“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Thursday, October 27, 2011

US is beyond point where cuts and raising taxes sharply enough can prevent exponential debt growth?

America can now only defer its debt crisis

Whatever action its politicians do or don’t take this week, the US is already bust, writes Jeff Randall.

Without a deal to raise the country’s $14.3 trillion debt ceiling, the US will default on August 2.

It has come to this: the world’s biggest economy, head of the triple-A club and home of the financial system’s reserve currency, can pay its bills only if it borrows more money. America needs to increase its credit limit by $2.5 trillion simply to get through to next year’s presidential election.

Billions, trillions, schmillions, chill out, why fret over a few more zeros? Well, for context, America’s 2011 GDP (annual output) will be the same as its “official” debt, $14 trillion to $15 trillion.

This doesn’t tell the whole story. The good news is that $4.6 trillion of America’s debt is accounted for by intra-government loans, money the US owes itself. The bad news is that on top of the $9.7 trillion Washington must repay to outside investors ($1.1 trillion to China), it has $60 trillion of unfunded social security and Medicare obligations, ie, welfare pledges to its own citizens for which there is no pot of savings, only the taxes of future generations.

As Dolly Parton nearly said, it cost a lot of money to sink this deep. America’s commercial and military hegemony came at a terrifyingly high price.

In 1835, US federal debt was zero; the country owed nothing. Two centuries later, having become the richest and most powerful nation on earth, America is, quite literally, running out of cash. The problem was explained by Addison Wiggin and Bill Bonner in their best-seller Empire of Debt: not many people can afford to live like Americans; the trouble is, neither can they.

Last year, the difference between what the US paid for imports and received from exports was almost $500 billion. This year, the trade gap with China alone is running at $25 billion a month. As a result of ambitious welfare programmes and military adventures, the Obama administration is running a budget deficit of $1.3 trillion.
According to Warren Buffett, America’s most successful investor, the country has “relied on the labour of others to provide things that can be used every day… this can continue for a long time and on a large scale – but not forever”.
There speaks the voice of common sense. On the other side of the hospital screens, we have media dons, Princeton’s Paul Krugman and British-born David Blanchflower, professor of economics at Dartmouth College, championing fiscal incontinence as the route to salvation.

Aside from their links with Ivy League universities, Krugman and Blanchflower have something else in common: they both admire Gordon Brown, who clocked up £160bn of budget deficits in the boom years of 2003-07. At the core of their thinking, and his, is an unshakeable belief that government spending sparks growth, which is the sine qua non of life, liberty and happiness – and also debt reduction.

But hang on a minute, how come Greece required two multi-billion-euro rescue packages? Did the Greeks economise themselves into penury? Were they guilty of criminal parsimony? Or was it that, thanks to its fraudulent entry into the euro, Athens was able to borrow recklessly, allowing vote-crazed leaders to bribe the electorate with money the country did not have and could never afford? Ah, say the professional spendthrifts, the US is not like Greece. True, it is vastly bigger and so are its debts – and they’re not going away.

A study by Harvard professor Kenneth Rogoff and Carmen Reinhart from the Peterson Institute shows that when public debt tops 90 per cent of GDP it acts as a brake on growth. Their study of 44 countries, going back 200 years, concludes that it would be foolish to interpret today’s low borrowing costs as a green light for further debt. “Politicians everywhere like to argue that their country will expand its way out of debt, [but] our research suggests growth alone is rarely enough to achieve that with the debt levels we have today.”

Boston University’s Professor Laurence Kotlikoff goes further: America is already bankrupt. Writing for Bloomberg, he explained that US debt is much greater than has been declared: “Congress has been very careful… to label most of its liabilities as 'unoffical’ to keep them off the books and far into the future… This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.”
Ponzi schemes survive as long as they are able to attract increasingly bigger contributions from ever more participants. Eventually they collapse under the burden of impossibility. This is where America is heading. It is beyond the point at which it can cut benefits or raise taxes sharply enough to prevent exponential debt growth.
If Democrats and Republicans can cobble together a compromise this week – and the markets still give them the benefit of the doubt – their fix will be nothing more than crisis deferral. Capitol Hill is in the business of Micawberism. What price the Fed resorts again to printing money?


  1. I disagree. It can be done but not with the fools presently running the country and the current system that controls Washington.

    The banks own the federal reserve sytem. We created a financial system based on borrowed money and debt. Most of our trade deficit is to China and for imported oil. There are too many people sharing in the welfare spoils. There are too many lawyers, too many laws and too many lawsuits. If lower taxes were the cure all, we would own the World since Reagan started the "tax revolution."

    There is plenty to work with and time to do it. It could be done, but don't bet on it.

  2. Obama has to go. He is incapable of any change and no hope for his leadership. He is a craven political hack and inept at anything beyond campaigning. Congress is bipartisanly stupid.

  3. Everyone who does their family budget knows that reducing debt is a matter of simultaneously increasing accounts receivable and reducing accounts payable. But our political system is divided precisely in half between a side that only want to increase accounts receivable, and a side that only wants to reduce accounts payable.

    Allen: The show about a single woman's struggle to find happiness in the big city was originally titled ‘Life Without Dick,’ but that was changed
    for some reason.”

    There are compensations.

  4. Do you remember those ancient high school algebra problems? You, know: The ones that had Bob going down the railroad track at 10mph, using a hand cart and Frank starting after Bob two hours later in a locomotive traveling at 60mph? Came the questions: “How long will it take Frank to catch Bob, and how far will he travel to do so?”

    Note: there was never any question about whether Frank would catch Bob. The rules were set: Bob would remain on the handcart on the rails. The outcome was inevitable.

