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Guest Post: The US Debt Crisis - How High Will It Go?

Tyler Durden's picture




 

Authored by Chris Ferreira, originally posted at Economic Reason blog,

The implications of the US debt crisis are not well understood in most circles, and it is not widely spoken about in the media and during important political debates. The irony is that the US debt is so significant that it plays a monumental role in finance and modern political strategy. The debt poses great risks moving forward, and yet it is referred to in only the vaguest of terms.

Here is why the US debt must grow every year and why it is mathematically impossible for it to continue forever.

Before we can understand why the debt must grow every year, here is is a visual representation, to scale, of how much the current debt is standing at. Each tall uniform column in the background of the picture below refers to a pile of $100 bills stacked one on top of another. Each “tower of debt” consists of 10 x 10 fork-lift palettes that reach out into the sky and are higher than the old World Trade Center buildings. These towers of debt represent $US 16.394 trillion. However, by the time you wake up to read this, it will be larger than that. DemonOcracy does great work on visual representation of the US debt levels. 

Why did the US debt grow to these proportions?

Short answer: the US government spends more than what it receives in revenue. In 2012, the US federal government expects to receive $2.5 trillion in revenue, while the total spending carried out by the federal government is $3.8 trillion. The difference ($1.3 trillion) is debt piled onto of the previous debt.

To put $1.3 trillion into context, it is approximately $3,56 billion a day. To make matters worse, the current debt does not take into consideration federal obligations such as social security, Medicare, pension, and retiree health promises. According to David Walker, former controller of the US, when these unfunded programs are added to the enormous debt, it stands at $70 trillion and growing–that is $10 million per minute!

Seventy trillion dollars is over four times the debt in the picture on your left, dwarfing the current US GDP; in fact, it is approximately the world’s annual GDP in 2011. For a current view of the US debt, see the debt clock here.

The government allows for the debt to continue to grow by adding new debt on top of old debt plus compounded interest. Instead of paying back the debt, the government just borrows more to cover previous interest. The interest payments on the debt is over $1 billion a day. When “Uncle Sam” takes out a loan, it is called a bond (I.O.U.). These bonds are purchased by investors, banks, and foreigners. These bonds are a promise to pay capital plus interest. What “Uncle Sam” does, essentially, is pay his investors with his credit card and create new loans to cover interest.

Talk about short-sighted finances with no discipline.

Compounded interest has allowed the debt to grow exponentially, and has reached, in my opinion, unsustainable levels where the debt is reaching at the vertical portion of the “hockey stick” formation.

debtceiling_graph

 

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.

- Albert Einstein

How does the US government allow the US debt to grow?

Doing the “right thing” is usually political suicide for politicians. Cutting expenditure to pay its bills to pay down the debt will make the economy implode. Instead, the government in power continues its daily activities and promotes new social programs to promote reelection. Almost half of the spending done by the US government goes to entitlements (Medicare, Medicaid, social security). If any cuts are carried out in this sector, you can expect riots on the street (approximately 28% of the US population are baby boomers and 80% of investments and laws are carried out by this powerful demographic.) Cuts to entitlements are highly unlikely!

chart

 

The continuous debate on raising the debt ceiling is all about a government mismanaging its money and not being able to control it–much like a child with no discipline. Since debt is being mismanaged, it has caused many distortions in the markets, and yet the debt is allowed to grow because of the US Congress. The debt ceiling has been increased 10 times since 2001. If the debt ceiling were actually a ceiling, the market and debt distortions would have imploded the economy–an implosion necessary for the economy to restore its equilibrium and liquidate all inefficiencies.

“Too big too fail” is absolute nonsense.

Paying back investors, costly wars, entitlements and bailing out the “financial terrorists” (who caused the crisis) all add to the national debt and to the dysfunctional economy that continues to operate until its debt will cease to grow. The problem with this system is that it created significantly more credit (someone is the creditor to all the debt) than “cash” money (money in your wallet). Every time debt expands, the credit supply also expands. (Read Fractional Reserve Lending on how money is created.)

According to the FED, the Total Credit Market Debt Owed (TCMDO) is approximately 53$ trillion and 2.4$ trillion in the true money supply (M1). In other words, cash money is approximately 4.5% of credit (TCMDO/M1).

The result to our economy is that “boom” periods are hardly driven by cash money, as cash money is insignificant in relation to credit. Credit is what drives the markets, and it is this same credit that “busts” the markets as well, in times of credit contraction. In order for debt to expand, someone must be lending the US this money. At the moment, the lenders are China, Japan, and the OPEC countries. 

But why do they continue to buy this debt?

Because they have too.

The US Dollar is the reserve currency of the world. You need it to buy oil, a vital component of any economy. Since other countries like China cannot print US dollars at their leisure, they have to get it from somewhere. They get it from trade with the US. The US buys products in Asia and the rest of the world with US dollars, and in turn these same dollar surpluses are used to buy oil and US bonds, creating a much needed artificial demand for US dollars.

This is also how the enormous US 558$ billion trade deficit in 2011 was financed. The US has been in a trade deficit since the 1980′s and it continues the grow as jobs and manufacturing are being lost to more competitive nations. The trade deficit also accounts for the national debt. The financing of the debt creates artificial demand for US bonds which helps lower the interest rate and coincidentally helps to raise the debt levels even higher.

The table below shows the leading foreign holders of US debt, which are China and Japan, followed by the OPEC countries. These are the main financiers of the US trade deficit.

 

But here is the Achilles’s heel for the US debt scheme:

In order to maintain and continually expand the debt, the US dollar needs to remain the reserve currency. In order for there to be continuous demand for these dollars and debt instruments, the US dollar needs to maintain a hegemony over competing currencies. Any threat to the dollar needs to corrected immediately. or else confidence in the US dollar will be quickly eroded and the subsequent tsunami of US dollars abroad rushing into the US will cause hyperinflation as never seen before.

William R. Clark’s excellent book, Petrodollar Warfare, treats this issue precisely, going in depth into the Petrodollar collapse and how the US maintains its dollar supremacy with its current imperialistic foreign policy. This gem of a book is a definite read for anyone wanting to know how the US truly maintains its power on the world stage.

Undoubtedly, the extent of US debt would never have been possible had the US dollar not been the reserve currency and had there been less favourable global trade policies to provide a channel for the distribution of dollars. (You can also read more about the Petrodollar here.)

Why must the debt grow every year?

To keep the debt-servitude paradigm going. To increase economic activity in a country operating in this type of system, you need to increase the level of credit and thus debt grows in tandem. This is self serving: if debt is the “fuel” to increase economic activity, interest payments will become larger and larger, until eventually it reaches a point where debt can no longer be increased. This point is known as the Minsky moment–when there is no net benefit to extra debt.

Adding debt, both public and private, creates an environment of servitude among the population while the banks are generating extra profits. Through their lobbyist groups, the financial terrorists create favourable laws to keep people enslaved with debt.

Real estate, for instance, is a heavily subsidized investment; such subsidies entice people to purchase real estate and as a result, people are unwittingly working for the banks. In a real free market, people save money for a purchase.

The word “save” is becoming archaic in this debt servitude paradigm, a paradigm that was build on sand and cards and that can and will eventually collapse. The foundation, of course, is confidence in the US dollar.

So there we have it, in our “creditopia” world, if debt does not expand, the economy cannot grow and jobs cannot be created. In order to increase debt, foreigners have to continually finance the ever growing debt by purchasing government bonds and selling consumer products to the US. In turn, the US must increase the level of consumption, decrease savings, and eliminate the threat of any nation posing a risk to the US dollar hegemony. Is this a symbiotic or a parasitic relationship? Is is certainly a relationship that cannot grow forever. It poses an economic risk for ALL nations due to the interconnectedness of the global economy.

 

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Sat, 01/05/2013 - 21:18 | 3126216 EARLPEARL
EARLPEARL's picture

i really believe the debt of the private sector...the debt of 200 million americans is 100 times bigger problem than the government debt....there can never be growth , or consumption, or any kind of meaningful recovery until the private sector gets their debt under control

Sat, 01/05/2013 - 23:00 | 3126366 Anusocracy
Anusocracy's picture

And government is a hundred times bigger problem than private and public debt.

It is the cause of both.

Sat, 01/05/2013 - 21:26 | 3126231 SgtSchultz
SgtSchultz's picture

Am I the only one getting a bit discouraged?

Sat, 01/05/2013 - 21:31 | 3126236 Yen Cross
Yen Cross's picture

 Long live " Hogans Heros"...

Sat, 01/05/2013 - 21:33 | 3126237 Yen Cross
Yen Cross's picture

 Cc.

