taking has been made.

Inequality before the consequences of risk taking favours risk taking for all those who are the right side of inequality while an equal environment might freeze everyone in the starting blocks.

Wishing for inequality and equality at the same time is US citizen typical but unreal.

What has job creation and risk taking to do with the current point?

Job creation is the result of the tension between the level of activity available and the amount of manpower required to tackle that level of activity.

Job creation is unconnected with risk taking. I dont even see why you cast this into the question of inequality and risk taking. It is stupid, save you have this typical US citizen mind set trying to lure the lower class to fight your wars for you.

bobzibub's picture

Capitalism is the application of capital and labour to produce something that people wish to buy. Buying and selling a car is what the financial markets are supposed to do: lower transaction costs for the rest of us.
It is definitely not inequality of education that makes a society rich--that is only what makes the already rich richer. In fact, mainstream economic theory has an assumption which they use in their modeling: "perfect information".

jack stephan's picture

Johnny Cash: Now I've asked you forty different ways and it's time you come up with a fresh answer.

Ace's picture

'Well, the "liberal" and "conservative" doctors are so busy arguing their point of view that they haven't noticed that one of the patient's legs has been half chewed off. He's bleeding out through the huge open wound.'

It's not that the didn't notice; their goal is the destruction of the patient (and themselves). The so-called doctors are also the ones that half chewed off the patient's leg. They keep trying to tell the patient otherwise.

hooligan2009's picture

with apologies (and a slight danger of thinking what I have to say is important) I repost something I put in another thrad. Punch line question..Would you (and you and you and uyou) support a 20% cut in Federal receipts to you as an inidividual (pentagon, health care, state services shut down for one day) and simultaneously support the introduction of a DEBT REDUCTION TAX of around 7% per annum, in order to put America and you and you and you on a sustainable economic path? Feel free to use the flag as junk as the No's and reply as the yes's :)

suggestion, cut spending until the economy is downsized to the appropriate level (where the drop in spending results in a contraction of the economy, but eventually an equilibrium is discovered)

next, impose a Debt Reduction Tax that retires the 14.275tn +2.4tn proposed limit increase + 0.5 tn in net Freddie and Fannie debt + 2.7 tn in municipal bonds = c. 20tn

Note 2010 GDP of 14.3 tn and the proposed 2.4 tn will increase this to 16.7 tn will mean debt to GDP will be around 110% of GDP and will equal, around $55,000 per head compared to Greece's $44,000 per head...

Foreget the 20 tn ..its too scary and deal with just what the circus on the Hill and the big wheel thinks is reality..The DRT (Debt Reduction Tax) can be imposed for twenty years to drop 17 trillion at 110% of GDP down to say, a manageable 7 trillion or 40% of GDP. GDP in constant dollars that is so . Ergo, DRT will need to collect 10 trillion over 20 years = 500 billion a year. Pretty scary but bigger than the clowns with their 4 trillion over 10 years are planning; the bus is still careering down to the edge of the cliff at ten year rate.

Now taxes are 2 trillion, so the DRT will mean an increase in taxes of 25% per annum which given the effective tax take of 27% of GDP = a 6.5% hike in the tax take.

Of couse this is just the debt. Interest of 3% x 16.7 tn means half a trillion a year will have to be funded from the budget, where the clowns in the GOP get 20 billion a month from for interest is beyond me, its 45 billion) can be targeted to be paid down over 20 years. 

So spending cuts of 1.5 trillion (3.5 trillion down to 2 trillion) adjust for second order effects as we root out all the corruption from crappy government, maybe the 2 trillion in cuts drops taxes by a few hundred billion (though I cant see how with half the country paying no taxes whatsoever, the poor and the rich)... then raise 6.5% of GDP in taxes for 20 years to GET BACK TO NORMAL UNCORRUPT LIFE WITH NO BULLSHIT.


Any takers?

pods's picture

Hooligan, that is a plan that if we operated on a normal money system would have a chance at working.

