This page has been archived and commenting is disabled.
The Most Dangerous Line Uttered During The Debt Ceiling Debate
Submitted by Lance Roberts of STA Wealth Management,
Today there is a great sense of relief that has swept the nation as news flowed through the media that the government shutdown had come to an end. After all, during the 16 days of the shutdown, there was great hardship inflicted on the average American as the stock market rose by 2.4%, government workers that were furloughed received a 2+ week paid vacation and interest rates fell from a peak of 2.65% on October 1st to 2.59% on October 17th. Outside of the financial markets, which were never concerned of a "default," the reality is that the government shutdown did likely clip up to 0.5% off of 4th quarter's GDP. While that clip to economic growth created by the government standoff is temporary - the ongoing persistant weakness of economic growth is another issue entirely. This is the focus of this discussion.
The most disturbing sentence uttered during the debt ceiling debate/government shut down, that should raise some concerns by both political parties, is:
"We must increase our debt limit so that we can pay our bills."
Think about that for a moment. The U.S. has become the single largest debtor nation on the planet as welfare dependency rises, government spending continues to increase and economic growth slows. However, what is ironic about this situation, is that it is the continuing increases in debt which is directly responsible for the decreases in economic growth. The chart below shows government debt as a percentage of GDP as compared to annualized rate of change in economic growth.
Since the beginning of 2009 very little of the increases in government debt, which was used to fill the gap created by excess expenditures, returned very little in terms of economic growth. In fact, as of the second quarter of 2013, it required $5.61 of debt to create just $1 of economic growth.
As I discussed recently in "The Long Game Of Hiking The Debt Ceiling:"
"The chart below shows the current projected rates of debt to real GDP through 2018 according to the CBO estimates versus the current annual run rate of $1.1 trillion."
"At the current rate of debt increase the U.S. will pushing 130% of debt to real GDP by 2018. This is, of course, not including the funding needs that will ultimately be required to support the increased costs of the entitlement programs of Social Security, Medicare and now the Affordable Care Act (ACA). The reality is that debt needs will substantially increase as entitlement programs continue to consume ever larger chunks of the current budget. By 2020 the current welfare programs alone are expected to require 75% of all federal revenues and this does not include the impact of the ACA. This, of course, is unsustainable."
President Obama was very correct in his speech, following the resolution of the government shut down, by stating that one of the three things that the government should focus on in the short term is budget reform. The current pace of increase in the participation of social welfare programs from food stamps and disability claims to social security and Medicare is creating an ever increasing consumption of current revenues. The implementation of another social welfare program will only create an additional drag on the revenue/expense equation.
While the President did note that the deficit was indeed shrinking; this is due to the massive surge in tax revenue created by the fears over the fiscal cliff. With the final tax filing and payment date, October 15th, now behind us we will begin to see the deficit once again widen. This is simply due to the fact that ordinary tax revenue trails government expenditures by a wide margin.
So, while the government shutdown is now temporarily behind us, at least for the next 90 days, the real battle lies ahead. Unfortunately, there is little desire to truly reform spending or the budget. It requires sacrifices that no one is willing to make. However, the wakeup call really should be the fact that we are making the statement that "we have to increase our debt simply to pay our bills."
»
- 18341 reads
- Printer-friendly version
- Send to friend
- advertisements -
Is that the same as "Must order more checks"?
Or its 'time to visit a bakruptcy lawyer".
1800-BROKE
Time to start a Brinks type business...
Dangerous? my wife says this all the time.
Setting the Record Straight
There will be no slowdown in the 4th quarter due to the furloughs.
The folks were furloughed in October, came back in October and will be paid for the time off.
Maybe some transfer of spending from early October to Late October or Early November, But All Contained Within the 4th Quarter
Evan a Caveman kinn figger thet wun out, n' I ain't as stoopid anymore, neither
Note the emphasis on "due to the furloughs."
Oh, they'll be blamed, another it's "temporary" excuse in an otherwise rotten deal.