    Now, if catastrophe is to be avoided. The US must have a paradigm shift. The country must get off the rails or divert to a siding or hope for rescue from the air or try anything other than the status quo or the status quo ante. But, clearly, playing by the current rules will lead to an inevitable outcome – Bob will be crushed by Frank’s oncoming locomotive. Continued clumsy intervention by government MAY slow the locomotive slightly, but that can continue only so long. Inexorably, the whistle of the train can be heard in the distance, closing the gap with each sound of the horn.

    There is war; or, more precisely, a continuation of the present world strife. However, it seems that only a worldwide conflagration will have the effect of creating the necessary paradigm shift. It is probably idiotic to hope for a rational, international change of focus.

    Hmm…No, poor Bob can pump away all the harder, but Frank is going to close that gap. When and where remain; the questions posed by the original problem.

  5. 13. no mo uro What, exactly, will this Euro war be fought with? Weapons they never developed or bought? The armies they no longer have? Children they no longer produce? Sounds like a small war, Ms Merkel.

    Europe is a mass icepick murderer who was caught and did sixty years in prison. Merkel is on the parole board warning if Europe gets out there's gonna be even more mayhem, but when that day actually comes Europe will roll stately out of the joint in a wheel chair smelling like Ben-Gay and Depends.

  6. Nightmare scenario: U.S. deflation risks rising
    What do you call the situation where the country's single largest economic sector is down about 30% over three years, with tremendous momentum pressing prices further downward, e.g. a shadow inventory of several million REOs et al?

  7. Your Debt: The One Thing Killing the Economy, Says Mark Dow

    Look at Figure 1

    [The Economist] The variable burden of household debt
    "The big problem for households is that incomes have fallen below levels that were expected at the time debt was taken on. And incomes are expected to stay below that level for some time; indeed, nominal incomes are falling ever farther behind the pre-crisis trend."

  8. Well,, let's see ...

    The family can sell that tract of recreation property, in the mountains. The children object, saying that property is their "Heritage".

    The other option, stop borrowing money, and then die within their means. Mom objects to this, saying that medicine for Junior and her Dad are essential.

    This is the point were the "family" analogy breaks down.

    Because Father cannot call down to the shop and have the "boys' create a couple of trillion dollars, with the strike of a hammer.

    The United States can ...

    ... and should.

    Do not borrow more money to pay the interest on past debts, just create it, out of platinum.

    If it freaks Charlie Chi-com out, good deal.

  9. Looks like Mr Perry could have gained, by reading the EB.

    It seems that the dangers of the "debates" are now apparent to him.
    He is opting out.

    Should have done, as advised here, and skipped the first one, at least.

    Gone to them late, rather than quitting on them, early.

    He is quickly disqualifying himself, from this round of the game. If he learns some lessons, he may be ready to go, in 2016.

  10. DR said...
    This is the point were the "family" analogy breaks down.

    There was no analogy.

    Do you have any idea of the amount of the average American's credit card debt, for example? How much does the average American household owe in personal debt? You did not look at the charts, did you? Just firing from the lip, again. Had you looked, you would have seen that Americans have become addicted to ever larger amounts of personal debt.

    Even in America, one cannot indefinitely spend what one does not have and what one has little chance of ever having.

  11. (Roll Call) — In the latest battle in the Congressional franking wars, Democrats have been vetoing use of the word “Obamacare” in taxpayer-financed mass mailings, saying it violates rules against using the franking privilege for “personal, partisan or political reasons.”

    Their objections are irking Republicans as the calendar advances toward the 2012 elections.

    “It’s telling that Democrats are fearful of taking ownership of the president’s signature piece of legislation,” a GOP House aide said

  12. Yes, allen, I've seen the charts.

    I know that the savings rate in the US went from aprox 10% down to the negative range during the Bush years.

    The savings rate is now inching its' way up, as people become aware that their incomes are not matching expectations.

    Paying off that personal debt, where possible. Many, in the real estate market, are holding on to property and mortgages that are not "marked to market".

    The losses, in real estate alone, I've seen reported at over $7 trillion USD.

    Liquidity just sucked out of the economy. Not just here, but across the globe. Property values in the EU, Ireland, Greece, Italy, Spain and Portugal have plummeted.

    With no help from Fraudie or Fannie.

    Only the Federals can hydrate the economy.
    They should not use debt to so.

    But they should utilize the full power that being the global reserve fiat currency avails US.

    To the best advantage of the US.

  13. The President can inject $1.2 trillion USD into global liquidity, over the next 12 months with the stroke of his pen.

    It is not glib to say he should.

  14. How, like specifically, should the Prsident, in your view, inject that money into the economy rat?

  15. Pays the interest that comes due in the coming year on the National debt.

    Suspending the sales of Treasury notes, which had been serving that purpose.

    The market then invests that $1.2 trillion, which would have gone to Treasuries, elsewhere.

    Money never sleeps.

  16. DR,


    :-) thoughts exactly...

    ...not looking for argument; rather, clarity...

    At this writing there is so much bogus real estate info generated by government et al as to defy description. It has been said here, and I think it true, "We are royally screwed!" The effort to make it so was bipartisan.

  17. It is a "Market Directed" stimulus plan.

    Not one of "Central Planning", by the Federals.

  18. For years "The Five Rings", written in 1645 by the samurai warrior Miyamoto Musashi, was touted as a management learning tool.

    Grand business strategies were extrapolated, by those touting the virtues of the samurai.

    I read the book, while learning to wield a katana.
    There was only one thought that permeated all the writing. One lesson that Miyamoto was trying to convey.

