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"Uh, Marriner Eccles: We Have A Problem" - Obama Predicts He Will Breach Debt Ceiling Two Months Before Election

Tyler Durden's picture


In light of the epic fiasco from last August, when the US debt ceiling hike became a 2 month televized affair, culminating with the GOP caving, but not before the S&P downgraded the US (and in the process breaking the US stock market), Zero Hedge has long been analyzing the chronology of future debt breaches, as with the presidential election in November, what happens in the months and weeks ahead of it as pertains to the number one problem facing America - its lethal debt addiction - will be by far the biggest weakness of Obama's campaign. This is something we believe the GOP has finally understood, and they want a full replay of last August's insanity, to remind America just how broke (and broken) this country is. Yet it turns out all of our analyses have been for naught (if 100% correct). Because it is none other than President Barack Obama who has been kind enough to point out, that on September 30, 2012, or in just over 7 months, total US debt subject to the limit will be, wait for it, $16,333,900,000,000. Why is this an issue: because the final debt ceiling that Obama has been afforded with automatic Senatorial roll overs (even as Congress theatrically votes these down), is $16,394,000,000. In other words, with two months ahead of the election, the US will have a de minimis $60 billion in debt capacity. And since the implied burn rate is $133 billion/month this means that the United States will be in full blown debt ceiling hike chaos just as the final electoral debates take place. And one wonders why the GOP rushed to green light Obama an additional $160 billion in debt issuance. If indeed the $160 billion in new debt is added, the US may not even last to September before Tim Geithner is forced to start plundering G-fund and other retirement accounts. It also means that two months of America in a debt ceiling breach situation will deal a dramatic blow to Obama's reelection chances as the last thing the US population will want is a replay of last summer.

From the Analytical Perspectives Section of the President's Budget (source). One word: OOPS

As a reminder, here is what we said on the topic of the GOP's increasingly more interesting gambit yesterday.

Two weeks ago when discussing the latest lunacy surrounding America's exponential curve #1 also known as its debt balance, we suggested what the GOP election strategy should be: "[if] the debt ceiling becomes a sticking point at the election, Obama's chances of reelection plunge. Which makes us wonder - will Republicans grasp that the paradox of defeating Obama is precisely in giving him a carte blanche on all the stimulus programs he wants? Because if Congress approves another $200, 300 or even $400 billion in stimulus pork (the only thing better than one Solyndra? One thousand Solyndras!) the Treasury will drown in the need to raise hundreds of billions more, and will in fact hit the ceiling well in advance of the elections. As for the stimulus projects themselves, they will crash and burn just like all centrally planned endeavors, and actually result in a far worse outcome than if they had never been attempted. [Because] the best way to finally get back to a fiscally prudent regime? Why go to town, of course." We were delighted to discover that our policy anti-recommendation has finally been adopted. Because as the WSJ reports when it comes to the latest payroll tax extension we find something quite stunning: "House Republican leaders said Monday they would introduce a bill extending the payroll-tax break for the rest of the year without finding spending cuts to offset the program's cost. The proposal marks a major shift for Republicans, who previously had insisted that the costs of extending a trio of provisions expiring at the end of the month be offset with spending cuts." That's right - no offsetting spending cuts. Which means one thing - much more debt.  How much more? At least $160 billion much. Which means that the debt ceiling discussion will hit not in November as we speculated previously, but potentially as soon as September.


It also means that by the time the GOP candidate is debating Obama the primary topic of discussion will be just how much the Administration is plundering from government retirement and pension accounts to keep the country under the latest and greatest (and just upwardly revised) $16.4 trillion debt ceiling.

And some more color in this most critical matter from none other than former Obama's economic advisor, Peter Orszag courtesy of Bloomberg:

Table 6-2 shows that even with a somewhat sunny outlook for economic growth this year, the amount of government debt that is applicable to the debt limit is projected to reach, by the end of September, $16.3 trillion. The debt-limit itself currently stands at $16.4 trillion. So by next January, if not sooner, we will again be debating a debt-limit increase -- at the same time that significant spending reductions and tax-cut expirations are scheduled to take effect. The journey through this fiscal maze next year will make last summer’s debt-limit debate look like child’s play.

