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The Error of My Ways
By: Chris Tell at http://capitalistexploits.at/
“Now, this debt ceiling — I just want to remind people in case you haven’t been keeping up — raising the debt ceiling, which has been done over a hundred times, does not increase our debt; it does not somehow promote profligacy. All it does is it says you got to pay the bills that you’ve already racked up, Congress. It’s a basic function of making sure that the full faith and credit of the United States is preserved.” - Barrack Obama
I confess to having spoken harshly of politicians in the past. I've been cruel, even spiteful to our leaders. I've stated that entitlement programs actually destroy creativity, suck from the productive in society while benefiting the unproductive.
I've stated that bureaucracy undermines the free markets, and further driving the knife deeper into a gaping wound I've championed that free markets are the lifeblood of an economy and therefore wealth creation. I've said that allowing the political class ever greater control has always, and will always end in tears.
I must now humbly apologize on bended knee. Listening to those keen insights from the leader of the free world I was struck with a blinding revelation. I now see the error in my thinking. How could I have been so wrong? I have confused many, many things in my little brain.
In my defense, I'm just a normal guy. I've never graced the steps of parliament, congress or any such hallowed ground where the mighty thinkers tread.
Damn those Austrian economists, they brainwashed me! How silly they clearly are with their misguided, simplistic rantings. That which goes up must come down...they must think that high finance is a matter of logic. Fools.
Having now seen the light, I wasted no time and immediately called out to my wife. I asked her to take inventory of our debts and credit limits. Whatever they were I wanted them raised, immediately!
She quizzed me curiously and pointed out that we don't have any debts. I was ashamed and upset. Why was this? How could I have been so foolish? and I'm the one that is meant to know this stuff. I've been involved in financial markets all my adult life.
Now my wife is beautiful and bright, but alas not financially or politically minded, so I need to be patient with her. I had to explain how raising our debt limits and borrowing more (or in our case any) money in fact does NOT increase our debt, it in fact allows us to pay our bills!
Paying our bills is a good thing, she agreed. Looks like I'm making headway.
It follows therefore that if we are to be able to continue to pay our bills it is imperative that we raise our debt limits. No austerity in this household. Don't need it according to Mr. Obama.
Now my wife started shifting about nervously and eyeing me suspiciously. She normally does that when...oh never mind. I'm going to have to find someone smarter than I to explain this to her.
"Look," she said all of a sudden. "You know our neighbours Alan and Sue down the road, right?" Where was this going? "Sure," I said. "Well, they are now both working full-time and then some to pay for that new rental property 'investment' that they purchased. Is that what you mean by increasing our debt limits?"
"That 'investment' is sucking another $25,000 a year out of their budget, money that clearly wasn't there to be spent. Now their kids can't come and play with our kids in the afternoons because they are in after school care! Not interested!"
From what I could gather, my wife doesn't want our kids to have to go to after school care, and she doesn't want to have to go find a job to support my "crazy new idea."
Now she's taken all the booze out of the liquor cabinet and started mentioning doctors. It's getting uncomfortable, but I'm determined to re-edumacate her.
This is important stuff, and our financial future depends on it.
I'm wondering if Mr. Obama could setup a helpline to assist financially illiterate people such as my dear wife... 0800-FREE-RIDE.
Until then I'm going to have to figure out how to live within my means and pay my bills with cash in the bank instead of debt. That doesn't sound nearly as fun, damnit.
Meanwhile, if any of you dear readers are more skilled than I in explaining complex financial mumbo jumbo, please let me know. I need to get my wife on board before it's too late! Any help is greatly appreciated.
- Chris
"Deficits don't matter" - Dick Cheney
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Is this sarcasm?
Debt, it seems to me, you lived your life
Like a (s)candle in the wind... Lalee La La...
Confessing my ignorance, I have the impression that Austrian economics is about running the economy like a good housekeeper runs the household budget. A housekeeper does not print a reserve currency and engage in fractional reserve lending, so if the housekeeper analogy truly represents Austrian economics, then we already have a problem. Most of the ZHers espousing Austrian Theory seem to argue strictly from the household budget POV in any case.
The household budget approach breaks down for governments. If you as a housekeeper have a salary of $30000 and you owe, say, $500,000, there is no way you can pay that debt. The best you can hope for is to roll it over. Because of the usury component, you must even borrow more to roll the debt.
So to argue that governments should pay down their debt is to argue for the impossible. It's really just about exponential growth of debt which, though it starts out slowly and can continue to be financed for decades, eventually becomes an unstoppable steamroller that crushes all in its path. The only way out is to declare a jubilee. Even wars do not help because they too are financed.