Sat, 01/05/2013 - 21:33 | 3126238 Yen Cross
Yen Cross's picture

 Tyler has "Uncle Fester", running the servers. Appologies for the multiple post/

Sun, 01/06/2013 - 02:22 | 3126630 CrockettAlmanac.com
CrockettAlmanac.com's picture

Anybody with a UPS socket in their face can run my server anytime.

 

http://mollymediastudios.files.wordpress.com/2010/09/uncle-fester-light-...

Sun, 01/06/2013 - 12:16 | 3127007 GMadScientist
GMadScientist's picture

You're gonna want a step-down and some conditioners in there...Fester's not the most predictable power source.

 

Sun, 01/06/2013 - 05:38 | 3126718 bunnyswanson
bunnyswanson's picture

Not.  I actually wrote this in a moment of such elation, I can only remember parts of it.  (edited out webpage link .. i need to delete that)

My words: 

Hey Visalia, Let's join in supporting Barack and Joe! (Debate Watch Party - old)

I am hoping to attend or host a party here at my house, to get Visalian's moving in the Obama and Joe direction - Where are the yard signs, Visalia? Where are the bumpers stickers? The T-shirts? Why is the Obama and McCain headquarters "right beside one another." Is there no shame????? Is the democratic headquarters lacking in imagination or is it actually a republican headquarters in disguise????

There are people in this town who support Barack and Joe are looking for a place to gather and show their support. I will provide one if others are interested. Young people and children more than welcome. No republicans. Faint blur now.  It's unbelievable I had this much faith in the president.  It's really sad to see how wrong my judgement was.  I feel like I was tricked.

Sun, 01/06/2013 - 07:45 | 3126760 negative rates
negative rates's picture

How could you? Remember, you don't know anything.

Sat, 01/05/2013 - 21:30 | 3126235 blindman
blindman's picture

"..It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.
" .....
05 January 2013
Taibbi: Secret and Lies of the Bailout
http://jessescrossroadscafe.blogspot.com/2013/01/taibbi-secret-and-lies-...

Sat, 01/05/2013 - 22:06 | 3126293 Seasmoke
Seasmoke's picture

hey Matt, why not a family of niggers who moved in forever, sleeping nine to a bed and building a crack lab.....

Sat, 01/05/2013 - 22:55 | 3126360 Dr. Sandi
Dr. Sandi's picture

Yow, Hillbilly Backlash at Zero Hedge.

You go, Jethro.

Sat, 01/05/2013 - 23:33 | 3126403 akak
akak's picture

 

hey Matt, why not a family of niggers who moved in forever, sleeping nine to a bed and building a crack lab.....

Hey, now you're straying into Trav777's territory!

Sun, 01/06/2013 - 00:02 | 3126466 blindman
blindman's picture

ahh, the race thing just never stops. it
is like a metaphysical virus, pre-reproductive
dna type pre-life form. in the preconscious
and isolated mind . there it is. waiting to
live in some other's birth. where were we?
oh yea, the stealing of the treasury of the global
currency and treasury, that would be by mutant
inbred offspring of , not niggers, but pure bred
hillbillies. and color doesn't matter, it is the
nurture not the nature that breeds this dominant
ignorance and global stupidity. the conquest
forthcoming as relates to geopolitical advance of
resource allocation and "legitimacy" happens to
depend on appearance of simpatico-africano.
ie. o-man africa resource war vs china. banker
fed west vs/integrated the east pro-devel-uction/
transition. simultaneous rape of the west for
pocket padding and rule of yachts and pissing off
money to buy law, judges and politicians and whatever
other bullshit that can be bought with empty debt
note promises which includes most everything except
the real deal. nothing to see here ....

Sun, 01/06/2013 - 01:45 | 3126601 francis_sawyer
francis_sawyer's picture

I bet the chicks really dig that 'pillow talk' you lay on them...

Sun, 01/06/2013 - 03:23 | 3126677 blindman
blindman's picture

initially i was going to say ...
"please explain francis. take your time to
wipe yur gob and the saliva from your pillow biting
extravaganza, then proceed. i bet i have no interest
or concern regarding yur dementia other than how it
will detract from the general and particular individual
profit. aka, blow it out u'r ass tweed fuck nut."
..
but on second consideration i would say,
there are no chicks and no pillow talk.
there is only failed monetary systems and resulting
death and suffering for u, me and the chicks.
" good times " right francis?
u have a good day my friend and best to u, seriously,
best to u.