But we dont.  We operate on a system that requires ever increasing levels of debt to keep ahead of the compound interest of the system.  By reducing debt, we will crash the system.  Sounds crazy but that is how it is.

I, and many others here are actually trying to do exactly this, so we may start a system that does not merely benefit those in charge of the system, and forces the rest of us to "chase return" with the FRNs that we have left over to stay ahead of the function.

Figured I would explain myself instead of junking you.  


hooligan2009's picture

thanks pods..i got a zero response but at least signs of intelligent thought. i dont know if i can post my email ehre but if i could it would be phooligan2008atyahoodotcom :) 

I don't think I can quite get to crashing the system because I still have some remnant of worry about the pain this will cause the 295 million out of 300 million who are unwilling bystanders in the rigged came of "make it complex, so you can steal with plausible deniability".

I prefer to work out where we should be, then come up with a number of plan options, then take the best out of these and simply transact..simplistic I know..but collateral damage (which is where the huge black swan resides in my view - collateral pledged 40100 times, much like the over leveraged banks prior to February 2007) is such a bloody thing. I'm thinking Dresden and Horishima here.

John_Coltrane's picture

Yes, here's how you do research on interest:  Go to http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm

You will find that in 2010 we spent 34.4B/month interest on the debt.  So, far this fiscal year we have spent around $20B/month for 7 of the 9 months listed.  Cash flow for interest expense is now a rather trivial amount of incoming revenues.  There is no danger of default on interest.  Bond traders know this fact which is why bond prices are increasing and yield decreasing as the so-called dealine approaches.  Less debt issued means less supply so interest rates and thus interest expense should decrease if the ceiling remains in place. 

Why is this?  Your naive calculation of an average 3% rates fails to account for the distribution of bond maturities.  Most US debt is very short term and rolled at rates of less than 1%.  The "clowns" in the GOP apparently understand basic arithmetic. 

So-called GDP spent by the government is mostly phony income transfer.  You know, I'll do your laundry and you'll to mine, then we'll pay each other and call it income.

One final thought:  you don't solve a debt problem by taking on more debt any more then you can reduce a negative number by adding more negative numbers to it.  You work, save and invest in future income.  If you've got a spending problem, gambling problem, drinking problem quit doing it!  That's how debt free adults behave.  The government credit card has been maxed out.  Time to live within our means.  No increase in the debt ceiling. 

hooligan2009's picture

ok, coupon interest is running at 20 bn a month, so if the numbers are right for 7 out of 9 months and the annual run rate is 240 billion, then excluding fraudy and funny GSE coupon interest, the effective coupon rate post the massive debt increase we have seen in the last three years of 240 bn on 14 trillion government only debt is 1.7%. Now, admittedly, there has been a huge substitution of tbills for previous higher coupon bond debt, but even at best, should the economy ever return to c. 2% GDP growth and 2% CPI, then I contend the average coupon/yield will rise to c. 4%, or 640 billion per annum or 50 billion per month...or....we are on the same path as Japan. 

ebworthen's picture


Kill the vampire squid, wherever they may hide.


Lady Heather...UNCLE's picture

Nice post George...you are onto it big time. Off Topic: who was that fucktard congressman Green? and what was he banging on about "crushing truth and then it rises. thank you Mr Bernanke, history will remember you kindly". <shakes head in disbelief>  who the fuck is that wally? I am from New Zealand so forgive my ignorance.

tony bonn's picture

when i need sanity i can always count on mr washington to provide it.

Quicksilver Will's picture

I keep imagining I hear the voice of Buddy Hackett delivering the punch line to one of his jokes "No, No, we don't need amputate,  pretty soon that gonna fall off, ah...ll by itself. "

HungrySeagull's picture

Gangrene will kill you just the same. Just takes a little longer.


In fact, amputation isnt the hell it used to be. Produce new limbs and you are back into the battle.

TruthInSunshine's picture

I suggest having now law abiding, productive citizens, who are the hosts that the parasites are feeding off of, choose the 'opt out' revolution plan.