The household model is so patently stupid in light of the exponential function that it can only be a propaganda tool deployed by those who benefit--ie, are creditors--from keeping people ignorant by appealing to their sound instincts of household money management. This avoids any discussion of jubilees. It enables the takers to squeeze every last drop of blood from a turnip. Indeed, we are slowly being conditioned to expect a bail-in of possibly 30% of our net positive wealth. Establishmentarians such as Rogoff are part of the conditioning process (we have also been conditioned by Corzine and Cyprus--when these injustices occur and nobody is punished, it induces a disabling sense of futility and despair). When the bail-ins happen, the worse that will happen is that people will grumble, due to this conditioning.
Well, then there's that. Thank God for ZH . . . and the Misean "Science of Liberty" to lead the way to our Salvation.
http://mises.org/journals/aen/aen11_2_1.asp
But we sure as hell beat them goddamn commies, bitchez!
"You didn't build that debt ceiling. I did."
"If you like your current indebtedness, you can keep it."
"and pay my bills with cash in the bank instead of debt"
You are winding me up right as a financial advisor?
Under ZIRP you might do better pulling it all (the spare cash) out of a bank because then it cannot endure a haircut!
On seconds thought if you are worth like 300 billion, please keep it in the bank no reason to give the FED any more excuses to CTRL-P to fill the vacant hole.
Both those concepts I would never have dreamed of even a decade ago.
Think those thought patterns are a better reflection of the economy myself.
The default rate on mortgages is approx. equal to the $85 billion / month of debt monetization (printing). That pesky MTM issue is gone now. This is why hyperinflation has been held at bay for 5 years. But the next 5 years will be different. At some point our debt exceeds assets and China and others will cut the cord. Our gold mines are now being sold to the Chinese at fire sale prices, not as a transaction, but as colatteral by a corrupt US regeime. We may offer up the US breadbasket of the Midwest farm belt before ultimate default. China could benefit by owning our Midwest farms and the most productive agricultural region on the planet. God only know what kind of horse trading will occur before collapse and reset. I am looking for bond yields to explode as a precursor. Also, COMEX will unravel, physical metals will blow out vs paper (metal) trades, IRA and 401K investments will be required to include a mandated % of gov't debt and we will see micro black markets develop in food supply, medicine, alcohol, tobacco and other necessities. Ammo prices will sky rocket (whoops). Ignoring MSM helps to focus on real data, not BS that is our news. When RT is more truthful than US MSM you know the world has fundamentally changed.
I just bought my Atlas Shrugged hat. It says "Atlas Shrugged - Now, nonfiction"
Keep an eye on Yellowstone. That is what they will sell.
""Deficits don't matter" - Dick Cheney"
"Dick Cheney don't matter"
There fixed
Hey, let's pick on the current Vice President. Cheney is so last administration.
"Scandles lost in the scandle fog..."
http://www.youtube.com/watch?v=-nfA7IyL1pk#t=37
How unpatriotic of you not to have debt! Shame on you!
The only satisfaction I get out of all this is that I know that Moochelle knows Barry is in the closet, and she has been worried since day one that someday his splooge will be identified on some guy's dress.
Gold. Absolute fucking gold.
This is why I absolutely fucking love the internet. I'm no dummy, but I am constantly amused and amazed by the comic chops of folks on ZH (and elsewhere).
Capitalist Exploits
what a load of crap.. and so sheep like
it just increasing your share of the debt ..
and will be paid back in the blood of armys
and causes unemployment, poverty, wars
are you on a trick of drugs ???
As the man said at the AA meeting. "Just because I get a new case of Whiskey does not mean that I am going to fall off the wagon."
By the way, Obama has already racked up another $400 billion in debt, since he said that he would not.
Oh, and by the way, you can keep your health plan if you like it.
Urban Dictionary: Teleprompter
A bullshit delivery device.
Obamadebt: the Affordable Debt Act, live the life you never could afford. Call 1-800-FU A-GAIN Now.
Free markets have had the most wonderful effect on Government, the Media and . . . well, hell, now that everything has been put up for sale to the rich and powerful--with the "free market" as the only God before us, what hasn't seen "progress"?
Yup, let the "productive" march the rest of us to the pure, God-given good sense of them not only owning, but controlling it all. And "all" sounds just about right. They've earned it.
Such great times we're living in.
Thank Gawd for them Austrians.
When was the last time there was a free market? Been a long, long time since we were even close to that.
Sorry BO, I've said it before and I'll say it again, watch out world, when it comes to the national debt I'm defaulting on my share.
don't default. repudiate. it was odious anyway.
Obama's statement makes perfect sense. Raising the debt limit doesn't mean you automatically are borrowing more. They just raised the debt limit on my credit card. The difference is I've paid the balance in full each month for decades and have no intention to ever reach my higher debt limit, or ever not pay the balance in full each month.
But, Obama is going to borrow up to the debt limit, so his statement is technically correct, but just another deceit. As for that wife; tell her I charge everything for which I can't get a cash discount, in order to get 1% or more back on my purchases, each month. Tell your wife, the joy is greater when they owe you.
