Monday, July 18, 2011

Barker's Newsbites: Monday, July 18, 2011


Yabba-dabba-doo!
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5 comments:

William R. Barker said...

http://www.realclearmarkets.com/articles/2011/07/12/get_over_it_weve_already_defaulted_99120.html

In their 2009 book "This Time Is Different" economists Carmen Reinhart and Kenneth Rogoff singled out Australia, Canada, New Zealand and the United States as countries that have never defaulted, or more specifically, have "never outright failed to meet their external debt repayment obligations or rescheduled on even one occasion."

Of course, as they later acknowledged on the same page, there are other ways to default.

There is traditional default whereby creditors experience a "haircut" or a delay in payments, and then there's a stealth default.

Looked at in terms of stealth defaults, all those countries, including the U.S., have most definitely stiffed creditors over the years.

Reinhart and Rogoff in particular pointed to a U.S. default in the 1930s. As they wrote, "the abrogation of the gold clause in the United States in 1933, which meant that public debts would be repaid in fiat currency rather than gold, constitutes a restricting of nearly all the government's domestic debt."

(*NOD*)

In short, the U.S. defaulted in 1933, and as evidenced by the dollar's stupendous decline in value from 1/35th of an ounce of gold in 1971 (in private markets a dollar bought roughly 1/45th of an ounce of gold at the time in question) to 1/1600th today, the U.S. has been in default for most of the last 40 years.

(*NOD*)

All U.S. creditors have known since 1971 is persistent default by the U.S. Treasury owing to its [often deliberately] poor dollar oversight,

* IN OTHER WORDS, FOLKS... DELIBERATELY ACCELERATED INFLATION - MONETIZATION OF THE DEBT - IS A FORM OF SLOW MOTION DEFAULT. IF YOU DON'T UNDERSTAND THIS, GO BACK TO THE SCHOOL DISTRICT(S) WHERE YOU ATTENDED HIGH SCHOOL AND DEMAND YOUR PARENTS SCHOOL TAXES BE REFUNDED TO YOU. (DITTO WITH THAT "SHEEPSKIN" FROM COLLEGE.)

July 18, 2011 at 9:11 AM
William R. Barker said...

http://thehill.com/homenews/administration/171997-obama-officially-threatens-to-veto-cup-cap-and-balance

The White House on Monday warned President Obama will veto GOP legislation to “cut, cap and balance” spending and the budget.

(*SHRUG*)

* WHAT'S IT GONNA TAKE, FOLKS?

July 18, 2011 at 2:49 PM
William R. Barker said...

http://fuelgaugereport.aaa.com/?redirectto=http://fuelgaugereport.opisnet.com/index.asp

* GAS PRICES ARE UP 4-CENTS SINCE LAST WEEK. SO MUCH FOR OBAMA'S "GRAND PLAN" OF RAIDING THE STRATEGIC PETROLEUM RESERVE.

(*JUST SHAKING MY HEAD*)

July 18, 2011 at 2:49 PM
William R. Barker said...

http://www.nypost.com/p/news/opinion/opedcolumnists/uncle_sam_sugar_daddy_b5PtLOJxAhWJuG66PQxZlN

When did it become the primary function of the federal government to send millions of Americans checks?

[T]his [question]...is what the debt-ceiling fight is all about - the inexorable and ultimately fatal growth of the welfare state.

If you don't believe it, just look at President Obama's veiled threat to withhold Grandma's Social Security benefits if Congress doesn't let him borrow another $2 trillion or so to get himself safely past the 2012 election.

When Social Security began in 1935, most workers weren't expected to live past the "retirement age" of 65. The program wasn't supposed to have to pay off, except to widows, orphans and the odd male who somehow staggered to his gold watch. Today, it's a national retirement program for an aging country whose life expectancy is pushing 80.

When Medicare began in 1966, it cost $3 billion; congressional estimates were that, by 1990, it would cost about $12 billion, allowing for inflation. The actual figure turned out to be $107 billion. Today, Medicare's future unfunded obligations total at least $36 trillion. Other estimates run even higher.

Medicare, Medicaid, Social Security and debt interest consume...nearly half of our $3.8 trillion budget.

* OH... AND BACK TO "BUDGETING"...

The feds now borrow 43 cents of every dollar they spend.

Under Obama, outlays have soared to nearly a quarter of GDP (the historical average is just under 20%) and once ObamaCare starts to fully kick in around 2014 it will only rise.

You do the math.