Spot on Peter, only it won't be next January.  It will be this September. If not sooner.


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Tue, 02/14/2012 - 12:45 | 2157724 ONO47
ONO47's picture


I believe you have the comment of the day.

Tue, 02/14/2012 - 12:37 | 2157688 Bartanist
Bartanist's picture

I guess I just don't understand how they can possibly spend that much money. They treat it like toilet paper instead of something that has value ... well then maybe that is what it is, eh?

Tue, 02/14/2012 - 12:37 | 2157689 bingo was his name
bingo was his name's picture

I Pledge Allegence to the flag of the United Ponize of America

To the rehypoallocation for which stands

One Nation under Keynes

Indivsible with food stamps and bailouts for all.


Tue, 02/14/2012 - 12:42 | 2157710 tickhound
tickhound's picture



One Nation under Skynet,

Tue, 02/14/2012 - 12:39 | 2157697 ONO47
ONO47's picture

The problem is the Republicans don't want to cut spending any more than the Democrats do.

Or as Newt said of RP's one trillion dollar cut "a non-starter".

Mitt, Newt and Rick all would like to start a war with Iran. And we all know war ain't cheap.


Tue, 02/14/2012 - 12:40 | 2157702 LawsofPhysics
LawsofPhysics's picture

Someone has been using linear relationships to try and predict exponential functions again - FAIL.

Tue, 02/14/2012 - 15:44 | 2158596 trav7777
trav7777's picture

sadly, a proven psychological phenomenon.  How most ppl's brains work.  Read a paper on this awhile back.

Too many people answer the bacteria/bottle question with 6pm.

Tue, 02/14/2012 - 12:42 | 2157712 SoNH80
SoNH80's picture

Yow!!!!!  Better prepare the Mogambo Bunker of Doom (MBD)

Tue, 02/14/2012 - 12:42 | 2157713 dwdollar
dwdollar's picture

I don't know. The GOP could see a major backlash. They know this, which is why they backed down last year. The entitlements must flow or the whole thing comes crashing down today, instead of a few years from now.

Tue, 02/14/2012 - 12:42 | 2157716 Tunga
Tunga's picture

"Looks like I picked the wrong day to stop running drugs through the Caymans." - Mitt Romney

Tue, 02/14/2012 - 14:20 | 2158181 Phil Free
Phil Free's picture

A nod and a tip o' the hat to Lloyd Bridges..

Tue, 02/14/2012 - 12:44 | 2157727 JR
JR's picture

As far as the people aboard the good ship America are concerned, Captain Bernanke has abandoned ship

Bernanke’s housing speech to the nation’s home builders in Orlando and his funding of the parasitic actions of the world’s central bankers who live and feed off the wealth of people is understandable when one realizes that the goal of Bernanke’s handlers “is to grind the working man into hopeless poverty through ruthless extortion by government agents.”

It is this World Order of parasitism that the “central” bankers are now realizing; it is the sole dedication of these WO parasites to maintain their positions on the national hosts from which they draw all sustenance. Their interlocking goal is a “leveling” effect of mankind as they break down national and class borders for their rule of World Socialism, giving themselves enormous tactical advantage over all people. That is, and has been the common twentieth century goal of the powerful interlocking global corporations and financiers.

Bernanke’s housing speech was a tremendous admission of failure from the people’s perspective. Here, in essence, is what they heard: I am in charge and everything is falling apart and it’ll be some time before it is fixed.

IOW, the stock market is up, bankers are getting bailed out of fraud charges and monetary conspiracy to defraud the public, not one big player has gone to jail, and, as a result, the economy is tanking because housing and employment are a shambles.

Who’s Bernanke kidding?

If the Fed is going to have this power, they are the tyrants. Get Hank Paulson up here to explain what was going on when he negotiated a stimulus with the Congress that did nothing but rob the people and put money into the pockets of the bankers. Is Paulson walking around penniless? No! He has a book out! He’s famous!