    Once the decision to engage is made...

    Act decisively, with vigor.

  19. Want to see something funny?

    Watch Charlie Chi-com react, when the US teaches him a lesson in currency manipulation.

    Only 2.7% of US GDP goes to China, according to the Motley Fools.

    We do not have to allow the tail to wag the dog.

  20. So, to pay the US bills, redeem Treasuries as they come due and pay coupon payments as the come due, under your scheme, the government just deposits this 'new money' in the Federal reserve somehow (is that possible?), and writes checks against it coupled with no new issues of treasuries.

    I'm curious what the consequences would be to such radical action. I'd guess the bond market would be...disturbed and the blatant printing of money would make many in the world dump whatever US dollars they could while they could...

  21. This comment has been removed by the author.

  22. Yes, it is legal today, ash.

    No new legislation would be required.

    It is as shovel ready as it can get.

    If some of "Those" folks start "dumping" dollars, well, it just adds to the liquidity.

    We need to hydrate most all of the $7 trillion lost in real estate, back into the economy.

    So let 'em dump.

    Where else are they going to?

  23. Where the bond markets would be, after the Federals stopped sucking $1.2 trillion out of it ...

    A function of the marketplace, not the central planners.

  24. How ironic - China, which used to routinely call the US a "paper tiger", sees itself as the Asian tiger. It may be a tiger holding a lot of potentially worthless paper.

    For all its purported strengths, China has as many Achilles heels as an octopus.

  25. The President does see the wisdom of taking unilateral action, where he can.

    In the past days he has moved on mortgage refinancing and student loans.

    His approval numbers are on the rise.

    Is Joe Starbucks correct, is Mr Obama owned by Wall Street?
    Or is he still a community organizer, a man of the people?

    If Mr Obama is truly a radical, if he is an agent of change, he'll mint the coin.

    If he's owned by Wall Street, he'll not.

  26. Financial Crashes normally happen when the Big Banks get too much money sloshing around in their coffers, and get into mischief. This happens about every second generation.

    Big thing to keep in mind: The U.S. is not like a family business (or even a small Euro country.) These are "Currency Users."

    The U.S. is a "Currency ISSUER." All the difference in the world.

    I read the other day that the citizens of the U.S. are, actually, deleveraging faster than the Government is "Leveraging," such that the total debt of the U.S. in declining, not rising.

    A few people in Congress are starting to realize that it's imbiclity at its highest to continue to Penalize Corporations for bringing their money back to the U.S.

    China will be an, albeit slowly, self-correcting problem.

    That leaves "Energy." That's where we have to get to work.

  27. If Obama actually did what rat suggests then the US currency would not be the reserve currency any longer. The US dollar would become worthless fast. Not so bad if you are a landowner and other physical assets not so good for the rest.

  28. So far, Obama has done, pretty much, the right things. Even that 60 Million bbl drawdown that he and the IEA did from the Strategic Reserves made a Lot of difference.

    It, temporarily, broke the back of the rapid run-up in gasoline prices, and was largely responsible for the strong Sept, and the uptick in 3rd qtr GDP. I wouldn't doubt that he doesn't do the same thing around March, or April.

    You can't do this trick forever, but, given the size of our reserves, you can do it long enough to get "reelected."

  29. It would not, ash.

    As you say the same process is used by the Fed, which "prints" money to buy the Treasuries.

    We're just going to skip that step.

    As to those selling their dollars, ash.

    Where else are they going to go?

  30. As they "buy" things, ash, they'll be playing into the plan.

    Increasing liquidity, which will lubricate economic activity, stimulating growth.

    Get those dollars rollin'
    Get 'em Up !!
    Move 'em out !!
    Rawhide !!!!

  31. Is the Euro going to become the reserve currency?

    The Yen?

    We've got a lock on it, until the decision to introduce the Amero is legitimized, because of the "destabilization" of the dollar.

    Which, using the algebraic analogy, is on track, regardless.

    To take no action is a recipe for failure.

  32. There can be only one Alpha Dog. The Alpha Dog is the one with the F22's, B2's, 10 Nuclear Carrier Groups, Missile Defense, and the one capable of Fighting Wars on the other side of the World.

    That will be the Dog with the Economy that's close to Three Times that of its closest competitor.

    Nothing is forever, but it will take awhile to supplant This Alpha Dog.

  33. You must think, ash, that the physiological multiplier effect, achieved by taking decisive action, would be far in excess of the value of the interest the US would be paying on that $1.2 trillion USD.

    And that, amigo, is one of the precepts required for success.

    Providing the greatest economic bang, directed by the market, with no cost to the government.

  34. You are making the case, ash, for the program.

    Economic activity would certainly be stimulated.

  35. Under the new paradigm of balanced Federal spending, revenues to expenditures, without debt, the economic consequences would be explosive.

    Which, it just so happens, would exist today, if the interest payments were "off budget".

    If successful, the multiplier effect of minting that $1.2 trillion would be enough to liquify the economy, lifting all boats.

    If not, the spout may need to remain open, until it does.

    Or until the effort is judged a failure, by proven performance.

  36. The Congress would be fulfilling its' Constitutional role, despite itself.

    The Plan is Grand.

    If the President were bold ...

    If he were a "real" leader ...

    He'd be buyin' that ticket to ...

    ... Jacksonville ....