[T]hree Obama Cabinet officials warned in their most recent report on the health of the entitlement system: "Projected long-run program costs for both Medicare and Social Security are not sustainable..." [E]ven Team Obama realizes these programs must be put on a sound footing (and likely radically restructured) to continue[!] Yet the president and the Democrats still refuse to put meaningful spending cuts on the table and refuse completely to deal with the entitlement monster.

Even though they know the numbers don't work, they're trying to lock in Obama's sky-high spending as the new normal - and then up the ante.

The debt-ceiling cage match is the culmination of the Democrats' 75-year-long fight to establish a voting bloc of dependents under the false flags of "compassion" and "social justice." It's sapped our strength, created a welfare mentality and, if unchecked, will reduce us to a nation of aging, resentful beggars with eyes cast permanently toward Washington.

The preamble to the Constitution talks about promoting the general welfare, not the welfare state. For the welfare state is incompatible with the rest of the preamble, which concludes: "and secure the blessings of liberty to ourselves and our posterity." By definition, dependents are not free.

Republicans must stand firm in their demands for real spending cuts...

* PERIOD.

July 18, 2011 at 3:13 PM
William R. Barker said...

http://www.nypost.com/p/news/opinion/opedcolumnists/the_true_trouble_with_america_credit_1izcjvr2uagXu34XFkkXCI

[B]oth Standard & Poor's and Moody's say the real threat to the US government's AAA rating comes from Washington's refusal to start living within its means.

The big problem: President Obama's (and Democrats', in general) ideological resistance to spending cuts.

The big worry: The "government debt-to-GDP ratio . . . is currently nearing 75%" and on course to hit "84% of GDP by 2013."

* THAT'S ALL OBAMA, FOLKS... HE "OWNS" THE DEBT TO GDP RATION.

Obama has goosed federal spending 30% above the modern norm.

For the 60 years before he took office, it averaged 19% of GDP, but now it's over 25% - and forty-three-cents of every dollar he's now spending is borrowed. The feds are borrowing more than five times faster than GDP is growing - issuing IOU's for $5.5 billion while the economy only grows $1 billion every business day.

Government just has to be reined in to pre-Obama-era levels - which will require real reforms to Social Security, Medicare and Medicaid, among other changes.

Without a major course correction, America will soon owe more than it can afford - and raters see Obama and the Democrats as unwilling to make big cuts, even if the GOP caves on tax hikes. [And] House Republicans insist on no tax increases...not that tax hikes would do much good.

Set aside the wisdom of raising rates on job creators when unemployment is 9.2%; Uncle Sam has never been able to collect much more than 19% of GDP, no matter how high lawmakers took the marginal rates. So spending cuts are the only solution.

(*SHRUG*) (*NOD*)

[Moody's and Standard & Poor's aren't] buying into Obama's fiscal-hawk pose. His demand for a $2.4 trillion raise in the debt cap, even with a "grand bargain" involving trillions in cuts, belies his true intentions: If the cuts were real, hiking the cap by 16% of GDP wouldn't be necessary to bridge him until the election.

(*SHRUG*) (*NOD*)

Indeed, the president's concrete offers to cut spending so far add up to just $2 billion - about what the US borrows every three hours.

(*SMIRK*)

His major "contributions" to the debate are all posturing - threatening to shoot his hostages by not issuing Social Security checks, the endless demagoguing of a corporate jet tax break that...

* WAIT FOR IT... WAIT FOR IT...

...he himself expanded, etc.

Bottom line: Lawmakers raising the debt ceiling without making big cuts won't stop a downgrade.

A downgrade will drive up the interest rates the Treasury pays, now at historic lows. Interest, budgeted at $430 billion in 2011, will rise by $143 billion for every 1% more that the Treasury pays - and rates could turn on a dime.

For now, US debt is a safe haven only compared with European sovereign debt.

State and local governments will suffer, too. Because they hold Treasury bonds, a downgrading will drive their own ratings down and their borrowing costs up. Ditto for Fannie Mae, Freddie Mac, the Federal Home Loan Banks and thousands of other financial institutions and insurance companies. The effects will ripple through trillions in debt, including credit-card and mortgage rates, a blow that our housing sector can ill afford.

Judgment day is upon us.

It doesn't require a default, just a rating downgrade.

Obama isn't responsible for the "entire" public debt (he's "only" raised it 53% so far), but he alone "owns" the 25%-of-GDP government.

Until he truly admits to that tragic mistake and embraces a balanced budget, he has locked us into a path to fiscal Armageddon.

July 18, 2011 at 3:32 PM

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