It should also be recognized that in the 2-3 weeks leading up to Sept 30, spending from every government agency spikes. This is due to the fact that if an agency doesn't spend their budget by the end of the government fiscal year, they fear losing it and having their budget cut back.
I knew a white collar guy a few years ago who was at a Federal Prison Camp and his job was working in the Psychology Dept. as a clerk. He told me that in September one year he was approached by the staff Psych. Doc. She handed him a few catalogues and told him to pick out $7000 worth of useless merchandise for the department. He ended up ordering fake plants, motivational posters, unneeded office supplies and other items.
Such is the governmental agency budget process. Your tax dollars at work.
One department within one facility within one agency - an excess $7000.
Multiply that by the thousands of departments within the thousands of different facilities and you get an idea of the waste of our money.
Cue the food stamp riots
http://www.planbeconomics.com/2013/10/the-coming-food-stamp-riots.html
Germany 1923
no...it is more like 1920...after this each year will seem as though it cannot get worse. In terms of time we may be a year away from the big 'pop' but in terms of inflation we are far from 1923. I think we might get 1920 through 1924 all in one morning.
That is a very scary, very real possibility.
Customer: You must increase my credit limit so I can pay some bills
Credit card bank: Sorry. You must get you finances in order. Best of luck and we just lowered your limits.
Customer: F--- Off
I never got to the increase request. They lowered my limit to a $100 over my balance based on my "profile" of card use. Poof - $6Gs of credit I thot was there suddendly wasn't.
That happened to me once circa 2008. I made the operator cry.
Yeah - I needed a short term increase in my credit limit to pay my federal taxes on-line. Request was denied, and I expect a decrease soon.
Moar Debt!
$100 trillion.. He can do that with his pen .. All by himself now
... and the penis mightier than the sword.
Unless the sword meets the penis at speed. Then it's not only 'all bets' that are off.
Don't tell Lorena Bobbitt that.
The last time a pen(is) came up against her sword not even Viagra could cure that erectile dysfunction.
""we have to increase our debt simply to pay our bills.""
I tried that personally some decades ago ... did not turn out well. So I stopped doing it ... that worked much better.
We have the federal government our Founding Fathers tried to protect us from, I weep for our children!
The beauty of that sentence is when you follow it up by saying "raising the debt ceiling does not increase the debt"
So now we can pay our bills by borrowing, but the act of borrowing does not increase the amout we owe.
See? All good.
Think of these **shole federal leaders as our Funding Fathers.
The Fedcoats are coming! The Fedcoats are coming!
Best you can do then is to don't have children.
WHO SAID THAT??
sunny
You can also say...
We must run up more bills so we can get more debt.
It's just as fun that way too.
How does Oblameo reform the budget when he ain't never had one ?
Cloward and Pivens 101.
Correctomundo. Overload the system until it collapses under it's own weight.
They can just build beefier ACA-funded Walmart scooters.
A government that has become so large that the prospect of shutting it down terrifies the populace must be immediately shut down for that very reason.
It's so simple and yet not 1 sheep in a million understands it.
NO, anything that has gotten too big and too complex has to be gradually disassembled, unless you want to torch society in total. The military is is enourmous and complex and does not work well, but you can't just dissolve it. The back and white crew want to pretend you can just turn off government, in spite of the endless roles that we have thrust government into to make society work better. No military without government, or inspections of endless varieties, or space program, or air traffic control and flight inspections.
We the people built this mess over the decades, and we the people will have to clean it up over decades. To pretend otherwise is to be as blind at the Teabaggers to complexity and reality.
We the people built this mess? NOT! This mess was created mostly by big goberment Demoncats like ObaMao! Only an ignorant welfare slave living on the Demoncat entitlement plantation would pretend to otherwise be as blind...
And where do W. And Dick "Deficits Don't Matter" Cheney fit in, since they are as culpable as Obama, and then some. Forget R vs. D, they're all in this up to their eyeballs,.