  37. This looks to me to be a stone "Suckers' Rally" in the stock market.

  38. No Rat,

    The interest paid on the debt currently is minimal. The Fed is printing money and debasing the US dollar through its QE program but that is not operating at near the magnitude you are suggesting. What you are proposing a default on US debt obligations through the use of the printing press. It would not lead to a slow adjustment of currency values but rather it would crater the US dollar - you would be flooding the market with dollars vastly out-stripping demand with supply. Anything imported would get much more expensive (and the US imports ALOT). One of the functions of issuing debt by the government is to indicate to the world that they are not simply printing up dollars willy nilly but rather it will be paid back through growth. Doing what you suggest would crater confidence that there was any underlying credibility to the US dollar. Heck, the US is risking the credibility of the US dollar proceeding as they are currently as evidenced by your rants on the slow but steady decline in the US dollar. Your suggestion would increase the decline so much so that I think it would crash.

    There are many other places for the world to put their cash than the US, baskets of currencies and commodities. There would be a rush for exits so you would see huge gyrations in the markets.

    rufus, all that military power is worth something but even if the US empire tried to extract revenue from the empire like the British did look what happen to the British empire.

  39. All Current Economic Data, today, were from Bad (jobless claims,) to horrible (Pending Home Sales, and Consumer Comfort.)

    Daily Data - Bloomberg

  40. Alas there are no easy way out to the predicament the US has got itself but rather it must execute an increase in revenue for the US government AND a decrease in spending.

    RAT your dream of simply printing up a few trillion to solve the problem is just that, a dream, a fantasy. Rather they are nervously printing up a bunch to stem the flood of crises and that doesn't appear to be working.

  41. That's correct, ash.

    The Federals are half-stepping, when double time is called for.

    I think the Joe Starbucks is correct, Mr Obama is owned by Wall Street and the Boner Bankers.

    I never thought he was "real" radical, and he is proving me correct.

    Stay the course!

  42. Agreed, Ash; but when things get really bad, you want to be standing next to (behind) the biggest, baddest guy in the fight. Right now, that's the U.S., by far.

    That's why, every time it looks like the shit is really going to hit the fan the world runs, not sidles, to the Dollar.

  43. That is an effect, government revenue, ash, not a cause of the challenges.

    It is true that Federal revenues are at 60 year lows, based upon GDP.

    But that challenge cannot be addressed, unilaterally, by the President.

  44. The don't run to the US dollar because of the aircraft carriers but rather because of the deep liquid capital markets and the history of the US being a productive sound dollar nation. That is already being eroded, the sound dollar productive part, but the market for Treasuries is deep, liquid, and the liquidity is further backed by a Fed willing to step in a buy them up itself.

  45. This comment has been removed by the author.

  46. It certainly can't be addressed unilaterally by the President and the the President is not God with a magic wand to wield making all things right for the US. In fact printing up a few trillion with that magic wand won't make it all right for the US but rather the US people will need to find a way to increase the governments revenue AND decrease expenditures to work their way out - otherwise things won't be so nice and cozy in the good ole USA.

  47. The Rich pay for the Government (they have to; they have the money.) Over the last few years they've lost their ass. Now, they want to cut expenses (pay less for the government.)

    They are fighting hard to shed their tax load. If we allow that, we'll go into Depression. If we hold their nuts to the fire, and make'm pay up, we'll all recover, and they'll start making even more money, again.

  48. Don't kid yourself, Ash. Those Aircraft Carriers have a lot to do with it.

  49. It might be on a subliminal basis, but the instinct is there.

    OBL had one thing right: People want to be with the "Strong Horse."

  50. And the deal there, rufus, is that if we had half as much military than we do, we'd still have more than anyone else.

  51. Yep, To be the Biggest, with the Mostest, is important; but, to be ridiculously Big is, no doubt, wasteful.

    Americans have always had a problem with moderation, eh? :)

  52. The run to the US dollar because they believe they will get their money back when they want it. If you rattle that perception they won't run to the US dollar. I don't think most believe that it is the aircraft carriers that are enabling the return of their money. Sure, it might have some effect but rather small. Heck, the British Empire ruled the 7 seas for a long time and now look at the limeys.

  53. "Ruled" being the operative word, perhaps? :)

  54. I'm not disagreeing with you on this one Ash. You're, totally, correct.

    However, I'm just saying, "Size Does Matter." :)

  55. I'm just attempting to point out a factor that, it seems to me, is too seldom acknowledged.

  56. Only the Republicans could be so stupid as to pave the way for an Obama victory. People are not stupid. They know the difference between being underpaid and over-taxed. Illegal immigaration , energy and trade policies has had the effect of decreasing income to the vast majority of working America. Those paying the most money have been more than compensated for their "high taxes" by their higher income. Their income has more than compensated for their taxes. That is the perception rightly or wrongly. You know and I know and so does most everyone else that "high" is a relative term as well as "low"is a relative term. When a cup of coffee was a dime, it was because the cumulative wisdom of the marget knew that people would not pay fifteen cents. My first pack of Camels required a quarter in the machine, but delivered my camels with two cents change tucked into the cellophane.

    A quarter for a pack of cigarettes was too damn high. You are not going to win a national election crying that the wealthiest are paying taxes that are too high.

  57. The Republicans should be running with the anger against the Washington bureaucracy, even if they are part of the problem, which thet are.

  58. Yeah if my taxes go up I'll be off the Monte Carlo in a jiffy. Wouldn't it be awful if all the bankers left Wall Street. Where would they go? To Bora Bora I suppose. Most super rich Americans have jets fueled up and ready to go the minute their taxes go up, you know. Can't you hear the engines running?

  59. Who Rules America?

    An Investment Manager's Guide to the Top 1%

    It doesn't really get interesting until you get to the top 0.5%, and then the top 1.1%.

  60. should have been "top 0.1%" there at the end.