Bernanke said numerous times before the final fall that “if we need to do more, we’ll do it; we have the tools.”  NOW, he says, it’s failing! And what does he mean by imbalances that need to be “resolved”?  Housing? Jobs? The “lower living standards for many Americans.”

Tue, 02/14/2012 - 13:23 | 2157937 Captain Benny
Captain Benny's picture

I didn't abandon the ship, I drove it into the rocks intentionally.  At that point, the ship no longer functioned as designed so I dumped it in the sea and let the masses go down with it.  My moral compass points in the direction where I don't need to give a crap what coast guard is telling me on the radio.  Its their fault that they perished with the non-functional ship, they were defective people anyway.  They had a strong normalcy bias and actually believed what I said on the PA system... that everything is alright.  No need to worry, the ship is fine and you can go about your dinner while the ship lists at 30 degrees.

I, Ben Bernanke, would never lie to you about the American ship listing at 30 degrees.  Unemployment is totally down, way under 9%!  I didn't make secret deals with other central bankers conspiring to control rates between the EUR, JPY, CNY, AUD, and SEK.  No, us central bankers don't conspire to hurt anyone not in our tight knit circle.  We won't let Greece default.... never .... 

Tue, 02/14/2012 - 14:17 | 2158169 JR
JR's picture

Yes, the current spokesman for the apex of the pyramid of power, Herman van Rompuy of the European Council, has called for global governance because international finance, due to the nature of international travel and international trade, requires a world arbiter to determine the value of instruments of trade.  With the development of paper money and stocks and bonds and other negotiable documents, the earlier methods of barter or payment in gold or silver or through piracy or seizure by force, no longer work.

Says Eustace Mullins, so a power was necessitated that was “able to exercise influence anywhere in the world, to declare that a piece of paper represented one billion dollars in real wealth, or even one dollar in real wealth. An entry on a computer, flashed from London to New York, states that someone owes five billion dollars to someone else. Without genuine power backing, no such sum could ever be collected, regardless of the factuality or morality of the debt. As anyone in the Mafia can tell you, you don’t collect unless you are willing to break legs...”

And break legs they do…by the use of force. ”Behind every piece of paper is a force which can be employed anywhere in the world.” Military force... assassination...! The globalists and central bankers, using communications control, have divided and conquered to set American against American and nation against nation to establish an “iron grip on the daily lives of the people.” They also incorporate the principle of “1984’: no groups of two or more can assemble unless a Big Brother representative is clandestinely present.

Communications control, of course, until the Internet. The worst thing that ever happened to America was television. The best thing was the internet. Hence, Zero Hedge... 

Tue, 02/14/2012 - 15:45 | 2158611 trav7777
trav7777's picture

you don't think there are turfers here and that this place is spidered by 3 letters?

Tue, 02/14/2012 - 16:09 | 2158733 JR
JR's picture

Hi, trav.

Well, in that Obama’s Information Czar Cass Sunstein in his 2001 book,, “argued that the Internet may weaken democracy because it allows citizens to isolate themselves within groups that share their own views and experiences, and thus cut themselves off from any information that might challenge their beliefs, a phenomenon known as cyber balkanization,” according to Wikipeida, then , yes, I think there are turfers here, especially from the WH, but most are so creepy they tend to find it hard to hold their turf image.

And, in that “David Axelrod, the TOTUS's Minister of Propaganda and the man behind the teleprompter, is the king of astroturfing," free speech has become a major battle field, especially with the megaphone phenomenon and Zero Hedge’s prominence of the red and green arrows that precede and prejudice the initial reading of a person’s comments.

But I think ZHers are up to the challenge. :)

Tue, 02/14/2012 - 12:45 | 2157728 SheepDog-One
SheepDog-One's picture

Oh NO! Debt ceiling date already moved up months before ObaMao's precious election? Well GODDAMN get busy printin some more money FAST! We got a KING to save here!

Tue, 02/14/2012 - 12:47 | 2157738 babylon15
babylon15's picture

This couldn't be better timing for incumbents, they will use this as justificaiton to postpone elections or forego elections entirely.  Never waste a crisis.