Sun, 01/06/2013 - 10:53 | 3126892 francis_sawyer
francis_sawyer's picture

if there are no chicks & no pillow talk... What the hell kind of world are we really fighting to establish?... [would be my reply]

~~~

I'll waste my time trolling someone else next time...

Sun, 01/06/2013 - 11:13 | 3126915 blindman
blindman's picture

thank you. i was going to delete
my comment in response but you got
there first, apologies if it was not
appropriate, it wasn't. at the time
i thought it had some humour to it.
uhhhyy. apologies f.s.

Sun, 01/06/2013 - 00:23 | 3126501 Yen Cross
Yen Cross's picture

 The , basement babies  are crying out  AKAK.

  The 2000?) It's time to write a letter with those digits you were born with!

  FUCK HEADS!  Your parents from the ghetto should be banished to an old leper colony!  Fucking scum!

Sun, 01/06/2013 - 04:05 | 3126686 bunnyswanson
bunnyswanson's picture

The slave owners are responsible for the broke families within the African American community and resultant strife.  And this method they used can be applied to anyone who requires reprogrammed to obey the rules.  First Lady is the great granddaughter of a slave.  The stories that must be told during the holiday, in honor and remembrance of them. 

From article:  The Willie Lynch Letter

"The following excerpt from the Willie Lynch letter explains the process of destroying and rewiring our ancestor’s psyche.

“Both a wild horse & a wild or natural nigger is dangerous even if captured, for they will have the tendency to seek their customary freedom, and in doing so might kill you in your sleep. Hence both the horse & the nigger must be broken, that is breaking them from one form of mental life to another, keep the body and take the mind.

In other words, break the will to resist.” From this point he breaks down the gruesome degrading breaking process. The main agenda was to break the black family apart, dehumanize the male, which destroys the dependence & respect the female has for the male, resulting in her striving for her independence from the male.

Destroying the family dynamics, and removing the black male as the head of the family was just the starting point to rewire the psyche of our ancestors."

http://therichhistory.wordpress.com/

Sun, 01/06/2013 - 12:23 | 3127021 GMadScientist
GMadScientist's picture

"why not a family of niggers"

Because the analogy was to bankers and there are precious few black faces in those circles.

Besides...everyone knows it's more like they moved in, sublet your house to hillbillies and crackheads, pimped your wives and daughters at "Solomon's Bunny Ranch", and then proceeded to sue you after they slipped and fell on their own feces.


Sun, 01/06/2013 - 12:35 | 3127050 DosZap
DosZap's picture

Because the analogy was to bankers and there are precious few black faces in those circles.

Dont have to be BLACK to be called Nigger dude, check out the defintion.

Sat, 01/05/2013 - 23:25 | 3126391 andyupnorth
andyupnorth's picture

Matt Taibbi Chrysostom (aka "of the Golden Mouth").

Sun, 01/06/2013 - 04:22 | 3126692 Element
Element's picture

Had wondered what Taibbi was up to, cheers - direct link

http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout...

Sat, 01/05/2013 - 21:35 | 3126242 PUD
PUD's picture

Just play the hand out logically....every manjack saves nothing, maxes out every source of credit to the point that all his income goes towards debt service even at the lowest increment above zero possible....then what? Can he consume on grain of rice more?

This is the financial system we live under. It's what's made everything currently in existence possible...but obviously it is finite isn't it?

Debt as money, usury, interest on money that compounds relentlessly staved off all these years by ever greater debt creation and velocity of money until all walls are hit

Debt based money was always a flawed and doomed to fail system. Nothing in nature can compound grow infinitely. Bacteria in a petri dish will double and double again and again until all the growth medium is consumed...then they all die. Only nature has laws, men have rules. They are not the same.

Zero interest rates and zero savings is the wall. It is the economic speed of light that cannot be exceeded. We are there. With no savings to spend and no credit to draw on there can be no more money creation. Without more money creation there can be no growth. You cannot prime a dry hole.

Bubble economics has bought time. The inflation of various assets has created more money credit that could be tapped for a time...housing, dot com, student loans, sovereign debt bubbles that we now enjoy. What entity remains? Extraterrestrial?  No, there is no higher predator in the money food chain, the can has been kicked as far as it can go, no more money credit can be created without the destabilizing effects of inflation and devaluation which we are witness to now as well.

The only question remains is when not if the cogs seize up for good and what comes of the chaos that will ensue...I wish I had a clue about that. 

Sat, 01/05/2013 - 22:51 | 3126359 Lucius Corneliu...
Lucius Cornelius Sulla's picture

"The only question remains is when not if the cogs seize up for good and what comes of the chaos that will ensue...I wish I had a clue about that. "

It is very predictable because it has happened numerous times.  Currency debasement and debt collapses are nothing new.  There really is nothing new under the sun.  Read some history.

Sat, 01/05/2013 - 22:57 | 3126363 Dr. Sandi
Dr. Sandi's picture

The beauty of the human mind is that even when we end up living amid chaos, it all seems so NORMAL.

The visitor is generally amazed that "they can live like that."

Sat, 01/05/2013 - 21:38 | 3126247 monad
monad's picture

Time of your life, huh kid?

Sat, 01/05/2013 - 21:39 | 3126250 pauhana
pauhana's picture

Jeez, I feel like such a jerk for not having a mortgage or any other debt.  At least my "investments" don't earn any actual money unless I sell them (Thank you, Ben!) so that the crappy $30k I get from SS and pension put me in the "Congratulations!  You're getting a refund!" category.  Now all I have to worry about is the complete collapse of the entire world financial system.  Buddy, can you spare a $1 Trillion dollar coin?

Sat, 01/05/2013 - 21:44 | 3126256 Dark Meadowlark
Dark Meadowlark's picture

What Debt Crisis? ANYONE SEE THE the FREAKING yield curve and stock market  lately? FED= winning!

Sat, 01/05/2013 - 21:59 | 3126278 q99x2
q99x2's picture

I don't know how high it can go but since they are going to disarm the population shortly. The banksters will probably begin killing us by the end of 2013. They just purchased another 200,000,000 rounds to add to the 1,600,000,000 rounds already in stock at DHS.

Sat, 01/05/2013 - 22:47 | 3126351 CompassionateFascist
CompassionateFascist's picture

I sent an e-mail to Feinstein's office stating that if she wants my M1a, she can come for it in person. Chickenhawk neo-conz aside, the ZOG isn't going to disarm anyone...not w/o sparking civil war. Molon Labe.

Sun, 01/06/2013 - 02:30 | 3126640 CrockettAlmanac.com
CrockettAlmanac.com's picture

I'll bet you used a really large font.

Sat, 01/05/2013 - 22:10 | 3126280 ElTerco
ElTerco's picture

 

"Why must the debt grow every year?"

The real answer?  Assume there were a fixed amount of money (i.e. gold).  There will always be a portion of the population that has a propensity to accumulate more money than is offset by their individual ability to produce.  In very short order, all the money would end up with this class of people, eventually forcing all those who accumulate roughly as much as they produce out of the economy.  Therefore we must have an accumulation of debt every year so that those who produce roughly equal to their consumption won't be frozen out by those who are good at taking but not good at giving back.

Clearly, this explanation is not perfect, but for the most part, this is the root of the problem.

Sun, 01/06/2013 - 09:25 | 3126805 Quinvarius
Quinvarius's picture

Let me correct that disaster of a post:

Assume there were a fixed amount of money (i.e. gold). There will always be a portion of the population that has a propensity to accumulate money as savings to retire on.  In very short order, all the money would end up in banks, eventually being loaned into the economy by the banks.  Therefore we must have an accumulation of savings in gold every year.  Then, those who run banks won't be forced to get money from the government when people stop putting savings into useless fiat coupons and stop depositing the useless depreciating coupons in banks.  This also benefits the gold savers who were very smart to save their money and earn a return from the banks, who then loaned it out into the economy to create businesses.

There.  Now you understand economics.

 

Sun, 01/06/2013 - 15:06 | 3127345 ElTerco
ElTerco's picture

The problem with what you just said is that banks don't loan out gold, they loan out promises for gold that doesn't exist (i.e. debt).  I stand by what I said.

 

PS For those who might have misinterpreted my post, there are two clear examples of people who take more than they give back: welfare recipients and bankers.  The middle class is the productive part of society that ends up getting squeezed out, and without debt, there would be no more middle class.

Sat, 01/05/2013 - 22:12 | 3126300 Yen Cross
Yen Cross's picture

  Tyler ,  You forgot the "Squid Blimp".  Blankfein and Bloomturd throwing (EBT) cards upon the masses...

Sat, 01/05/2013 - 22:30 | 3126318 tooriskytoinvest
tooriskytoinvest's picture

HOLY SHIT!!!

H.J.Res. 15 amendment to remove term limits on the President of the United States http://investmentwatchblog.com/h-j-res-15-amendment-to-remove-term-limits-on-the-president-of-the-united-states/
Sat, 01/05/2013 - 22:58 | 3126364 Dr. Sandi
Dr. Sandi's picture

Yeah, that'd play well in the RED STATES that would also have to ratify a constitutional change.

Sun, 01/06/2013 - 09:46 | 3126822 Quinvarius
Quinvarius's picture

This country is a banana republic.  Obama could do it with a signing statement.  McCarthy was right.  We do have a problem with Communism in this country.