  61. Ash: RAT your dream of simply printing up a few trillion to solve the problem is just that, a dream, a fantasy.

    He doesn't understand what money is. Pork bellies have intrinsic value. Money is just a marker that says, "One of these equals one pork belly". You can print ten times more money, but then they have to say "Ten of these equals one pork belly", otherwise all the pork bellies will be snapped up before you get there. Same thing works for gasoline.

  62. Well, Ms T, after a home that was worth 300,000 pork bellies is now worth 125,000 pork bellies, you have what is known as deflation.

    That is what needs to be remedied.

    It is you who do not understand what a fiat currency is.

    Especially one with the scope and scale of the US dollar.

  63. The introduction of $1.2 trillion would not be inflationary, indeed it would not be enough, in and of itself, to supplement what has already bled out.

    The multiplier effect, might.

  64. We are well beyond Bretton Woods, now.

    15 August 1971 the death knoll rang out. Richard Nixon had killed Bretton Woods

  65. We've had $7 trillion in deflationary pressure.

    $1.2 trillion will not "balance" that pressure, let alone inflate a balloon.

    Not by itself.

    To less, will fail.

    To do more, would take political cooperation, across Party lines.
    Which is not likely to occur, little matter the outcome of the '12 elections.

  66. No Ms T. it is you lacking the understanding of what money is and what Rat is suggesting. Printing all those dollars will not solve the US's problems, that is the fantasy. Sure you can erase the debt denominated in US dollars that way but that debt is a symptom not a cause of the problems.

  67. It would provide a window of opportunity, ash.

    It is no panacea, in and of itself. Far from it.

    But an option available to the President, if he is serious when he says:

    “We can’t wait for Congress to do its job. So where they won’t act, I will,”
    Obama told students at the University of Colorado-Denver.
    “We’re going to look every single day to figure out what we can do without Congress.”

  68. The cause of the immediate challenge, ash, the unfunded wars.

    A third of the "National Debt" the Government owes itself.
    $4.6 trillion.

    China is on the tab for about $1.1 trillion.

    There may be some long term challenges to Social Security and MediCare, but that is fixable, in the CSI adjustments.

    But, discounting the interest payments, the Federal budget would be balanced, today.

    By utilizing the minting of the coin to create an "Obama Shock", he could stimulate the economy, in a market driven fashion.

    As part of a five to ten year plan to retire the nation's debt, entirely, as it came due.

  69. Bzzzzzt! Wrong.

    Debt is Not a "Symptom."

    Debt is a lot of things, but "symptom" it is not.

  70. Mr Romney LOOKS like Wall Street.

    It exudes from his pores, emanating deep from his core.

    Mr Obama, who is according to Joe Starbucks, wholly owned, by Wall Street will be the one riding the anti-Wall Street wave.

    He sure looks the part, comparatively speaking, of course.

  71. Re: Who Rules America

    This did not turn me off immediately. In fact, it captured my interest for some time.

    “No, conspiracy theories are wrong, though it's true that some corporate leaders lie and steal, and that some government officials try to keep things secret (but usually fail).”

    This falls in line with my high regard for Franklin’s observation that three can keep a secret if two are dead.

    This was also appreciated greatly:

    “Q: Is connected to the site called "Who Rules America?" on
    A: No! That site (and many others with documents purporting to tell you "who rules America") is run by a white supremacist/neo-Nazi organization.”

  72. I beg to differ rufus. As Rat has pointed out one could simply print up the cash and pay off the debt. Would that fix things in your view? No, the problem, the cause, is a balance of payments problem and the symptom is the debt. There is the monetary bit and economic bit, you know productivity, current account balances and that kind of thing. Money really just makes barter easier - instead of carrying pigs and chickens around, pork bellies ect. one carries money.

  73. I would say that debt is a "Result," not a "symptom."

    Debt would be more like the Disease, than a "symptom" of the disease.

    Perhaps I'm engaging in hair-splitting, and semantics; but, maybe not. aah, whutever.

  74. DR: Well, Ms T, after a home that was worth 300,000 pork bellies is now worth 125,000 pork bellies, you have what is known as deflation.

    That's only a problem for the people who promised 300,000 pork bellies in 2007 and want out now. Other people promised 200,000 pork bellies in 1999 and they already delivered 75,000 pork bellies, so they're not underwater at all. Meanwhile they've got a nice place to stay, and if they keep plugging away until 2019 they might even be able to sell for 400,000 pork bellies. So what you call "deflation" is all a matter of false expectations by people who wanted to flip houses, not build value with something they had to have anyway, which is a roof over their head.

  75. Rat is more right than wrong. Look at what happened to the liquidity produced by QE 1 and 2. First, where was the liquidity injected? The banks.

    The liquidity was created by the FED and for purposes of recycling it into the economy (which is where DR is suggesting is the need).

    The banks refused to do it. The banks bought treasuries and provided liquidity for traders and arbitragers who bought commodities and currencies for speculation.

    Had that same liquidity bypassed the banks and been returned to tax payers it would have been used to reduce debt and spent in the domestic market. Assume there are 200 million possible recipients of the Fed and or treasury liquidity. The stimulus, in trillion dollar increments, at the retail level would have been $5000 per taxpayer or citizen. Some of it would have gone to pay down credit cards, some to make rent or mortgage payments, car payments or other loans. In other words it would have been recycled into the banks for them to clean up their balance sheets. The balance of the money would have been used for food, heath care, small purchase or savings.

    The results would not have resulted in oil futures or runs against the Euro or yen. The economy could have absorbed such an incremental shot on six month intervals and this think would be over. The banks that could not escape their self made tar pits would have been replaced by credit unions and local banks.