Obama's statement is only correct when you realise that in order to pay their bills their credit limit needs to be raised. In other words they have to borrow additional money in order to pay their bills. Therefore the other portion of his statement is complete rubbish. This does in fact increase their debt. If you borrow another $10k to pay the interest on an existing $200k mortgage at the end of the fiasco you will now owe $210k...ergo increased debt.
It's not the bills that he is paying. It's the pool boy, the landscaper, the nanny, and the new Mercedes he just leased. He's still buying luxury items, when his mortgage is thirty months behind.
edit; toomuch to drink to type
sounds like just the right amount to me
Makes the Congressional Budget Office an oxymoron.
RealMoron POTUS Barry
Another Oxymoron ... Credit Limit (for .gov)
Oxymoron ... automatic debt ceiling
Scary thing to me is that alot of people think Obummer's statement makes sense.
"Raising the debt ceiling should be automatic." - BHO
Kinda like a moonroof then.
EITHER YOU IS, OR YOU ISN'T!
This is crude propaganda.
President stampy foot needs an introduction to the Micawber Principle.
There is no reason to have a debt ceiling, IF...debt doesn't really matter.
Likewise, no reason to have something called bankruptcy courts or bill collectors or as many accountants or earning or saving money or even money as we know it. Most people would just spend their time laboring away out of the goodness of their hearts, for others, farming, ranching, transporting, stocking the shelves for the idle to just come by and take what they want.
But then we get to down to the real nub of it, no taxes either...because remember...debt or money doesn't really matter.
The sound you just heard was a million progressive heads exploding ;-)
What a silly crock of shit!
How so Henry?
I will answer for him. Raising your credit card limit does not require additional borrowing. It just ALLOWS it. Of course it is madness to borrow it BEFORE it is allowed!
Raising your credit limit in order to meet the interest bill on already borrowed money is what is taking place. So in this respect raising your credit limit does indeed increase your debts.
See my above response on mandatory / discretionary spending to understand that it isn't only the interest on the debt that continue to pile on in Zombieland.
BUT...when the debtor has been playing games with accounting just to keep under the supposed limit, when the debtor doesn't even acknowledge the vast majority of his fiscal debt, when the debtor keeps borrowing to pay off the loans tha tare coming due, we can assume that raising the debt limit is going to lead to a helluva lot more debt. How much more can I borrow? That's what is being asked here. It's not asking whether we can pay the debts or not. We cannot. We just need to ask someone to loan us the money so tha twe can pay that new debt.
As my man Bugs Bunny would say, "What a ma-roon." Stop drinking the Kool-Aid.
No doubt.
Its madness to raise it with known scofflaws & spendthrifts begging for it to be raised. They're like a crack addicts, just one more hit and they'll stop...lol.
By now, we should be up to our fucking eyeballs in "green jobs" providing "free energy" and smooth comfortable roads & bridges for our Prius' to drive on in order to stop by the pharmacy to get our frrreee! birth control & Viagra after this spending binge...right? ;-)
@donsluck - unless you accept that Newton's First Law of Motion has also become the First Law of Governance, you'll never understand the debt ceiling debate.
Yes, in a proper functioning Congress, the debt limit itself would not matter so much. The point of action on more spending would be the vote / consideration of the additional spending. Not adding to the spending would clearly mean it didn't matter if we up against the ceiling or miles away from it. At the same time, the decision to add to spending would obviate the limit question given that positive action was needed and provided (so really, would separate action be required on the limit since said limit and status would be part of the overall understanding).
But, we live under a system on auto-pilot. Only 30% off all federal spending gets done through affirmative means. All the rest, 7 out of every 10 dollars, happens unless Congress does something to stop it. That’s the discretionary / mandatory spending ratio.
So, yes, increasing the debt ceiling does result in increased spending. To see why, game out our current system under the single variable of increasing and not increasing the limit – everything else is equal. If we don’t increase the limit and do nothing else, mandatory spending (and any already appropriated discretionary spending) would continue as always until we hit the debt limit and then all spending would take a haircut to bring expenses into balance with revenue. Absent anything else, the total debt will hit and then remain at that debt limit level. *
If we do increase the debt limit but then take no other actions, mandatory spending continues as always and already appropriated discretionary spending will continue until those authorizations expire. Move the timeline forward and you’ll see that even after the 30% of discretionary spending drops to zero (in effect, even more of a shut down than the recent shut down), our auto-pilot spending is still greater than revenue, which means the debt will continue to increase.
* What would really happen is unknown, 14th Amendment nonsense, trillion dollar coin insanity, and interest and other payment prioritization schemes are all things that would be back on the table. And of course, the disruption caused by this self-inflicted wound would negatively affect revenue (taxes) and likely cause higher future interest payment, both of which would exacerbate the problem.
Don’t forget the Ritalin for the kids…
Everything on 36 Black.
Dat b waycist.