Tue, 02/14/2012 - 13:30 | 2157972 SheepDog-One
SheepDog-One's picture

Probably none of it will happen anyway, just over the last 24 hours bombings in Israeli embassy and Bangkok blamed on Iran....we'll probably be plunged into full scale WW3 within a few weeks. 

Tue, 02/14/2012 - 12:48 | 2157743 onlooker
onlooker's picture

Tyler makes a valid and concrete point but the majority of the US voters do not understand, and they are not going to be educated by the media they watch.

IMO 30% have a grasp, 70% have the ability to have a grasp. To SELL the importance, there needs to be a story (maybe an individual as Obam uses) beyond the basic numbers. And it has to be constantly replayed.


The problem is that this stuff is boring--boring unless one understands that it is scary as any horror movie and is a real and present and future threat to the family. This is deadly serious but if you don’t know, you don’t know. Not everyman is a ZHer or ZHer wanta be.

Tue, 02/14/2012 - 13:10 | 2157877 grid-b-gone
grid-b-gone's picture

Self-delusion and ignorance has value. I know I'd be happier if I truly believed the recovery began in March, 2009.

Tue, 02/14/2012 - 13:20 | 2157926 lizzy36
lizzy36's picture

The majority of the MEDIA doesn't understand it.

Media is mostly owned by big corporations that have a certain narrative (cough propoganda) that they want to disseminate.

You can't sell the importance as most people won't swallow it. 

Take Bernie Madoff. Despite being unable to reverse engineer his returns. Despite all the red flags, people lined up to get in on the scam. LINED UP. They didn't want the truth. They want the delusion. 

American exceptionalism is the narrative that sells. Yanks want to believe they are the exception. They are invested in that narrative. 

The greatest myth ever sold to Americans is they too can be millionaires. They are not ready to give that up.

Tue, 02/14/2012 - 13:28 | 2157962 GeneMarchbanks
GeneMarchbanks's picture

So they will be! Each and every American will be a millionaire before this is all over. I promise you that much.

Tue, 02/14/2012 - 12:48 | 2157744 vegas
vegas's picture

Uh oh, Chalky Soetero has a big problem. Thanks for the election issue. And this is the guy who is supposedly the smartest guy in the room?

Tue, 02/14/2012 - 12:51 | 2157761 hognutz
hognutz's picture

Give a man enough rope and eventually he will hang himself............

Tue, 02/14/2012 - 12:56 | 2157788 Dr. Engali
Dr. Engali's picture

Give the man a pole with that rope  and he can feed himself some fish.....or something like that.

Tue, 02/14/2012 - 12:53 | 2157770 taniquetil
taniquetil's picture

Print baby print! Print money! Print jobs! Print a new debt ceiling! Print ALL the things! Pretty soon Obama will be printing Hope tablets to hand out to the unemployed youth.

Tue, 02/14/2012 - 12:54 | 2157778 Jlmadyson
Jlmadyson's picture

What have I've been saying. The shit storm is coming.

Tue, 02/14/2012 - 12:59 | 2157805 vincent
vincent's picture

I know a fella who has about 40 grand in a mutual fund.

I'll thank him for doing his part for the republic.

We should be thanking all of the morons who refuse to pay attention.

They will assist in keeping food and real money cheaper for a little longer.

BrotherJohnF does a little investigative reporting on this fiasco.

Tue, 02/14/2012 - 13:02 | 2157823 SilverIsKing
SilverIsKing's picture

Why hasn't anyone from the GOP produced a TV commercial showing what things will be like in the USA in 2016 if Obama gets re-elected?

There are so many ideas that come to mind, especially $6.00 gasoline.

Tue, 02/14/2012 - 13:11 | 2157881 lizzy36
lizzy36's picture

As opposed to if Santorum gets elected?

There are so many ideas that come to mind, especially $6 gasoline.

Tue, 02/14/2012 - 13:16 | 2157905 SoNH80
SoNH80's picture

Two flavors of Kool-Aid on offer, cherry and blueberry. Different paths to the same result. Take your pick, if you want to bother with that.