    Rat is more right than wrong. IMO, a $3 trillion issuance of currency over 18 months to 200 million people would have created over 3,000,000 jobs and gave the big banks and WAll Street a decent deserved burial.

  76. 62. Eggplant: Obviously, the PPT are up to their old tricks. The Greek bailout provided the perfect cover story.

    That's funny. If the stock market doesn't do what you want (go down), you invoke a conspiracy by manipulators. Average daily volume in the NYSE, AMEX, and Nasdaq alone is 8 billion shares, but today it was 12 billion shares. You're telling me your cabal of secret manipulators have enough cash in reserve (more than a trillion dollars) to purchase an additional 4 billion shares. Since there's only one trillion dollars of cash actually in circulation, and I have some of that, and I know some other people who do as well, that means your cabal had to liquidate something else really fast to pay for all those long positions. It wasn't gold, because gold was up $24.

  77. If you look at the demographics of where this money would have went, you would find it as the very level and the place where it was needed, 200 million independent decision makers who would have spent it mostly in their local communities. in the areas that needed it the most, it would have been used for necessities and not ended in up in currency and commodity trading pits or in the bank accounts of flash traders, arbitragers and the over-taxed accounts of the pitiful rich.

  78. No one would have gotten rich or threatened the republic with their $5000 check. Charlie Sheen would have used his to buy one bottle of wine.

  79. A New Mexico woman was in dire need of a "Get Out of Jail Free" card Thursday after cops took her in for allegedly stabbing her boyfriend during a feisty game of Monopoly.


    Chavez was held on charges of aggravated battery on a household member with a deadly weapon, battery upon a peace officer, assault upon a peace officer and resisting or evading a police officer.

    Her bond was set at $5,000, a sum she had been unable to come up with as of Wednesday night. Her boyfriend remained in the hospital.

  80. And it probably would've been French wine.

  81. Early Oct. 20, a small sedan apparently filled with cartel gunmen rapidly pulled in front of a military vehicle, drawing the military patrol into a car chase in downtown Monterrey, Mexico. After a brief pursuit, the vehicle carrying the cartel gunmen turned at an intersection. As the military vehicle slowed to negotiate the turn, an improvised explosive device (IED) concealed in a parked car at the intersection detonated.


    Hundreds of violent incidents take place every day worldwide, from fuel depot explosions in Sirte, Libya, to shootings in southern Thailand to grenade attacks in Nairobi, Kenya — just a few of the things that happened on a single day this week. Indeed, a typical day sees dozens of incidents in Mexico alone, from shootings and beheadings to kidnappings and cargo theft.


    Once we decide to dig into an incident and rip it apart analytically, we task our analysts and regional open-source monitors to find everything they can about the incident. At the same time, we reach out to our network of contacts to see what they can tell us.

    Bombing in Monterrey

  82. A perfect example Sam; Chavez could have used her $5000 to stay out of jail and saved the local lockup the per diem charge in holding her.

  83. Trade was also a contributor to growth, with exports rising at a 4 percent annual rate and imports rising more slowly, at a 1.9 percent rate.

    One drag on growth, however, was government. Steep budget cuts by municipalities around the country led spending by state and local governments to fall at a 1.3 percent annual rate.

    Indeed, state and local governments have subtracted from overall economic activity in 10 of the past 12 quarters.

  84. Though many analysts contend that defectors’ attacks in Syria appear uncoordinated and local, Colonel As’aad claimed to be in full operational control. He said that he was in charge of planning “full military operations” while leaving smaller clashes and day-to-day decisions up to commanders in the field.


    Andrew Tabler, a fellow at the Washington Institute for Near East Policy, said the emergence of the fledgling group was crucial to the larger question of whether the opposition would stick to peaceful protest, as it largely has, or if it would “go down another path to fighting back.”

    “They are organized and they are speaking to people outside,” Mr. Tabler said. “But the question is to what degree are they receiving financial support from people outside, such as individuals in Turkey and Saudi Arabia.”

  85. For Romney, his strongest argument against Perry is electability. And in every debate that both men have participated in, Romney has looked like the more polished candidate and the one who is best equipped to take on President Obama next fall.

    Given that, it’s hard to imagine Romney purposely giving Perry an out.

    It’ll be interesting to see if Perry makes good on his threat to take a pass on upcoming debates. Given the reaction among the Republican political class, it seems like a very bad idea.

  86. And even this prognosis was based on the over-optimistic assumptions that Greece continues its fiscal restructuring and privatization as promised and growth does not slow more sharply than forecast.

    There were also doubts about whether European banks would in fact be able to raise billions of euros as part of the recapitalization program from investors already burned by the European crisis. And it was not at all clear, analysts said, how Europe would finance its more powerful bailout fund, or what effect this would have on countries like France, say, if it had to put more money into the fund.

    “What European leaders really needed was a massive, comprehensive, and credible bazooka of a plan to illustrate it has the resources and resolve to end this crisis once and for all,” said Bernard Baumohl, chief economist at the Economic Outlook Group. “Instead, after 14 summits conferences and 10 hours of negotiations last night, the bazooka ends up popping out a small flag that says “Bang!”

  87. The U.S. military deploys drones on attack and surveillance missions over Somalia from a number of bases in the region.

    The Air Force operates a small fleet of Reapers from the Seychelles, a tropical archipelago in the Indian Ocean, about 800 miles from the Somali coast.

    The U.S. military also operates drones — both armed versions and models used strictly for surveillance — from Djibouti, a tiny African nation that abuts northwest Somalia at the junction of the Red Sea and the Gulf of Aden. About 3,000 U.S. military personnel are stationed at Camp Lemonnier in Djibouti, the only permanent U.S. base on the African continent.