Sun, 01/06/2013 - 09:51 | 3126828 Winston Churchill
Winston Churchill's picture

Didn't matter when the 16th amendment did NOT get the required majority of States

to ratify.

Go and count them yourself if you don't believe me. I did.

One short.

Sat, 01/05/2013 - 22:30 | 3126319 espirit
espirit's picture

TBTF = Sunk Costs.

http://en.wikipedia.org/wiki/Sunk_costs

Societal Collapse Bitchez.

Sat, 01/05/2013 - 22:31 | 3126325 blindman
blindman's picture

To be fair, Paulson started out by trying to tell the truth in his own ham-headed, narcissistic way. His first TARP proposal was a three-page absurdity pulled straight from a Beavis and Butt-Head episode – it was basically Paulson saying, "Can you, like, give me some money?" Sen. Sherrod Brown, a Democrat from Ohio, remembers a call with Paulson and Federal Reserve chairman Ben Bernanke. "We need $700 billion," they told Brown, "and we need it in three days." What's more, the plan stipulated, Paulson could spend the money however he pleased, without review "by any court of law or any administrative agency."

The White House and leaders of both parties actually agreed to this preposterous document, but it died in the House when 95 Democrats lined up against it. For an all-too-rare moment during the Bush administration, something resembling sanity prevailed in Washington.

Sat, 01/05/2013 - 22:34 | 3126333 blindman
blindman's picture

from same link ...."
So Paulson came up with a more convincing lie. On paper, the Emergency Economic Stabilization Act of 2008 was simple: Treasury would buy $700 billion of troubled mortgages from the banks and then modify them to help struggling homeowners. Section 109 of the act, in fact, specifically empowered the Treasury secretary to "facilitate loan modifications to prevent avoidable foreclosures." With that promise on the table, wary Democrats finally approved the bailout on October 3rd, 2008. "That provision," says Barofsky, "is what got the bill passed."

But within days of passage, the Fed and the Treasury unilaterally decided to abandon the planned purchase of toxic assets in favor of direct injections of billions in cash into companies like Goldman and Citigroup. Overnight, Section 109 was unceremoniously ditched, and what was pitched as a bailout of both banks and homeowners instantly became a bank-only operation – marking the first in a long series of moves in which bailout officials either casually ignored or openly defied their own promises with regard to TARP."
.
and there is more ..

Sat, 01/05/2013 - 22:38 | 3126341 km4
Sat, 01/05/2013 - 23:26 | 3126349 Yen Cross
Yen Cross's picture

  Risk> Reward  (1-2%) of asset pool. 

 Fed. Risk reward. 16.4T vs 2.3T based on ponzi reporting = { 16.4 ÷ 2.3}/ 7.1304%

 

 That is the "Federal Reserve" risk ratio! Excluding all other axioms, which the Fed. CBO, GAO does in it's reporting!

 Updated; 16.4T over 2.7T. *

Sat, 01/05/2013 - 22:58 | 3126362 ebworthen
ebworthen's picture

To the moon!  No wait, Saturn, no, Pluto; err...maybe a black hole somewhere...

Sun, 01/06/2013 - 07:55 | 3126766 negative rates
negative rates's picture

To many people on Mars right now, it needs some depopulation and soon from what I see. You either run into an asteroid belt and grow cold. Or skip the Earth and Venus (cause you are not welcome there) and it's straight to Mercury, or if one misses that, it's the sun for you my son.

Sat, 01/05/2013 - 23:01 | 3126369 ABG LINE
ABG LINE's picture

Buy Bonds or Notes.

Sun, 01/06/2013 - 07:49 | 3126763 SanOvaBeach
SanOvaBeach's picture

Have balls or ovaries, buy BitCoin!

Sat, 01/05/2013 - 23:03 | 3126370 ReptilianSlaveMaster
ReptilianSlaveMaster's picture

Great news everyone! Collect your 40k in benefits and stop complaining, government knows whats best

Sat, 01/05/2013 - 23:13 | 3126378 blindman
blindman's picture

oh, and the shite continues here ..
.
Secret and Lies of the Bailout

The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come
Read more: http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout...

."
"In the letters, Summers laid out a five-point plan in which the bailout was pitched as a kind of giant populist program to help ordinary Americans. Obama, Summers vowed, would use the money to stimulate bank lending to put people back to work. He even went so far as to say that banks would be denied funding unless they agreed to "increase lending above baseline levels." He promised that "tough and transparent conditions" would be imposed on bailout recipients, who would not be allowed to use bailout funds toward "enriching shareholders or executives." As in the original TARP bill, he pledged that bailout money would be used to aid homeowners in foreclosure. And lastly, he promised that the bailouts would be temporary – with a "plan for exit of government intervention" implemented "as quickly as possible."

The reassurances worked. Once again, TARP survived in Congress – and once again, the bailouts were greenlighted with the aid of Democrats who fell for the old "it'll help ordinary people" sales pitch. "I feel like they've given me a lot of commitment on the housing front," explained Sen. Mark Begich, a Democrat from Alaska.

But in the end, almost nothing Summers promised actually materialized. A small slice of TARP was earmarked for foreclosure relief, but the resultant aid programs for homeowners turned out to be riddled with problems, for the perfectly logical reason that none of the bailout's architects gave a shit about them. They were drawn up practically overnight and rushed out the door for purely political reasons – to trick Congress into handing over tons of instant cash for Wall Street, with no strings attached. "Without those assurances, the level of opposition would have remained the same," says Rep. Raúl Grijalva, a leading progressive who voted against TARP. The promise of housing aid, in particular, turned out to be a "paper tiger."" .....

Sat, 01/05/2013 - 23:14 | 3126380 JR
JR's picture

The economic crisis, after all has a cause. It’s usury…fought for centuries in Europe, but in America, after these 100 years, its impact has finally reached the point of full destruction of the economy. Its impact also can be felt on the European Union.

The writer Sheldon Emry in Billions for the Bankers, Debts for the People, written in 2001, lays out a clear outline of how this usury has become established as a prelude to the ‘solution’ -- a banker-imposed dictatorship on America. Highlights:

MONEY IS MAN’S ONLY ‘CREATION’: “Economists use the term ‘create’ when speaking of the process by which money comes into existence. Now, creation means making something that did not exist before. Lumbermen make boards from trees, workers build houses from lumber, and factories manufacture automobiles from metal, glass and other materials. But in all these they did not ‘create,’ they only changed existing materials into a more usable and, therefore, more valuable form. This is not so with money. Here, and here alone, man actually ‘creates’ something out of nothing. A piece of paper of little value is printed so that it is worth a piece of lumber. Its value has been ‘created’ in the true sense of the word.

“As is seen by the above, money is very cheap to make, and whoever does the ‘creating’ of money in a nation can make a tremendous profit!! Builders work hard to make a profit of 5% above their cost to build a house.

“Auto makers sell their cars for 1% to 2% above the cost of manufacture and it is considered good business. But money ‘manufacturers’ have no limits on their profits, since a few cents will print a $1 bill or $10,000 bill…

“[F]rom 1913 on, ALL of our money has been created and issued by an illegal method that will eventually destroy the United States if it is not changed. Prior to 1913, America was a prosperous, powerful, and growing nation, at peace with its neighbors and the envy of the world. But, in December of 1913, Congress, with many members away for Christmas holidays, passed what has since been known as the FEDERAL RESERVE ACT…

“Since that ‘day of infamy,’ more disastrous to us than Pearl Harbor, the small group of ‘privileged’ people who lend us ‘our’ money have accrued to themselves all of the profits of printing our money—and more! Since 1913 they have ‘created’ tens of billions of dollars in money and credit, which, as their own personal property, they then lend to our government and our people at interest. ‘The rich get richer and the poor get poorer…’”

THEY PRINT IT—WE BORROW IT AND PAY THEM INTEREST: “We shall start with the need for money. The Federal Government, having spent more than it has taken from its citizen in taxes, needs, for the sake of illustration, $1 billion. Since it does not have the money, and Congress has given away its authority to ‘create’ it, the Government must go the ‘creators’ for the $1 billion…the Government has now indebted the people to the Bankers for $1 billion on which the people must pay interest… Under this unholy system, those United States bonds have now become ‘assets’ of the Banks in the Reserve System which they then use as ‘reserves’ to ‘create’ more ‘credit’ to lend…

“In addition to the vast wealth drawn to them through this almost unlimited usury, the bankers who control the money at the top are able to approve or disapprove large loans to large and successful corporations to the extent that refusal of a loan will bring about a reduction in the price that the corporations’ stock sells for on the market. After depressing the price, the bankers’ agents buy large blocks of stock, after which the sometimes multi-million dollar loan is approved, the stock rises, and is then sold for a profit. In this manner billions of dollars are made with which to buy more stock. This practice is so refined today that the Federal Reserve Board need only announce to the newspaper an increase or decrease in their ‘discount rate’ to send stock up and down as they wish. Using this method since 1913, the bankers and their agents have purchased secret or open control of almost every large corporation in America. Using that control, they then force the corporations to borrow huge sums from their banks so that corporation earnings are siphoned off in the form of interest to the banks. This leaves little as actual ‘profits’ which can be paid as dividends and explains why stock prices are so depressed, while the banks reap billions in interest from corporate loans. In effect, the bankers get almost all of the profits, while individual stockholders are left holding the bag.