Tue, 02/14/2012 - 13:20 | 2157920 SilverIsKing
SilverIsKing's picture

I agree, it would be no different with Santorum or Romney, but it may serve as a vehicle to open a few eyes as to what's really going on.

Tue, 02/14/2012 - 13:24 | 2157948 SoNH80
SoNH80's picture

I take your point. Like how the other GOP candidates have taken the shine off of the Plastic Jello Mold aka Romney.  I actually lived in Mass. when Romney was governor-- when he was filled with pale pink strawberry Jello-- hobnobbed with the Beacon Hill liberal pols, spending zoomed up... and Romney not only did nothing about the Dukakis gun laws, he actually said how much he liked them!-- a model for the rest of the country!!  He's now filled with "true blue conservative" Jello, but it appears many aren't fooled.  Hollow, plastic, changeable, another politician for our times.

Tue, 02/14/2012 - 13:34 | 2157990 JR
JR's picture

Obama can do what he’s doing because the Republican Party doesn’t stop him. They write him the checks, for Heaven’s sake.

Obama is promising to take. He's going to take even more from the producers. That's what he's running on, while Bernanke is taking by inflation.

Obama expects everyone to do his fair share, except the 47 percent who do nothing - his constituency.

Only one man will expose scandal central; only one man will take it on. The people have a choice - Ron Paul!

Tue, 02/14/2012 - 13:03 | 2157824 Shizzmoney
Shizzmoney's picture

This is what happens when you let "academics", on both sides, run the country.

We need to get back to a simplier indentification of issues, like in this short economic narrative: "Shit happens"

Tue, 02/14/2012 - 13:04 | 2157835 grid-b-gone
grid-b-gone's picture

You don't get to be Speaker of the House without strategy skilz.

Tue, 02/14/2012 - 13:06 | 2157841 yogibear
yogibear's picture

Remember in Washington deficits don't matter. You better believe Obama will hit 24 trillion faster than anyone realizes. 

Tue, 02/14/2012 - 13:08 | 2157860 Doctor Doom
Doctor Doom's picture

Which means that Obama cannot afford single bailout whithout risking re-election.

Interesting situation.....


Tue, 02/14/2012 - 13:08 | 2157862 madcuban
madcuban's picture

I think something is missing here.  Obama WANTS that to happen.  B/c by then we will either be at or near war with someone.  Then he can blame all this on that issue and use it as a threat that in order for continuity during wartime, he should be re-elected.  win win for him. 

Tue, 02/14/2012 - 13:13 | 2157874 Wakanda
Wakanda's picture

Maybe Barry knows he is a one termer and is scheduled to be replaced?

He does not seem to be enjoying himself in this particular 4 year resume builder.

Tue, 02/14/2012 - 13:24 | 2157944 Seasmoke
Seasmoke's picture

WAR what is it good for ........Absolutely .......getting an incumbent President re-elected

Tue, 02/14/2012 - 13:25 | 2157954 wesa
wesa's picture

The government will never run a surplus on an annual basis because at the first sign of "surplus money" someone will come up with a way to spend it.

Tue, 02/14/2012 - 13:29 | 2157969 bob_dabolina
bob_dabolina's picture


I got one. 

Who am I?

America will always be AAA (right after first downgrade)

Tue, 02/14/2012 - 13:40 | 2158004 Burgess Shale
Burgess Shale's picture

This government is more afraid of recession than debt.  Recession would be a problem right now, while debt is a problem for the future.  Obama coming forward now means the only item on the DEM's plate this year is a big increase in the debt celing.  Everything else will be secondary.  Unless they opt for war with Iran--then all bets are off.

Tue, 02/14/2012 - 14:52 | 2158343 madcuban
madcuban's picture

you are slightly off.  they are afriad of a depression.  and are now settling for a recession.  instead of letting the market sort it out (depression for 2-3 years), they are smoothing it out with a recession that will last 15 years.   the problem is, now they're stuck with zirp and too much debt to roll over, so they cant fight inflation wiht higher interest rates.   whoops.