Yes Tulsa, you're right, but you got junked anyway. It's like trying to defuse a bomb that has many triggers- even triggers within triggers at this point.
But, I disagree that we built this. It was built for us while we were busy raising our kids.
I'm almost done with that now. Time to focus on more pressing issues is becoming available. Know what I mean?
NO, anything that has gotten too big and too complex has to be gradually disassembled, unless you want to torch society in total. The military is is enourmous and complex and does not work well, but you can't just dissolve it. The back and white crew want to pretend you can just turn off government, in spite of the endless roles that we have thrust government into to make society work better. No military without government, or inspections of endless varieties, or space program, or air traffic control and flight inspections.
We the people built this mess over the decades, and we the people will have to clean it up over decades. To pretend otherwise is to be as blind at the Teabaggers to complexity and reality.
Has ANY progress been made to clean it up? I only see it getting worse. Does the sequester only temporarily cut speding until the next across the board increase?
Well, it's no more dangerous than saying (or believing) statements like "fragile recovery" or fucking "green shoots"!
Though "green shoots" has much much more comic value.
I involuntarily blurt it out while watching the tee vee sometimes...it comes rolling out like I'm speaking in tongues or something.
Fuck yeah! USA! USA! USA! I'm so happy I could just shit!
Git yer hands off my Medicare you goddamn commy Libertarian pinkos, I'm ENTITLED to that hip-replacement surgery.
Why don't you go cut some of that-thar socialism we got, before you hurt the real Mericans that made this goddamn country great-n-glorious.
There will be no need for the last person to put out the lights.
The lights will have gone out long-time already
Sad, so sad. "great news, we've increased the overdraft"
Lets wait another 3 months and then start to go through it all at the last minute again ...... puhleez.
Meantime someone send Boner to negotiating school.
Weepy J, you are right, only for the wrong reasons.
we have to increase out debt to increase our money supply
to pay for the debt which demands it .....
because they are the same thing , usury based on flat out fraud!
.
"..Money would vanish without debt.
It is difficult for Americans to come to grips with the fact that their total money-supply is backed by nothing but debt, and it is even more mind boggling to visualize that, if everyone paid back all that was borrowed, there would be no money left in existence.
That's right, there would not be one penny in circulation -- all coins and all paper currency would be returned to bank vaults -- and there would be not one dollar in any one's checking account. In short, all money would disappear.
Marriner Eccles was the Governor of the Federal Reserve System in 1941. On September 30 of that year, Eccles was asked to give testimony before the House Committee on Banking and Currency. The purpose of the hearing was to obtain information regarding the role of the Federal Reserve in creating conditions that led to the depression of the 1930s.
Congressman Wright Patman, who was Chairman of that committee, asked how the Fed got the money to purchase two billion dollars worth of government bonds in 1933.
This is the exchange that followed.
Eccles: We created it.
Patman: Out of what?
Eccles: Out of the right to issue credit money.
Patman: And there is nothing behind it, is there, except our government's credit?
Eccles: That is what our money system is. If there were no debts in our money system, there wouldn't be any money.
It must be realized that, while money may represent an asset to selected individuals, when it is considered as an aggregate of the total money supply, it is not an asset at all. A man who borrows $1,000 may think that he has increased his financial position by that amount but he has not. His $1,000 cash asset is offset by his $1,000 loan liability, and his net position is zero. Bank accounts are exactly the same on a larger scale. Add up all the bank accounts in the nation, and it would be easy to assume that all that money represents a gigantic pool of assets which support the economy. Yet, every bit of this money is owed by someone. Some will owe nothing. Others will owe many times what they possess. All added together, the national balance is zero. What we think is money is but a grand illusion. The reality is debt. " g.e.g.
.
http://www.biblebelievers.org.au/jekyll.htm
.
and ...
"..If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible -- but there it is.
With the knowledge that money in America is based on debt, it should not come as a surprise to learn that the Federal Reserve System is not the least interested in seeing a reduction in debt in this country, regardless of public utterances to the contrary.