It would only take 5% to 10% of the net revenue paying productive members (of a group that might number 75 million - with 153 million in the work force), to do the trick (do the math).

Revolution isn't always bloody, violent and traumatic.

Sometimes, revolution (and revolution powerful enough to bring down a corrupt political system and the vagabonds who back them) looks just like this - which I really am starting to detect in the actions and opinions of MANY people (anectdotally, so I can't quantify it, obviously) I come into contact with as of late (if you see what I see, hedge accordingly):


Gonzalo Lira On The Coming Middle-Class Anarchy | zero hedge

HungrySeagull's picture

I fear that the mobs are starting to run already.

With that in mind, I lay down to sleep wondering if my area went nuts and how many bodies must I stack at the curb before they leave us in peace?

It would be much better to live in the woods at peace away from such anarchy.

TruthInSunshine's picture

Envision instead confident, mature, intelligent and peaceful people, who've been dutifully paying their pound of flesh year after year, turning upon their government officials, who they were told were there to enure a fair playing field for them and their children, opt out, because they can't tolerate the results and consequences of those lies anymore, as the kleptocrats are rewarded with the bounty of their hard labor.

No violence. No blood. Just calm, passive resistance.

The state would bend and break in rapid time if this were to happen. And the state lacks the resources to combat such passive resistance if that 5% to 10% (about 4 to 7 million highly productive and revenue paying upstanding citizens) choose such a path.

Slap That Taco's picture

George, you sure you don't wanna be King?

Sambo's picture

If the US govt can default, why not the 100+ million deep-in-debt credit card holders in this country? They will get a downgrade wrt their credt rating but that is ok, as the country, so the countrymen.

HungrySeagull's picture

I have defaulted once long ago. The result was 8 years in the wilderness eating bark off trees and living by what I can catch.

My neighbors were crushed by medical billing and they went ahead and defaulted, then bankrupt. Within weeks and months they were back on track with new credit cards etc.

I might default on credit card bills. It matters not. A few coins from the PM pile can make that go away. Same with the student loan. That matters not either.


What has mattered is that the Nation's People have had thier hearts hardened and then confused beyond reason by the decades of trouble easily resolved by some good honest budget work. If I can keep my house in the money each month, even if it is only a dollar (Have been less than 20 dollars a few times; but with strong heart and courage.. made it through)

The Government needs to keep thier National House in the money each month.

I hate to say this, but I would think a proper default will wipe out everything and allow us to start over again. If this is dragged out into winter, it's going to be trouble.


We have what? 13 departments (By President's own Council?) from Defense all the way down to Interior?

Each one needs a budget each fiscal year, in the black and PAID FOR.

The States need to be wiped out of thier debts and allowed to too generate a budget, also in the black for each fiscal year.


Some of you probably say to me, it's sopomoric and too simplistic. Fine. What will you do?

As for me, I would have handed all Members of the House and Senate a simple assignment.

Make a budget for the fiscal year in the black according to the States that they represent. Turn that all in, average the results and the bottom line should be somewhere within reason.


As far as Wall Street.


The Street needs to be allowed to run. If someone steps in and makes a bad money decision, they get wiped out. End of story. If a Company exports jobs to a tax haven or other benefits from the USA, they are eliminated from our workforce. End of story. If someone in the computers are using electronics to vacumn profits on the 9th decimal in the units of time so small, eliminate them too.

The car is easier to fix than a Medical work. I turned my truck into the dealer was quouted 150 dollars to flush cooling fluid. I said no way, I'll dump the shit (Fuck the EPA) and add fresh coolant myself. In the end, I found a shop that charged only labor 40 bucks to dump the fluids safely and add my fluids which I supplied.

The last time I was with a medical doctor was for a finger cut that wont stop bleeding. The total billing for the ER visit was $1140.00

Are you fucking kidding me?!

I have a medical kit at home which includes surgeon tools and a set for trauma from bones to gunshot wounds etc. I will let my family doctor fix the boo boo for 200 cash on the barrel before I will allow myself to go to a ER ever again.