“The millions of working families of America are now indebted to the few thousand banking families…and these banking families obtained that debt against us for the cost of paper, ink, and bookkeeping!”

For a debt-free, prosperous America, end the Fed.

Sat, 01/05/2013 - 23:28 | 3126396 Yen Cross
Yen Cross's picture

 Nice "long form" explanation J.R. +1

Sun, 01/06/2013 - 03:11 | 3126672 francis_sawyer
francis_sawyer's picture

I've taken to calling them "joobux"... You know ~ for simplification & all...

Sun, 01/06/2013 - 08:06 | 3126772 SanOvaBeach
SanOvaBeach's picture

Your a racist pig!  Obama was born in Kenya, all black people are lazy and on welfare, God is my guide, and last but not least...............u stupid redneck fucks out there, u know who you are, add the last one!

Burma Shave

Sun, 01/06/2013 - 08:10 | 3126773 SanOvaBeach
SanOvaBeach's picture

Keep the Fed going!  I need $$$ for that spread in Montana...

Sat, 01/05/2013 - 23:25 | 3126393 blindman
blindman's picture

at risk of preaching to the choir, oh my god ..
there is more ....
"..HAMP, the signature program to aid poor homeowners, was announced by President Obama on February 18th, 2009. The move inspired CNBC commentator Rick Santelli to go berserk the next day – the infamous viral rant that essentially birthed the Tea Party. Reacting to the news that Obama was planning to use bailout funds to help poor and (presumably) minority homeowners facing foreclosure, Santelli fumed that the president wanted to "subsidize the losers' mortgages" when he should "reward people that could carry the water, instead of drink the water." The tirade against "water drinkers" led to the sort of spontaneous nationwide protests one might have expected months before, when we essentially gave a taxpayer-funded blank check to Gamblers Anonymous addicts, the millionaire and billionaire class.

In fact, the amount of money that eventually got spent on homeowner aid now stands as a kind of grotesque joke compared to the Himalayan mountain range of cash that got moved onto the balance sheets of the big banks more or less instantly in the first months of the bailouts. At the start, $50 billion of TARP funds were earmarked for HAMP. In 2010, the size of the program was cut to $30 billion. As of November of last year, a mere $4 billion total has been spent for loan modifications and other homeowner aid."""
and more ...

Read more: http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout...

Sat, 01/05/2013 - 23:45 | 3126405 Yen Cross
Yen Cross's picture

Embrace your elders. Wisdom prevails. 

  Confucius say, " In a country well governed poverty is something to be ashamed of".

  Fuck off entitled libtards! You get work , or get steam roled!  No moar Starbucks!

Sun, 01/06/2013 - 00:17 | 3126485 bunnyswanson
bunnyswanson's picture

Have you ever considered that when the sold homes to people without verifiable income, AKA ~Predatory Lending~ that the banks were banking on the home owner failing to keep up with payments and that when the time would come, the plan was already in place to do the modifications - so to clear up the documents - call it laundering if you must - it's the same fucking thing.

The cash flow from this debacle is still flowing.  We don't hear about TARP warrants but apparently if you buy these "warrants" as investments, they can pay up to 175% return if the bank repays the TARP loan.  The borrowing bank must buy TARP warrants and then sell them as I understand it (correct me if I am wrong).

No one seems to know about these warrants - they were not promoted - another dirty little secret - but someone has, surely the investors on here have made some $$$ on TARP warrants.

I passed on a modification, even after dropping from 60 grand a year to 23 grand (now at 40).  But the bank keeps calling.  Last week, Chase FedEx an offer - a guarantee refi at a low rate .. begging me to fill it out by 1/3 of the offer expires.  But, I am an independent contractor and altho I am making my payments, may not meet their criteria as I did when I bought this play (14 years ago with 20 grand down fuck you very much).

Sun, 01/06/2013 - 00:27 | 3126507 Yen Cross
Yen Cross's picture

 Bunny/ Are you Mentally Ill?  If you want to quantify/justify your business dealings on Z/H thats fine.

  Just change your douche bag before you mess with me!

Sun, 01/06/2013 - 07:43 | 3126758 SanOvaBeach
SanOvaBeach's picture

Blow me!

Sun, 01/06/2013 - 10:22 | 3126866 Winston Churchill
Winston Churchill's picture

You are wise not to take up the HAMP mod.

If you can afford it you may want to spend $1500 on a forensic accountant,

and title report report on your loan.

75% chance its unenforcible even if the true lender came forward,which they won't for

a whole laundry list of legal ,and tax reasons.

Screw the banks, just as they are screwing us.

Sun, 01/06/2013 - 07:46 | 3126761 SanOvaBeach
SanOvaBeach's picture

Your a stupid redneck!  U lost the election fuck head, get over it....

Sun, 01/06/2013 - 12:17 | 3127009 Ralph Spoilsport
Ralph Spoilsport's picture

And "U" won the election but will lose the war along with the rest of us.

Sun, 01/06/2013 - 00:01 | 3126459 bunnyswanson
bunnyswanson's picture

Here is a link to the pitiful stories from 119 people who are attempting a Chase Bank modification.  They are all the same.  Waiting, denied, foreclosure.  Waiting, denied, foreclosure.  Most are refi attempts.  None that I came across were investors or people living on a shoe string budget  who should live in a shoe errr apartment or house rental...not own a home (the dream).

 

http://mychaseloanmodification.com/saving-my-home-from-jp-morgan-chase/

One woman’s relentless chase to obtain a loan modification from JP Morgan Chase.

In the last fourteen months Chase has repeatedly denied my request for a loan modification. Reasons have ranged from “lack of hardship” to “too much equity”; “unable to verify residency” and “still have three months cash on-hand”. They all add up to the same thing: Chase wants to further exploit the predatory lending practices employed by Washington Mutual, utilizing opaque banking procedures in the name of profits, all at the expense of the American taxpayer.

If I knew back in February 2009, or even August 2009, what I know today — that the investors behind my loan prefer to foreclose rather than work with me on a modification — I could have made an informed decision; instead I am scrambling to save my home with all the cards stacked against me.

Read my letter to David B. Lowman, CEO Chase Home Lending, JP Morgan Chase, regarding his April 13, 2010 testimony before the House Committee on Financial Services. Follow my search for answers.

Although it has been repaid, JP Morgan Chase received $25 billion in federal funding (TARP money) in a taxpayer funded bailout which helped facilitate the bank’s subsequent growth.

JP Morgan Chase also received $41 billion from the FDIC through a taxpayer backed debt issuance program. This money has not been repaid. In 2008, JP Morgan Chase absorbed Washington Mutual; the risks and costs associated with this deal were taxpayer funded.

Sun, 01/06/2013 - 08:00 | 3126769 SanOvaBeach
SanOvaBeach's picture

I actually don't give a screaming fuck if you lose your home or not.  Hey, ego-boy!  U never had a home in the first place.  Just a big fucking loan you could not afford. Now that I have all your $$$$ (I'm an investor in JP Morgan Chase) we are gonna throw you to the dogs!  And there is not a fucking thing u can do about it!  Burma Shave

Sun, 01/06/2013 - 08:25 | 3126776 SanOvaBeach
SanOvaBeach's picture

If I take out a 50 million business loan to start-up a business making blue widgets w/ spots.  My strong feeling is blue widgets w/ spots are gonna sell like hot cakes.  I'm WRONG!  My business fails!  Do I blame the bank for my failed business?  Let us take this another way.  I take out a $850,000 home loan because the house is gonna keep going up in price.  After all the value of homes has not gone down since the Great Depression.  I'm WRONG!  The values have gone down.  Do I blame the bank for my wrong decision.  Do I or should I take a sleg hammer and bust up everything inside just before I'm foreclosed on?  When I took out that home loan, my eyes were wide open  I knew what I was getting into.  Don't blame the bank losers, blame youself!

Sun, 01/06/2013 - 07:47 | 3126762 SanOvaBeach
SanOvaBeach's picture

Got BitCoin?

Sun, 01/06/2013 - 11:00 | 3126897 francis_sawyer
francis_sawyer's picture

Don't blame BitCoin... Blame yourself... [some day in the future]...

Sun, 01/06/2013 - 12:35 | 3127049 SanOvaBeach
SanOvaBeach's picture

U don't even know what Bitcoin is u goof!  Thats like, "bears are bad".  "What is a bear?"  "What is a bear?".  "I don't know, but their bad".  I love your since of logic!  Kind of reminds me of Nutneg Whitman.

Sat, 01/05/2013 - 23:30 | 3126395 samsara
samsara's picture

And Now class as a further indication that the Obama Whitehouse is just the 3rd term of Bush/Cheney, we look at the US Debt Ceiling graph. Notice that Bush/Obama period is a perfect progression.

Look at the graph just since 911. That is a major trend change starting point.

Do you ever imagine what things would be like if there wasn't a 911?

Sun, 01/06/2013 - 00:44 | 3126526 knukles
knukles's picture

You mean like the good old days.

(Jesus H Fucking Christ!  Did I really say that?  Next thing I'll be reminiscing about those good olde "Impeach Earl Warren" signs farmers used to have painted on the sides of their barns.)

 

Don't have to feel
Like Matrix meat
Becuse you ate
The red pill
Sweet!!

Burma Shave

Sun, 01/06/2013 - 07:42 | 3126757 SanOvaBeach
SanOvaBeach's picture

Kopy Kat.............think-up your own shit, asshole!!!!!!!!!!!!!!!

Burma Shave

 

 

Sun, 01/06/2013 - 02:24 | 3126633 mendigo
mendigo's picture

Its a very good point.
Basically osama managed to bankrupt the nation.