Here is the bottom line from the System's own publications. The Federal Reserve Bank of Philadelphia says:
"A large and growing number of analysts, on the other hand, now regard the national debt as something useful, if not an actual blessing . . . [They believe] the national debt need not be reduced at all."
The Federal Reserve Bank of Chicago adds:
"Debt -- public and private -- is here to stay. It plays an essential role in economic processes . . . What is required is not the abolition of debt, but its prudent use and intelligent management."
What's wrong with a little debt?
There is a kind of fascinating appeal to this theory. It gives those who expound it an aura of intellectualism, the appearance of being able to grasp a complex economic principle that is beyond the comprehension of mere mortals. And, for the less academically minded, it offers the comfort of at least sounding moderate. After all, what's wrong with a little debt, prudently used and intelligently managed? The answer is nothing, provided the debt is based on an honest transaction. There is plenty wrong with it if it is "based upon fraud".
An honest transaction is one in which a borrower pays an agreed upon sum in return for the temporary use of a lender's asset. That asset could be anything of tangible value. If it were an automobile, for example, then the borrower would pay "rent." If it is money, then the rent is called "interest." Either way, the concept is the same.
When we go to a lender -- either a bank or a private party -- and receive a loan of money, we are willing to pay interest on the loan in recognition of the fact that the money we are borrowing is an asset which we want to use. It seems only fair to pay a rental fee for that asset to the person who owns it. It is not easy to acquire an automobile, and it is not easy to acquire money -- real money, that is. If the money we are borrowing was earned by someone's labor and talent, they are fully entitled to receive interest on it. But what are we to think of money that is created by the mere stroke of a pen or the click of a computer key? Why should anyone collect a rental fee on that? " ...
Dispense with the god damn cut and paste diatribe, it is tedious and no one gives a shit anyhow. I could respond with a cut/paste of Act 1 scene 2 of The Tragedy of Richard the II butt that would be off topic.
dispensing with the unit of measure is the calling card
of the scum bag and fraud artist. who are u?
FU! blindman is my new best friend. More importantly, he's right. No debt=no money. The really fucked-up part is that the money needed to pay the vig is never created. Think about how that end game plays out for more than five seconds. You're pretty stupid for a Monty Python fan.
Where does the scrapping begin?
Agency Discretionary Mandatory Total Department of Defense including Overseas Contingency Operations 666.2 6.7 672.9 Department of Health and Human Services including Medicare and Medicaid 80.6 860.3 940.9 Department of Education 67.7 4.2 71.9 Department of Veterans Affairs 60.4 79.4 139.7 Department of Housing and Urban Development 41.1 5.2 46.3 Department of State and Other International Programs 56.1 3.4 59.5 Department of Homeland Security 54.9 0.5 55.4 Department of Energy 35.6 –0.6 35.0 Department of Justice 23.9 12.7 36.5 Department of Agriculture 26.8 127.7 154.5 National Aeronautics and Space Administration 17.8 –0.02 17.8 National Intelligence Program 52.6 0 52.6 Department of Transportation 24.0 74.5 98.5 Department of the Treasury 14.1 96.2 110.3 Department of the Interior 12.3 1.2 13.5 Department of Labor 13.2 88.4 101.7 Social Security Administration 11.7 871.0 882.7 Department of Commerce 9.5 –0.5 9.0 Army Corps of Engineers Civil Works 8.2 –0.007 8.2 Environmental Protection Agency 9.2 –0.2 8.9 National Science Foundation 7.4 0.2 7.5 Small Business Administration 1.4 –0.006 1.4 Corporation for National and Community Service 1.1 0.007 1.1 Net interest 246 0 246 Disaster costs 2 0 2 Other spending 34.0- 61.7 29.5 Total 1,510 2,293 3,803Re:Where does the scrapping begin?
I would suggest cutting the other guys scam first. The yours and then mine, if we need it.
Scrapping? We dont need no fucking dermatologist! Cut the fucking cancer out and then some but still too late. This fucker is going down. Plan accordingly.