Just need some Strong drink and a few friends to hold me down as I dig the bullet out or whatever next time.

If I die? Burial arrangements are already bought and paid for. None of that is anyone's concern except the driver who will cart me off to be cremated and wife to carry my ashes to the assigned grave.

Dr Hackenbush's picture

ivy leagues finest + world of infinite possibilities = two solutions 

perhaps fed/bankers should pay interest on US currency (rofl)

bigkahuna's picture

Agreement or not - we are all in trouble. Will we learn the proper lesson from all of this? Or are we just agregately too ignorant?

JW n FL's picture

Someone on the other thread quoted the "Grapes of Wrath" scene where the man serving the farmers the papers explained that, you could kill him and / or his boss but the foreclosure would still go thru.. it is not the people, it is the bank / system..


yes Georgie Peorgie Puddin Pie.. the system is broken.. but so is the energy supply.. which is the cause of all of these visible cracks.

drchris's picture

I hope they can't reach an agreement.  Things are just starting to get interesting.  I'm keeping my fingers crossed.  

apberusdisvet's picture

A good post that shows the lunacy of partisanship, or at least that they all are equally guilty and should be hung together.

newstreet's picture

Carthago delenda est.

zorba THE GREEK's picture

 Obama Doesn't want debt ceiling agreement, he wants to declare emergency and raise debt

 ceiling without congress. It's a power grab and he will be considered hero by seniors and

 military families for making sure their checks go out. And if it works, he gets re-elected.


John_Coltrane's picture

Seniors aren't worried, they know they have those treasuries in that "lock box" they can monitarize to pay their monthly checks.  Unless its already been spent?  I'm sure its just as good as the gold in fort knox.

piceridu's picture

An absolute plausible theory.

Transformer's picture

I thought we were already under a declared emergency?  did that go away?

sellstop's picture

We need to raise taxes.

nmewn's picture

Yes, because clearly taking half of peoples wages is not nearly enough.

More from Krugman, if anyone can stand it...

"This gets things exactly wrong. The truth is that creating jobs in a depressed economy is something government could and should be doing."


Close to a trillion dollar debt bomb later and he is still at it...pushing on that string.

I used to think he was just a stupid socialist, now I know he's not, he wants to destroy us.

web bot's picture

Great article. 1000+

I'd suggest you wrote a piece talking about "the day after". The day after the collapse occurs.. where either the USD has lost reserve status, or a complete meltdown. What would the scenarios look like and what would be done.

Ying-Yang's picture

Good idea... title it,

The Day the Earth Stood Still... then Exhaled

Transformer's picture

Pretty stupid video.  The premise of the collapse is that China quits buying treasuries.  Hey, they already did that a year ago!!  The video is based on stupidity, something happening in the future, that already happened a year ago.  Somebody should tell the NIA they got their head up their ass.

Derpin USA's picture

Don't fear the crash. Insist upon it.

We still have a chance to level the playing field before all of our wealth is taken from us.

Dulcinea's picture

Great post as usual, George.

AnAnonymous's picture

With stuff like that?

The real economy is:

(1) People making things or providing real, useful services


(2) People saving money




(3) People investing the money they saved into productive businesses which will make more things or provide needed services.


The real economy is that? Gimme a break. Another US citizen willing to kick the can.

km4's picture
Kucinich has the best remarks "Mark my words -- Wall Street cashes in whether we have a default or not....These are symptoms of a government which has lost its way, and they are a challenge to the legitimacy of the two-party system"
Spastica Rex's picture

Like him or loathe him, the other honest congressman.

Dan Alter's picture

So have many millions of others. From about 1987 to 1996 UFOs were seen over Mexico City everyday for years. In a 1990s incident at least a hundred maneuvered over the city for over four hours as the Mexican Congress and President watched. There are over 4800 videos of that incident.

Of course, none of this was reported in the US.

You obviously have not looked at the data. There are many millions of reports recorded worldwide. Try MUFON.