I thing that in fact he pretty much died laughing at our ignorant response to an isolated act of terrorism. He succeeded beyond his wildest dreams at collapsing an almost great nation.
the connect used the event as an excuse to fleece the nation. Just as well a nation so ignorant and lazy is dangerous and needs to be stripped of its influence.

Sun, 01/06/2013 - 12:24 | 3127025 mvsjcl
mvsjcl's picture

Osama? Really? And his 19 boxcutter-wielding cohorts? And one large container of laws-of-physics-suspending magical pixie dust? You mean that Osama?

Sat, 01/05/2013 - 23:42 | 3126413 ramacers
ramacers's picture

don't get mad, get.... and hone the blade for the smug, elitest political master classers.

Sat, 01/05/2013 - 23:50 | 3126437 Yen Cross
Yen Cross's picture

 Pythagoream Theorems of finance /  I thought Quantum {fuzzy economics} solved Human Nature, and it's spending habits?

Sat, 01/05/2013 - 23:59 | 3126455 malek
malek's picture

The article is pointless unless it introduces the concept of notional debt... which can grow indefinitely.

Sun, 01/06/2013 - 00:07 | 3126474 yogibear
yogibear's picture

It keeps increasing until it's realized that Skittle Pooping Unicorns don't exist. 

Right now the Bernanke and the the Federal Reserve keep printing to make people believe that Skittle Pooping Unicorns do exist.

Wouldn't be a bit surprised to see Fitch, Moody's and S&P change nothing until US debt is well over $20 trillion. Who's your daddy raping agencies, Fitch, Moody's and S&P?

Sun, 01/06/2013 - 07:40 | 3126754 SanOvaBeach
SanOvaBeach's picture

Got Bitcoin?

Sun, 01/06/2013 - 00:12 | 3126476 Yen Cross
Yen Cross's picture

  For some wierd reason April comes to mind. No guidance= forward earnings. Europe in a quagmire.

 Ask Steve Lies-Man?  Sock Puppet > extraordiniare 

 The Krugmanites are out tonight. Too much time on their hands. /pussys/

Sun, 01/06/2013 - 00:21 | 3126496 blindman
blindman's picture

oh shite ...
"In the end, there was no lending requirement attached to any aspect of the bailout, and there never would be. Banks used their hundreds of billions for almost every purpose under the sun – everything, that is, but lending to the homeowners and small businesses and cities they had destroyed. And one of the most disgusting uses they found for all their billions in free government money was to help them earn even more free government money." ...

Read more: http://www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout...

Sun, 01/06/2013 - 00:28 | 3126510 Kreditanstalt
Kreditanstalt's picture

Answer: The debt crisis can go on indefinitely.

No one has yet given me any reason why the Fed's balance sheet can't be indefinitely expanded as far as necessary.  In fact, it need never shrink...

Sun, 01/06/2013 - 00:54 | 3126552 bobert
bobert's picture

A popular uprising is your answer.

Sun, 01/06/2013 - 11:02 | 3126898 francis_sawyer
francis_sawyer's picture

Beats the hell out of an 'unpopular' uprising...

Sun, 01/06/2013 - 11:02 | 3126899 francis_sawyer
francis_sawyer's picture

Beats the hell out of an 'unpopular' uprising...

Sun, 01/06/2013 - 08:48 | 3126788 SanOvaBeach
SanOvaBeach's picture

Your right, sweetheart!  And this blog well keep on going and going.  Keep's gett'in propped-up.  Don't yea just love it! $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Sun, 01/06/2013 - 00:31 | 3126514 holdbuysell
holdbuysell's picture

According to the videos in the links provided here, the fall of the petrodollar is enough by itself to cause a collapse in the currency. And China is well on its way to enable this.

Bernanke would not even need to hit the CTRL-P again to cause the fall, But he'll need to do so to continue to fund the military to defend it.

Fait accompli.

Sun, 01/06/2013 - 00:33 | 3126517 Yen Cross
Yen Cross's picture

 Ok everyone. Based on the Friday close. Risk is going higher, after the gap gets filled in Asia.

 

    Europe will fill the trading screen next week.  Be well/ trade well

Sun, 01/06/2013 - 00:44 | 3126533 tony bonn
tony bonn's picture

"...jobs and manufacturing are being lost to more competitive nations..."

more competitive my ass, asshole! it's called slave labor.....nike plus many other us manufacturers pay the most selfish pecuniary wages since white plantation owners fed slaves 1 or 2 meals per day. i do not buy nike anything - they are slave owners....

on the other hand, the federal reserve runs a consol system which means perpetual debt, perpetual interest, and perpetual slavery, just the way slaveholder nike wants it. abolish the fed to free your selves....and chalmers johnson already described the imperialistic dynamic of reserve currency nations and their foreign aggressions to maintain their luxurious self indulgent selfish lifestyles long before the goober you cite did so. but a good truth is always worth retelling.

Sun, 01/06/2013 - 07:38 | 3126752 SanOvaBeach
SanOvaBeach's picture

The robots at my factory have made me and investors millions.  The plant is located in SoCal.  Have a nice day!

Sun, 01/06/2013 - 01:11 | 3126569 Bansters-in-my-...
Bansters-in-my- feces's picture

"Why did the US debt grow to these proportions?"

Answer = Compound interest from private bankers.
Oh ya.....Bitchez.!!!

Sun, 01/06/2013 - 01:21 | 3126577 blindman
blindman's picture

debt is all, that is the source and salvation,
there is nothing beyond debt in a debt based
colony. the identity of the owner and extender
of the debt, from thin air, is just the lord, an
aspect of one's own self, metaphysically transcribed
into the consciousness of the individual mind stuff.
the servant becomes the self and soldier dependent
and part and parcel ....
soul soldier
http://www.youtube.com/watch?v=PPKZW8c2E40&list=UULwXLS-KHDAABP02xEzplsg...
.
but there is always, thankfully, resistance and rebellion.
and on a good day, music

Sun, 01/06/2013 - 01:51 | 3126604 jonjon831983
jonjon831983's picture

Wow shit. Austria derivatives bomb "Austria plugs regional finance loopholes after scandal"

http://www.reuters.com/article/2013/01/05/us-austria-finances-idUSBRE904...

 

 

"They put the book loss at 340 million euros ($444 million), but experts are still trying to determine the state's exact exposure."

 

This woman probably is the fall... woman.  Guessing a case of plausible deniability for the gov't.

Sun, 01/06/2013 - 02:36 | 3126619 Tom Green Swedish
Tom Green Swedish's picture

But just like your life that debt fuels growth and debt is money.  If you spend it on worthless crap and not investments though its just throwing it away. If you spend your home mortgage loan on a vacation or a boat, you're not going to get any returns, but if you use it to buy something that produces something it will.  Like the jelly of the month club.  It's the gift that keeps on giving. But buying a jelly factory is no fun. Which is the case of the USA.  We are borrowing money to support welfare, unemployment and regulation / law enforcement / military, basically crap that doesn't make anything grow but the government and retailers (Sales Tax + Retailers 35 percent corporate tax rate).  You don't grow a country that way, because eventually you have to pay the money back (plus interest - 200 billion a year), and quite frankly maybe Japan and some other countries might want our military technology or even our greatest friendly Big Red China might too, (great news for us), I really don't think we're going to get much out of our investment in welfare and unemployment benefits.    Would probably be better to spend it on whores, at least they're not a threat to our economy, unless they go on a Chinese spending spree.  Women make more money nowadays anyways.  Fuck it.

 

Here's what I'm saying.  Even if you run big huge deficits you can get away with it as long as it will provide for the future.  The USA is clearly not doig this besides with military expenditures on technology - that's it and unless they are about ready to bust of the Tesla death ray (which he said would only cost 2 million to build) I doubt we got our money's worth, in all reality we're paying 1 million a year to have some foot soldier paint shit in Afghanistan each year.  The regulations the welfare it gets us nothing in return.  It's just like if I used my credit card to amass a huge debt in some gold mine.  Yea I'll have a huge deficit but it will repay itself.

 

On the bright side, I'm sure Asia will be happy to lend to us until we stop buying their stuff.  Then at which time when they hit their peak we become even and turn into Greece and have our own 97 Asian debt crisis meltdown which would surely fuck things up but would make their labor uncompetitive with our crap minimum wage, and or the rest of the world's for that matter and make them equal to us, or perhaps not if we INVEST IN JOBS FOR THE FUTURE. Seriously, if these clothing and electronic manufacturers can't find a way to make a 5 pairs of jeans in an hour with a minimum wage serf thing will continue to suck for them.  But money is just a tool for their Agenda 21.

Sun, 01/06/2013 - 02:34 | 3126637 jonjon831983
jonjon831983's picture

The idea of collapse of reserve currency and the effect is out there... spreading... but the details and path perhaps are only starting to be revealed.  Only some people have heard of this.  Even fewer if any even understand the significance of this... and then the question of how it comes about...

But as more countries move away from using the reserve currency ie. bi lateral FX deals between china or russia or india with other countries... then slowly game over.

IMO The key of Oil... for USA to survive in post-reserve currency world they need alternate sources of Oil.  Friendly... like Canada... or domestic... otherwise, currency hyperinflation time and they'll be locked out of access to Oil and everything else dependent upon USD for purchase.

Sun, 01/06/2013 - 06:26 | 3126732 groundedkiwi
groundedkiwi's picture

Iran is surviving without the reserve currency. 2013 we may see a reset with Iran as the sanctions are hurting the reserve currency more than they are hurting Iran

Sun, 01/06/2013 - 13:40 | 3127166 jonjon831983
jonjon831983's picture

I would think they're surviving because the "others" ie China/Russia are supporting them.  Especially since the heat turned up big time after Libya and now Syria.