  88. ( - The Girl Scouts of Colorado are allowing a 7-year-old boy to join a local troop because he is “living life as a girl.”

  89. .

    Rat is more right than wrong. IMO, a $3 trillion issuance of currency over 18 months to 200 million people would have created over 3,000,000 jobs and gave the big banks and WAll Street a decent deserved burial.

    The plan is still money for nothing. It does nothing to address the imbalance between revenues and expenditures. Initially, it was a call to address the debt crisis. Now that it is not necessary for that, rat touts it as a 'temporary fix' to address the debt problem.

    The temporary aspect of it is especially funny. However, let's merely call it what it is, a stimulous program albeit one which through technical slight of hand transfers the power of the purse to the president and away from Congress and the FED.

    The negatives of the plan have been posted here many time before but rat keeps bringing this up. Unless one calls it for what it is, a stimulus program, and argues for it on that basis there is no other reason to bring it up.

    Money for nothing. Paul Krugman would say it is a genius idea.

    The real point, however, is that it will never happen. There is no meaningful support for it on either side of the aisle. And to think that Obama or any other president (except maybe FDR back in the day) doesn't recognize that political reality is naive. So it, like rat's plan to sell off the Grand Canyon serves nothing more than to fill up the post counts on the EB blog.


  90. .

    ...a $3 trillion issuance of currency over 18 months to 200 million people would have created over 3,000,000 jobs...

    A nice round number. But are those real jobs, or as the energy sector and others like to project, implied jobs? Are they full or part-time? Are they permanent or temporary?

    Three million new jobs right now would be sweet, however, showing evidence that they would actually be created might prove difficult given current trends in savings, consumption, unemployment at the state and federal levels, uncertainty in the economy, here and around the world, etc.

    Projecting is kind of a crapshoot these days.


  91. The Tea Party movement arose as a kind of antibody to the money-for-nothing thing our pols have been pulling lately.

  92. But GE's engineers have found a solution to get around this problem and do it cheaply. They've built solar panels that can be linked in such a way that the output is socket-ready alternating current.

    They've also designed a standard installation kit so that the array can be assembled by an ordinary roofing contractor in half a day, as opposed to the two days it takes at the present. Korman says that the system has 60% fewer components than the current high-voltage kits. His goal is to slash installation costs by half and cut energy waste

    Half the Cost

  93. The Tea Party arose out of David Koch's checkbook.

  94. You can get about 1,500 gallons/acre of ethanol out of that stuff.

    It's a Perennial, you don't have to fertilize it, or cultivate it, and you cut it once/year in the fall.

  95. You can get 10,000,000 Gallons/Yr and never have to transport the feedstock more than 2.3 Miles.

  96. Rufus II said...

    One Beautiful Girl

    And a convenient place to do the nasty right behind her.

  97. Let's say you live in a small town of only 2,500. You would need an are approx 1/10 the size.

    1,000,000/1,500 = 667 acres

    about one section of land. An average farm.

    Never have to transport the feedstock more than 6/10ths of a mile.

    Just like "putting up the hay."

  98. The impact of issuing any stimulus check varies depending on how it is spent. Money spent on domestically produced goods is most stumulative. All money on any purchase becomes savings or personal income to someone. Since national savings is at best 5%, we can assume that on average a $5000 check will result in $ 250 worth of savings, so the amount available for stimulus is $4,750. The balance would end up as ordinary income to someone less the cost of an importe item. With an average tax of 20%, the first time the money was spent would result in aprox $800 in taxes going to the treasury. At the sixth turning the treasury would have reclaimed at least 75% of the $5000 in stimulus.

    It is hard to estimate the equity saved on such a stimuls plan, but assume a layed off worker had $15,000 equity in a car and owed $5000 to the bank but was 90 days behind on the payment. The $5000 check would preserve $15,000 in personal wealth and save the bank from a ding in its capital.

    None of these events are by themselves inflationary.

  99. She might be a little young, T.

    at least for me :)

  100. What would be the value to a small town of having all of its transportation fuel produced by a small facility on the city limits?

    2,500 X 500 X $3.50 = $4,375,000.00 Staying at home.

  101. $4,500.00 (after deducting State, and Federal Taxes) for every family of 3 in the Town.

  102. It really is quite an eye opener to understand how corrupt bankers behave.

  103. Let's say it was "Owned by the City."

    Financed by a local Bond Offering.

    Any profits would accrue to the City, thus reducing Local Property, and/or Sales Taxes.

    The Wages from the Refinery would go to local residents, and spent in the Community, not in Houston, Tx, or N.O. Louisiana.

  104. As long as the bankers can make money, they could care less about anyone else, even thought the problems are caused by them. Greece is just a current example. Recall Goldman Sachs arranged swaps that effectively allowed Greece to borrow 1 billion euros without adding to its official public debt. While it arranged the swaps, Goldman also sought to buy insurance on Greek debt and engage in other trades to protect itself against the risk of a default on those swaps. Eventually, Goldman sold the swaps to the national bank of Greece. Think back to when AIG and Goldman Sachs used the U.S.A. as guarantor of both of their counterparty positions.

    It’s a whole new business model contrived in the cauldrons of “financial innovation”. Dirty fuckers all.

  105. Jenny, dear, tell us somethng about yourself. You are interesting, dearie.

  106. I have a hunch that that is not you standing in front of that bunch of miscanthus.

  107. When asked about reports that Khadafy's former intelligence chief Abdullah al Senussi, who fled Libya, had passed from Niger into Mali, Ghoga said, "We did hear, and more or less it is confirmed, that Abdullah Senussi has crossed into Niger."