After I started replacing "debt ceiling" with "money target" things started making moar sense.
I just don't give a shit anymore.
Please. Maybe you're not stupid and just have a hard-on for blindman. Either way I'm pretty goddam sure that neither of us wants your help. Please stop. This is good advice. Take it and move along.
The "$5.61 of debt for every $1 of GDP" chart should be a serious eye-opener. It's proof that the Keynesian gravy train has reached diminishing returns.
The US used to be able to get out of a recession in true Keynesian fashion: paper it over with inflation, interest rate cuts, and go into debt. That is no longer the case.
Hey at least the Wall Street Bonus, K Street funding and mega wealthy housing market are doing GREAT!
They now have 3 more months to plan and execute the next false flag.
I think you're absolutely right, and thinking along the same lines I had when I read the msm narrative on the debt resolution.
The bill is essentially an uncontested original with regards to Obamacare with a side note on fraudulent claims. The crux of the matter, the debt ceiling deal, includes setting up a bipartisan, bicameral committee to settle a broader range of spending issues BY CHRISTMAS THIS YEAR. That should be ringing alarm bells in every government department to avoid funding cuts, and what better way to justify spending than creating a "crisis" that only they can solve? I expect the alphabet agencies are busy creating all the WTF false flags and faux entrapment cases we've come to anticipate in recent times in the coming weeks.
The most dangerous narrative I've heard mentioned is that the law on the concept of the debt ceiling itself should be repealed. Apparently, fiscal irresponsibility, economic and market interference, currency manipulation, and the Federal Reserve's abandonment of its charter to benefit the banks and their minions are not the reasons for all the problems. No, according to the pundits, it is the fault of having a debt ceiling over which polarised "extremist" politics haggle to put the reserve currency in danger. There are an awful lot of talking heads telling us that the Fed is the grown up, tea partiers/republicans are the "extremist" children, and we should just let the Fed print to infinity without any of these inconvenient pauses. You've got to laugh or you'll end up drinking. All this fuss when the inevitable destiny is already clear for anyone to see, that the country is already lawless, and we ran out of options the moment Obama turned out to be a much more evil version of Bush.
an open letter to all the world's peoples:
From all of us here in the USA...THANK YOU!! If you and your central banks did not continue to pay for our welfare state and dominating military complex we would not be able to live at a much higher standard of living than you do nor could we dominate and intimidated you. We are very grateful that you continue to buy our treasury's paper. This means we citizens of the USA do not have to fund 40% of this ourselves. Because you do not buy gold but rather save in our paper, we can buy gold and unlike the Japanese, we do not have to hold all that low interest rate garbage which will never be paid off. We know most of you do not live as well as we do but we are Americans and we are exceptional. You have given us the 'exorbitant privilege' and as was predicted long ago, we used it (Oh boy did we use it). While this party lasts we are going to enjoy the hell out of it. When it ends our government will, of course , look for someone to blame. They will claim speculators and evil foreigners are to blame for the collapse of our currency.
Since you have been so cooperative in supporting our way of life we here in the USA sincerely say: 'sure hope it ain't you that gets the blame', you have a nice country and it would be a real shame if something awful should happen to it. Keep that funding coming....
Yours
The People of the USA (especially those who get a check from the USG and the corporations (cuz they are people too) who pay almost no taxes.
+1
Hey you're welcome. If we didn't have such corrupt and/or blackmailable civil servants and politicians in our countries, who opened their dirty vaginas to the GS/JPM'S collection of alumnis to run our economies, maybe things would have turned out differently. We were beguiled by America's self appointed bullshit and propaganda. Some of us still are, and willingly lick the backside of the POTUS at every opportunity.
As for the third world, the poor bastards never had a chance against the biggest protection racketeer on the planet.
We are united by grief, increasing poverty, intrusive statists, and the anticipated disorder that follows collapse. I tried to explain before that the left-right political paradigm is as false and stupid as the us-them perpetual incitement of hatred which has plagued us throughout our lives. There is no "us" and "them". Just people, mostly stupid, who are led by sociopaths and traditions.