Sun, 01/06/2013 - 12:43 | 3127067 JR
JR's picture

There may be more oil in the U.S. than in the entire Middle East according to several claims.

One claim is that the Bakken oilfield in the Dakotas and eastern Montana has the “largest oil reserve in the world. Only a thousand feet beneath the Rocky Mountains lie more than 2 trillion barrels of oil.

“This is more oil than the entire officially proven oil reserves in the world.” In fact, it's enough to fuel the American economy for 30 years.

The bakkenblog reports:”The Bakken (BOKK-en) and Three Forks are vast, deep rock formations rich in both natural gas and quality crude underlying much of the western third of North Dakota in addition to broad areas of both Montana and Saskatchewan, an area the size of France.”

http://www.bakkenblog.com/bakken/HOME.html

Sun, 01/06/2013 - 13:45 | 3127177 jonjon831983
jonjon831983's picture

Apparently, there is one off the coast of Cali as well.  The issue is how good these sources are in terms of quality, amount recoverable, and how fast they dry up.  I think Testosterone Pit had a posting about Fracking in general.

Methinks there is plenty of good recoverable oil within US territory, it's just been saved for a "rainy day" and protected by regulations and creation of national parks.

Sun, 01/06/2013 - 14:22 | 3127265 JR
JR's picture

Agreed! Thanks.

Sun, 01/06/2013 - 03:28 | 3126649 Lord Of Finance
Lord Of Finance's picture

 

 

 

Bluto

Sun, 01/06/2013 - 02:51 | 3126660 blindman
blindman's picture

20 years o schooling and they put u on....b.d.
look it up

Sun, 01/06/2013 - 04:52 | 3126703 Peter Pan
Peter Pan's picture

As I keep saying, the debt is not the real issue. It's the unfunded liabilities that are piling up at a faster rate than debt that is the real concern. The point will be reached where no amount of printing will be able to fill that hole in the future.

As a simple example, imagine a point in time where there are 2 retirees for every one worker. No matter how much you print it's the physical immpossibility of having a functional society that brings the show to a close and the lack of both human and physical resources to keep the promises made in respect of unfunded liabilities. Not the lack of money.

Sun, 01/06/2013 - 04:59 | 3126706 Radical Marijuana
Radical Marijuana's picture

This article was quite good, although it underestimates how bad things actually are.

For example, this article stated:

Doing the “right thing” is usually political suicide for politicians.

Real history provides an overwhelming pattern of the biggest gangsters, the banksters, assassinating politicians that could not be bribed or intimidated. As the book about "Economic Hit Men" pointed out, if they failed, then the "jackals," the assassins, were sent in. Or, if that was not enough, then that country was invaded, and "bombed back into the stone age."

The real world operates according to the principles of organized crime. It is superficial to focus on the puppet politicians who get elected by appealing to the masses of muppets. The maximum leverage was achieved, with the most ripple effects, from the funding of the political processes, and paying assassins to kill politicians that refused to do what they were told was the foremost manifestation of that.

Today, we are used to the runaway fascist plutocracy juggernaut system already existing. However, it was built through the funding of the political processes, where the money system paid for the murder system, and then the murder system backed up the money system in return. In that overall context, nothing was more crucial than paying for the assassination of politicians who refused to become puppets, of the covert criminals that thereby took over control of the public governments.

Doing the “right thing” WAS usually political suicide for politicians in LITERAL ways during history. The current pathetic political puppet politicians, pandering to the public through the mass media, are the downstream result of previous critical bifurcation events, when the good politicians were discredited or destroyed by dirty tricks played against them. That is also why fixing these real problems continues to be EXTREMELY DIFFICULT AND DANGEROUS!

Sun, 01/06/2013 - 06:00 | 3126725 Setarcos
Setarcos's picture

Yes JFK was killed, Saddam Hussein/Iraq was killed - for wanting to sell oil for Euros - Qadafi/Libya was killed for wanting to set up an African gold-backed dinar.  And such examples are just prominent tips of 'icebergs' which threatened to sink the 'Titanic' of global banking.

I used to believe in the fallacy of "sovereign nations" and that these, unlike households, were immune to the ordinary 'laws' of finance; but I went on a steep learning curve and realized that countries, ruled by politicians these days, are no different from petty kingdoms of old, because they borrow from private banks/money lenders to fund their wars especially; then tax their populations to pay the compounding interest charged by the usurious money lenders who demand their "pound of flesh", as Shakespeare and others knew, centuries ago.

The US/NATO military is nothing other than a bunch of mercenaries for the banksters who fund wars and back both sides ... perhaps never before as blatantly as today with 'derivatives', 'futures' and other financial weapons of mass destruction.

NO ONE dares buck the banksters at any level that matters, because he will be kllled and politicians generally are SO corrupt that they are subject to MAB, i.e. Mutually Assured Blackmail ... simply put,  "If you tell on me, then I will tell the presstitutes that you have a thing for little boys/whatever."

Sun, 01/06/2013 - 07:34 | 3126750 SanOvaBeach
SanOvaBeach's picture

Got Bitcoin?

Sun, 01/06/2013 - 13:48 | 3127187 jonjon831983
jonjon831983's picture

I don't get it, why do I keep hearing of bitcoin.

What happens if something happens to our electronics or something. What happens to the bitcoins.

From what I heard you need to "mine" bitcoins via CPU processing.  What if not everybody can afford a computer or the processing power to do it?  Talk about energy hogging as well if "everybody" ended up flipping their electronic devices' CPUs to max.

Sun, 01/06/2013 - 14:31 | 3127284 SanOvaBeach
SanOvaBeach's picture

What if a metorite hits the earth!  What if I get in a auto accident!  What if they stop making Hostess Twinkies!  What if the Internet goes down and I can't get on Zero Hedge!  What if I get my girlfriend pregnet!  What if it rains tomorrow! FUCK!  I'm just going 2 stay in bed and read comic books all day!

Sun, 01/06/2013 - 05:06 | 3126708 AgAu_man
AgAu_man's picture

Einstein warned us decades ago... When asked, what the greatest invention of the 20th century was, he responded in his typical wit plus insight: "Compound Interest".

Whereas Special Relativity takes time to grasp, and General Relativity is not for the C students, even these should be able to grasp the primary school (gr.7-8) math of compound interest.

Yes, whereas only 'God' can create something out of nothing, compound interest and bankers are clearly the exception to natural laws: money making money. Screw the laws of thermodynamics, right? Is this what Blankfein means by "Doing God's work", creating something out of nothing? ;-/

If only FRB were taught also, ALL school children could figure out the great national Ponzi. Alternatively, just apply the same rules to Monopoly, when YOU play the banker, and increase the game's money supply.

Sun, 01/06/2013 - 07:32 | 3126747 SanOvaBeach
SanOvaBeach's picture

Got Bitcoin?

Sun, 01/06/2013 - 05:09 | 3126710 q99x2
q99x2's picture

Throw the banksters and their institutions out of the country. Get those parasites out of the system, redistribute what's left into an open source currency system and move on. The pigs have run out of slop. We don't need them and they don't need us. Fuck you Bernanke.

Sun, 01/06/2013 - 05:28 | 3126716 aleph0
aleph0's picture

 

 

..."To put $1.3 trillion into context, it is approximately $3.56 billion a day"...

 

= $12 / day / person(US pop)

 

FWIW

Sun, 01/06/2013 - 07:30 | 3126746 SanOvaBeach
SanOvaBeach's picture

Where is Redneck Freddie?  We all need his incrediable wisdom and genius to set us all straight....................

Sun, 01/06/2013 - 07:40 | 3126755 AnAnonymous
AnAnonymous's picture

Can the scheme go forever? No.

Can it go until the resources are depleted? Yes.

So, mission accomplished for 'americans'.

It is somehow quite funny to read 'americans' who keep flaming about inflation claim that it will take for the US market to extend consumption to keep extending the debt.

With a levelled or even decreasing consumption volume, debt can be increased.

All it takes is a shrinking environment. And fine, one heading for depletion of resources fits the bill.

As consuming gets more expensive due to resources being depleted, for a same volume of consumption (or less), one has still to go deeper and deeper into debt.

As to the interconnectivity of the world, the 'american' future is clear:

one will descend of people who consumed a lot thanks to debt, stole a lot or one will descend of people who consumed much less and got stolen a lot.

One alternative is better than the other. 'Americans' figured that one a long time ago.

Sun, 01/06/2013 - 09:52 | 3126829 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous said:

Can the scheme go forever? No.

Can it go until the resources are depleted? Yes.

So, mission accomplished for 'americans'.

Totally off. More exportating blame to convenient exterior to avoid self indiction. Here we see this Chinese citizenism citizen author, unable to conquer Chinese citizenism eternal nature, is fully acted by it.

One can clearly see Chinese citizenism pattern of resources consumption at the pheriphery. Now with their clever stealth, Chinese citizenism citizens are blobbing up to consume Africa, cutting through it like a hot knife into butter.

With the Chinese citizenism strategy of pheriphical resources consumption, one could easily say mission accomplished for Chinese citizenism citizens.

Sun, 01/06/2013 - 12:30 | 3127039 Ralph Spoilsport
Ralph Spoilsport's picture