    It was not known if Khadafy's son and onetime heir-apparent Saif al Islam was with him. Saif was earlier reported to be about to cross into or already hiding in Niger after his father was killed.

    Senussi, who is also Khadafy's brother-in-law, and Saif are subjects of arrest warrants issued by the International Criminal Court.

  108. I was born in the South and raised in the North, so I do the "Bless your heart" but not with quite that much finesse. Usually I fall back on my humor with a "Do we really want to go there?" …but when they persist, I go with both barrels. I was taught that profanity was unnecessary and fucking un-lady like. There is nothing like profanity at times, especially around Christmas when everyone goes insane. I won't join the PTA. I have radical ideas about how kids should be schooled. Number one is don't allow them to grow up and be bankers.

    My husband was a marine officer who was too fond of unsheathing his sword, especially with my girlfriends. I have a smart ass family, minus colonel asshole. However, I am the wittiest so I dominate. Don't even think about it Rufus. ;-)

  109. You guys are great but I like to look and lurk. I'm already busy as a hooker on the strip, so you talk and I'll mostly listen. The thing is I am in the middle of so many things, which is almost always being on the computer. I take a break and this is one of my stops.

    "Bless your heart", I am sure you understand!!

  110. I gived up "thinkin'" a looong time ago, Sweetheart. :) I don' even "dream" much, any more.

    How did you find The Bar?

  111. This is one hell of a baseball game!

  112. There really are a bunch of Elephant Bars. I found this one.

  113. You're in the Securities business? A Lawyer, perhaps?

    Low to Mid-thirties?

  114. Originally from the Atlanta area? Moved to Ohio in Grade School?

  115. .

    Speaking of schools, I saw an article in the paper the other day indicating many places are trying something new called "flipping".

    Seems the schools have their kids do classes at home using their computers. Then they do their homework at school during normal school hours with the teachers acting as tutors.

    At a couple local schools here they indicate they have had some pretty good success with it.

    The article didn't go into how they determined the "pretty good success".

    However, we need to do something with the schools. Good to see they are still trying different things. Somethings got to work.

    Something that keeps the things the US is best at while helping us to keep up with the rest of the world on the mechanics.


  116. Dang, I hate to see them "take" that first pitch down the middle, and then swing at the second low-outside slider.


    shit, they're walking him. D'uh.

  117. Yikes, hung it right down the middle and got away with it.

  118. 11th inning. What a final game for the World Series.

  119. Whitey Herzog woulda had a speed merchant on second, and they would have won the game on that bloop single.

  120. Just did.

    But, that was Game Six.

  121. .

    That's why winning a World Series two years in a row is pretty tough.


  122. I kept thinking this was game 7 !

  123. Freeze reminds me of a hockey player.

  124. I had forgotten they were playing until you said something.

  125. I had forgotten they were playing until you said something.

  126. jenny and the splendor of the grass caught your attention.

  127. jenny did, especially. She's pretty plugged-in to the down-and-dirty.

    Her writing style seems familiar, however.

  128. It's always cool to have a surprise guest at the bar.

  129. .

    Deuce said,

    The impact of issuing any stimulus...

    An interesting analysis. However, the question was on how it would create 3,000,0000 jobs.

    The $3 trillion would provide a stimulus. Whether that was a short-term stimulus or long-term would depend on a number of factors.

    First, how much of the stimulus would be spent? How much would be saved? And how much used to pay down debt? Is the debt being paid down current or in arrears?

    Second, would the stimulus encourage employers to hire more people than they normally would. The government has looked at offering incentives (tax breaks) of up to $5,000 (the total amount per person you are suggesting); but most analysts I have read indicated that given current conditions it is unlikely the program would work due to lack of participation by employers. In other words, an employer is not going to take on a new employee's salary and benefits for a $5,000 tax break.

    Of course, there is a multiplier effect with the stimulus. But you still have the questions regarding just how much of it will go into the economy and where. Likewise any stimulus will effect some companies more than others. What will the companies that benefit do with the extra profits? Unfortunately, many are currently sitting on their profits. Another unknown.

    Third, would companies 'have to' hire anyone to accomodate the increased demand from the stimulus? The current utilization rate in the US is around 77%. What would be the initial constraint these businesses hit in trying to meet the increased demands? Would there be any?

    If labor was required, it is reasonable to assume most companies would use overtime or hire part-time workers or contractors before taking on full time staff especially given the one-shot, short-term nature of the stimulus.

    It's very possible the $3 trillion would be sufficient to give the economy a pop. However, predicting the number of jobs being created by that pop given today's conditions carries some uncertainties.


  130. This comment has been removed by the author.

  131. .

    It's always cool to have a surprise guest at the bar.

    Right. Especially if she wears a skirt?

    Rufus, I've heard it said that you'd screw a snake if someone held its head.

    Of course, the person who said it weren't real reliable.



  132. According to today's GDP report, real disposable personal income—income adjusted for inflation and taxes—decreased by 1.7% in the third quarter (BEA). Since their peak in 1999, real wages have dropped 9%. Median household income—a function of wages and unemployment—has fallen 9.8% between December 2007 and June 2011. (Sentier Research).

  133. Vicious slander, propagated by my enemies, Q. :)

  134. Seriously, I thought jenny put up an interesting post.

    It didn't feel like a "cut n paste," to me. It had the ring of someone that was conversant with the issues.

  135. 'sides, it wus just one rattlesnake, and I did my own head-holdin'.

  136. I mean, I'd had a few beers, and you know how them little diamondbacks are. Cute as a button, and always flirting around.