Tue, 02/14/2012 - 13:37 | 2158005 Fix It Again Timmy
Fix It Again Timmy's picture

Just what does an effective president do now a days?

1. Pardon a turkey on Thanksgiving

2. Switch on the national xmas tree

3. Oversee the annual Easter egg hunt...

Tue, 02/14/2012 - 13:52 | 2158055 Wakanda
Wakanda's picture

Barry is an actor playing the role of President of the United States in the show "U.S. of A.".  Take away his script (teleprompter) and he often sounds stupid (not always).

He is an actor, nothing less and nothing more.

He behaves just like every actor I've worked on many stage productions with.

Tue, 02/14/2012 - 16:46 | 2158903 Money 4 Nothing
Money 4 Nothing's picture

You forgot about 90 golf outings.

Congress at this point is window dressing. Were fucked.

Barry Soetoro is the walking definition of a conspiracy theory. He was installed to take down the USA in my opinion.

Tue, 02/14/2012 - 13:39 | 2158014 Silver Dreamer
Silver Dreamer's picture

And then?

Tue, 02/14/2012 - 13:57 | 2158083 flyonmywall
flyonmywall's picture

You're forgetting that under the deal reached last August, the debt ceiling AUTOMATICALLY increases, unless Congress votes against it. If it does, Barry can just veto it, and it goes through, unless Congress approves it with a vetoproof majority (fat chance).

So, the only thing the debt ceiling increase will be good for will be political posturing during the election cycle.

Welcome to representative democracy. How would you like to be screwed, traditional, or doggy style?


Tue, 02/14/2012 - 14:12 | 2158132 BlackholeDivestment
BlackholeDivestment's picture far as World War Three, Senator John Cornynn just asked Leon Pandering Panetta about what reaction to expect from Iran when it gets hit. The General next to him whispered in his ear ''closed session'' and Leon said the question would be better answered in a closed session. 

>>> can see in full at video library >>

Tue, 02/14/2012 - 15:47 | 2158619 Silver Dreamer
Silver Dreamer's picture

World War III?  That's never going to happen.  har har

Tue, 02/14/2012 - 14:12 | 2158138 jmcadg
jmcadg's picture

Typical ZH rant about the budget without a SINGLE mention of what the debt is financing. The budget includes roads, hospitals, bridges and generous compensation packages for hardworking government workers like teachers and firemen. 

MDB - You are funny. You're like a little furry bunny, playing in the fields, not a care in the world, oblivious to reality.

Don't tell the bankers that the money is going to hardworking people, because that just wouldn't do, would it now.

Tue, 02/14/2012 - 15:07 | 2158393 libertyinsight
libertyinsight's picture

I think you're giving the electorate too much credit. Obama will use the debt ceiling debate to say the mean republicans want to crash the economy by not raising the roof and take away our goodies. The voters will eat it up.

Tue, 02/14/2012 - 15:11 | 2158413 Quinvarius
Quinvarius's picture

I think the required money will magically appear.  Just a hunch.

Tue, 02/14/2012 - 17:18 | 2159170 Cicero50
Cicero50's picture

By Sept. we'll be in full war mode and the Congress is going to raise the debt ceiling to cover war costs, leaving the whole issue moot.

Funny thing is, the Repubilicrats know this as well.

Tue, 02/14/2012 - 18:31 | 2159516 Matt
Matt's picture

Is there a betting pool on when the debt gets within $100 Billion of the ceiling? I want to put some money down on "between July 4 and 30, 2012"