There's nothing inaccurate about that statement. The bills are due. If you don't like it, you have to cut the amount due or increase revenues. You just can't refuse to pay. Not unless you are an irresponsible deadbeat.
As indicated by these charts, clearly there is a singularity point in the near future where we will have a nearly doubling of the national debt virtually no measurable growth in GDP. If someone could figure an approximately timeframe on that and bought some CDS' on America's debt, the asymmetrical payoff would be immense. Albeit, it would also be a pyhrric victory as the payoff would be denominated in the same units as the failed currency.
Solution: hedge with tangible assets.
"But we have to pass the bill so that you can find out what is in it" - Nancy Pelosi
We have to keep raising the debt limit to find out how much debt we need. Right now the only answer is: MORE!
According to Deutsche Bank:
https://app.box.com/s/otdvclw8ijxzflhkhem6
October 8, 2013
Bretton Woods III and the Global Savings Glut
Summary
History suggests that periods of global economic expansion are characterized by symbiotic imbalances rather than balanced arrangements that satisfy theoretical ideals. Therefore, it is important to understand the factors that drive the imbalances in each period as well as the resulting distortions. In our view, demographics will have a significant impact on the future trajectory of the world economy. In this report we specifically focus on the implications on savings and current accounts.
Population trends imply that we are entering a phase where rapid aging will cause many countries to generate persistent current account surpluses. This raises the question – who will generate the world’s deficits?
World demographics is not neatly spaced out such that some countries generate surplus savings exactly when others need to fund deficits. Moreover, there are many factors that may prevent surplus countries from funding deficit countries. Thus, we have a situation where countries like India, Brazil and Indonesia may attempt to tame their deficits before old countries like Japan and Germany enter their dissaving phase. The resulting savings glut could be further exacerbated by a likely increase in China’s current account surplus.
Thus, the emerging international economic system, dubbed by us as Bretton Woods III, will yet again depend on the United States to act as the demand source of last resort. Meanwhile, demographics will hold down the real cost of international capital whether or not the US decides to absorb part of it. In turn, the ability of world’s financial system to allocate excess savings will be tested again. Young emerging markets with the ability to sensibly deploy cheap capital could benefit disproportionately from this environment.
http://www.brainyquote.com/quotes/quotes/h/honoredeba197735.html
Privatize the profits, socialize the cost,
call everyone else a stupid offensive
name childishly.
Blame the vulnerable.
Use adversity as a new profit center.
Use demise as a hedge profit center.
Say there's no role for government and privatize.
Welcome high unemployment and oppose collective
bargaining, for that's supply side slavery.
Welcome monopoly with no control, call dissenters
opponents of free enterprise, and that's demand side slavery.
Don't let today's kids escape their debt, for then
they have no choice but to sell out.
And this is the easiest thing I have ever done.
https://www.youtube.com/watch?v=PUH2nHjBYsA&t=2m30s
(Presumed A Welcoming Site--Ads May
Be Present; Alternately, Fair Use/Academic Application)
The idea that there is no economic output backing up this Federal largesse is so ridiculous I find it amazing that the tripe still gets published. I love she introduction of explaining "why everything rallies on news of faux shutdown." But that's just it: this was a faux shutdown. An extra 2 billion of real monies...absolutely...but that's it. The real news in my view is Syria...that would have been a "statistically significant Government Program"...it didn't happen...move along. The State we have today is the same State we had after 1945. Nothing fundamentally has changed.
""we have to increase our debt simply to pay our bills.""
Who said that exactly? I cant find the original link.
thanks
18 trillion here we come.
They could possibly be lining up to abolish having a debt ceiling at all and just make it skies the limit, open ended.
A kinda of out of sight, out of mind solution.
We must increase our debt ceiling so that Treasury can issue more debt for the primary dealers to pretend to buy and hand over to the Fed in exchange for fresh cash so we can keep our Banks alive, flush and well.