While Chinese citizenism engineering consumptionists built Three Gorges Dam with enough concrete to alter the planet's spin, much care was taken to protect the environment by covering it with a huge lake. Thusly Chinese citizenism makes Hobson's choice very much something by utilizing valuable resources so 'americans' cannot commit depleteionization. Thereby the worm in the apple is spared the hot knife as to pointing out the point eternally forever notwithstanding.

Sun, 01/06/2013 - 15:06 | 3127355 akak
akak's picture

Very crusty. 

You have gripped the mattering thing goodly.

Sun, 01/06/2013 - 08:34 | 3126780 mind_imminst
mind_imminst's picture

The creditopia is even worse in the present day because buying crap no longer produces more jobs because so much "crap-manufacturing" is automated

Sun, 01/06/2013 - 09:31 | 3126811 forwardho
forwardho's picture

In order for debt to expand, someone must be lending the US this money. At the moment, the lenders are China, Japan, and the OPEC countries.

Stop repeating the BIG LIE.

In December the U.S. bought 90% of its own 30yr long term bond issue. This does not include operation twist[back dating bonds that are maturing]

No one wants our debt,

We are trapped in a collective fantasy.

The "debt" is an illusion that keeps our country from imploding.

The "debt" is a LIE.

Sun, 01/06/2013 - 09:51 | 3126827 smacker
smacker's picture

A very good analysis of the US economy.

On the benefits to the US economy of the USD being the global reserve currency...it is often overlooked that this status created an endless demand for USD by foreign nations in order to buy their oil and other commodities, bought & sold in USD. IE: you have to buy the dollars before you buy oil.

This in turn provides FX strength to the USD which in turn has allowed the US FED to operate significantly lower domestic interest rates for many years, without causing price inflation. Perhaps rates which are 1-2% lower than competitor nations.

Low interest rates has funded low-cost corporate investment/expansion and of course consumer credit. Also, as the Middle East oil producers (most notably Saudi Arabia) accumulated mega-surpluses of USD, they spent them on building huge domestic infrastructures and buying American Cadillacs, Of course it was the likes of Bechtel who got the building contracts.

Sun, 01/06/2013 - 10:43 | 3126880 Quinvarius
Quinvarius's picture

I don't think there is any limit to the debt.  The Fed will just keep buying it and propping up whoever would have needed the interest in a real economy.  The limits will only appear as a loss of purchasing power of the dollar, lower standards of living, and damage to the real economy.  As long as the government can continue to drain the wealth of the nation, it will.

Sun, 01/06/2013 - 10:52 | 3126891 Disenchanted
Disenchanted's picture

 

 

OP asks:

 

Why did the US debt grow to these proportions?


Answer:

 

"The Federal Reserve system is a deliberate trap, to enslave a population to unpayable debt in order to control and exploit them"

 

How we were led into and kept in the trap:

 

"Modern banking is not a science. It is a religion, simply a set of arbitrary rules and assumptions that favor the masters of that belief system, which we are brain washed in school to think is something tangible and real."

 

What is taught today as to the cause of the American Revolution...Tea Parties and Stamp Acts? What did Ben Franklin say was the real cause:

 

"The refusal of King George 3rd to allow the colonies to operate an honest money system, which freed the ordinary man from the clutches of the money manipulators, was probably the prime cause of the revolution." -- Benjamin Franklin, Founding Father

 

Quotes from:


Awaken slaves! - How The Private Central Bank Ponzi Scheme Trapped And Destroyed America

 

 

Sun, 01/06/2013 - 14:39 | 3127301 SanOvaBeach
SanOvaBeach's picture

Thank you............

Sun, 01/06/2013 - 11:12 | 3126911 tuttisaluti
tuttisaluti's picture

Does this also mean the US is not interested in a lower oil price because we would need less us dollars to pay for it?

Sun, 01/06/2013 - 11:19 | 3126921 SlowMoney
SlowMoney's picture

Any bets on when the US dollar will lose reserve currency status?

Is eveyone on the planet stupid? Don't you think that they all know they will never get their money back.

So I ask - why are they still buying our debt???

 

Sun, 01/06/2013 - 12:16 | 3127008 DosZap
DosZap's picture

So I ask - why are they still buying our debt???

Who is except Japan, China is slowly getting rid of it, and using it to buy HARD assets.

Bernie is the Number 1 buyer, and the Sheeple.

Sun, 01/06/2013 - 12:21 | 3127011 orangegeek
orangegeek's picture

US Dollar will lose reserve currency status when they dismantle their military.

 

That should occur around never.

Sun, 01/06/2013 - 13:20 | 3127108 epwpixieq-1
epwpixieq-1's picture

It has already started as a process, you just have to look for the particular news around the world, and although it is definitely non linear, probably ( on a longer term ) can be best described by an exponential curve with a non linear function defined only in a limited interval. And, although, we are at the beginning of this slow change, we shell see its end soon enough, as it definitely has a big feedback signal that creates the nice, exponentially looking, increment.

Sun, 01/06/2013 - 15:39 | 3127063 SmoothCoolSmoke
SmoothCoolSmoke's picture

"The debt ceiling has been increased 10 times since 2001."

So Bush raised it 9x, Obama 1x, heading for 2x.  Hmmmmmm, let's see, St Ronnie Reagan, the great hero/god of the fiscally conservative, raised the debt ceiling 18X.  Once more.... 18x!

So if Obama is an unmitigated asshole for 2x on the DC (Freddy?, et al), can we agree Reagan was 9X as big an asshole?

Oops, I forgot, Reagan was a white guy.


Sun, 01/06/2013 - 15:48 | 3127470 Arthur
Arthur's picture

On this board we  care about green, not black or white.

Sun, 01/06/2013 - 17:42 | 3127735 WmMcK
WmMcK's picture

Oh, I thought it was black or red but sometimes (too often) the ball lands on green and everyone loses (except the house, of course).

Sun, 01/06/2013 - 13:03 | 3127109 Arthur
Arthur's picture

"In a real free market, people save money for a purchase."

 

Which free market was this?

Nothing is wrong with a prudent use of credit.  A classic example is a toll bridge.  Build it to last 50 years, pay it off in 20 which allow people  to use the bridge paying back those who fronted the cost modestly over time.

The Problem is what the government is spending on, not that it is borrowing per se.  

It is not just a question of spending less, the question should be spending on what.

How to get the politicians to act like responsible adults is the big question.

Here is a start.  Eliminate the mortgage deduction over the 20 years.  No immediate harm to the RE market and everybody can adjust.  Same thing with entitlements, wind them down overtime.  If we don't people will get f*cked.  Otherwise in a few years current pensions will be cut severely and the dollar devalued screwing a lot of average mopes.  Look no further then Greece or Spain.  It can happen here too.


Sun, 01/06/2013 - 13:22 | 3127140 Mad Muppet
Mad Muppet's picture

The State is my Shepherd, I shall not want.  http://www.liveleak.com/view?i=d11_1357423844

Sun, 01/06/2013 - 16:38 | 3127601 devo
devo's picture

Higher than everyone thinks.

Sun, 01/06/2013 - 17:12 | 3127647 falak pema
falak pema's picture

This guy posts on ZH but I haven't seen this article here :

A New Era Of Oil Renaissance - Business Insider

If Econmatters is vaguely right it is an interesting line of thought that contradicts the Peak Oil predictions of Oil drum and Oil man which seem prevalent amongst the scientific energy community. 

Energy is the NAME of the game for the next decade. As finance is all fukked up. 

Meanwhile in Europe this : Cameron's absurd behaviour over EU membership | Peter Mandelson | Comment is free | The Guardian

Sun, 01/06/2013 - 20:54 | 3128256 Money Squid
Money Squid's picture

"This guy" is an idiot if he thinks tight oil is the solution to continued economic growth. I recall the average cost of a complicated well completion for tight oil is something aroun $3 million per well, and the production decline rate for these types of wells is steep in the first year. The oil does not flow to the well unless the oil can access the artificial permeability due to the fracturing process (reach of the well). Once the oil is drained it must be re-fracked/re-stimulated. The cost and complexity are high. Gas prices must remain high in order for this method to be used, but gas prices are directly related to GDP and the US economy is accustomed to gasoline at around $2.50 - 3.00. Unless gas prices go down significatly there much less money available by the masses to fuel any type of temporary recover. And, if prices go down, gas consumption goes up, depleting the tight oil plays ever faster. The peak may be postponed with the last ditch efforts but the decline will be steeper and more painful. Just like cuttig deficeit spending. Oh well off for a few drinks.

Sun, 01/06/2013 - 20:45 | 3128232 Money Squid
Money Squid's picture

Dramatic graphics like those in the article are silly. The stacks of bills can and will be replaced by a few $1T coins or bills. You will need a powerful zoom button to view the lobby floor of one of the tall buildings, then zoom further to see a man's shoe, then further still to see the small stack of coins next to the heal of the shoe to demonstrate the size of $50 trillion dollar debt.    zzzzzzzzzzzzzzzzz

Mon, 01/07/2013 - 04:05 | 3128929 luckylongshot
luckylongshot's picture

This cyyle of debt exploding has occurred regularly throughout history. However there is no evidence that austerity ever helped in faixing the problem. What did help was debt cancellation. This happened regularly in history and would work today as well. Furthermore as the mountain of debt clearly was created without any consideration backing it, the net effect of cancelling it would not amount to an actual loss to those that created the money in the first place.

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