Tue, 02/14/2012 - 20:04 | 2159840 Snapperton
Snapperton's picture

In a later post on this site, there is mention of disability payments and the $200 billion USD that is spent annually on both legitimate and fraudulent claims.  MillionDollarBonus likes to carry the torch and suggest that if we are spending money on infrastructure, government employment and aid to the needy these are acceptable debt increasing causes.  That, I fear, is the crux of the problem.  We can all feel compelled to "cure" what ails us.  We may even have legitimate reasons for making claim on funds from the Treasury.  The problem is sustainability.  We will have gone from 80% Debt to GDP to 130% by the end of 2015.  This estimate is conservative from what I have been reading.  Are we all batshit crazy?  There are no conditions under which this is serviceable.  And we are making interest payments to the Fed for money that is created and has no basis of value other than the full faith and credit of the United States.  Well, I am so relieved to know that.  No one is willing to sacrifice.  We are such selfish and arrogant people.  I have been learning about unemployment, disability, and food stamp benefits.  The cost for these programs is very high.  We can't pay for the programs, so we borrow money to pay people who don't have jobs and can't make a contribution?  I understand the liberal argument, but the compassion play is ultimately without compassion for those who are producing and trying to keep their businesses afloat in increasingly difficult times.  And lets be realistic about where wages and production comes from.  Less government intrusion, less wealth distribution (because the government is very inefficient at it), and more incentive for producers to keep producing.  If my social security requirement was lessened, I guarantee I could do more for my neighbors (as would a lot of other good people) than the Federal Government can do.  For one, I could offer another full time job right out of the gate if my tax liability was reduced.  That is the problem with our current State.  Central planning is inefficient and small businesses have proven to be most efficient when distributing resources.  This applies to both supply and demand aspects of operation.  Central planning provides supply by taking production (with force essentially) and artificially creates demand for services.  This compels distribution of finite resources to less productive parts of an economy and leads to weakened availability of supply in higher demand areas.  This is a generalized macro view, but it is sound nonetheless.  We have been led to believe that free markets have failed us.  This is not true.  Intervention in the market by central banks and bureaucrats has led to a skewed and imperfect market that is anything but "free".  Manipulation is normalized in our current world markets with the western powers the biggest offenders.  We cry fowl at a little currency manipulation by China...hypocritical to say the least.  I am looking forward to the fallout from this.  It will separate the wheat from the chaff as it were and I pray that those who can, will help their neighbors if the opportunity presents itself.

I am an Alien

Wed, 02/15/2012 - 08:02 | 2161003 Element
Element's picture

If USD purchasing-power wasn't so crap, would the USA still need to borrow as much?

Could it be that the endlessly elevated plateau of deficit spending is simply a product of FED's gushing inflation of the money supply?

Therefore it would in practical terms be an irreversible process.

Increased spending drives deficit growth, and cutting would help lower the NET spending, but if given in $2,001 USD would it ultimately make a difference, if debasement of USD continues to accelerate, and thus forces deficits to balloon further, even as this larger amount buys you less and less of everything, including 'stimulus' effect, due to the accelerating fall in purchasing-power, right across the board?

Wouldn't that be anti-stimulatory, in NET?
i.e. ZIRP is going to kill itself.

Should we 'intervene'?

Nah, just sit back and watch the period between successive debt-ceiling rises get shorter and shorter, even as military spending and other big programs start to be slashed.

At some point people will generally realise affordability is the demand-side problem ... and will again blame it on induced inflation and a lack of employment and m an hours worked, with static or falling wages.

And that is how you make a huge debt smaller ... inflate the buck supply ... but not if the deficit keeps rising this fast!

All that will happen then is the dollar ain't worth shit ... so welcome to the USSA's soft-default process.

Creditors just get paid in worthless paper.  All fair and legal. 

And the major creditor is Uncle Sam's proles anyway.

An inflationary soft-default (attempt) that you will pay for, one way or another.


How about those Cali pump prices, eh? ... less demand and utilisation ... but higher prices ... weird huh?

Wed, 02/15/2012 - 07:52 | 2161012 Element
Element's picture

And I'm fairly sure Barry promised to halve the US Federal deficit before 2013. 

And when he made that promise the projected Bush deficit of the day was $1.06 trillion.

Fri, 02/24/2012 - 00:24 | 2191795 holdbuysell
holdbuysell's picture

"By the pricking of my thumbs, something wicked this way comes."  - Shakespeare

"In politics, nothing happens by accident. If it happens, you can bet it was planned that way." - Franklin D. Roosevelt

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