Tag Archives: Debt Ceiling

Buy the Dip? by James Howard Kunstler

Posted on April 17, 2017 | Leave a comment

James Howard Kunstler reminds us to keep our on the ball: the debt-laden economy and its financial dynamics. From Kunstler at kunstler.com:

The military frolics of spring have distracted the nation’s attention from the economic and financial dynamics that pose the ultimate mortal threat to business as usual. Note the distinction between economic and financial. The first represents real activity in this Land of the Deal: people doing and making. The second, finance, used to be a minor branch — only about five percent — of all the doing in the days of America’s putative bigliest greatitude. The task of finance then was limited and straightforward: to manage the allocation of capital for more doing and making. The profit in that enabled bankers to drive Cadillacs instead of Chevrolets, but not much more.

These days, finance is closer to 40 percent of all the doing in America, and it is not about making anything, but getting more than its share of “money” — whatever that is now — and what “money” mostly is is whatever the people engaged in finance say it is, for instance, Fannie Mae bonds representing millions of sketchy loans for houses of vinyl and strand-board built in places with no future… or stock issued by the Tesla corporation… or the sovereign IOUs of the US Treasury.

The list of things that pretend to be “money” these days would be long and shocking and the sheer churn of these instruments among the banks and markets “produces” the fabled “revenue streams” beloved of The Wall Street Journal. What happens when the world discovers that these instruments (securities and their derivatives) represent falsely? Why, bigly trouble.

To continue reading: Buy the Dip?

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Watch These Geopolitical Flashpoints Carefully, by Brandon Smith

Posted on March 24, 2017 | Leave a comment

Brandon Smith highlights the dangers ahead. From Smith at alt-market.com:

Anyone who has been involved in alternative geopolitical and economic analysis for a decent length of time understands that the establishment power structure thrives according to its ability to either exploit natural crises, or to engineer fabricated crises.

This is not that hard to comprehend, but for some reason there are a lot of people out there who simply assume that global sea-change events just happen “at random,” that the elites are stupid or oblivious, and that all outcomes are a matter of random chance rather than being directed or manipulated. I call these people “intellectual idiots,” because they believe they are applying logic to every scenario but they are sabotaged by an inherent bias which causes them to deny the potential for “conspiracy.”

To clarify, their logic folds in on itself and becomes faulty. They believe themselves objective, but they abandon objectivity when they staunchly refuse to consider the possibility of covert influence by organized special interests. When you internally dismiss the possibility of a thing, no amount of evidence will ever convince you of its reality. This is how the “smartest” people in the room can end up being the dumbest people in the room.

In the survivalist community there is a philosophy – there is no such thing as a crisis for those who are prepared. This is true for prepared individuals as much as it is true for prepared communities and prepared nations. The only way a society can fall is when it becomes willfully ignorant of potential outcomes and refuses to organize against them.

By extension, it would make sense that by being prepared for a particular crisis or outcome an individual or group could not only survive, but also profit. It is not crazy or outlandish to entertain the idea that there are groups in power (perhaps for many generations) that aggressively seek to predict or even force particular outcomes in geopolitics for their own profit. And, by profit, I do not necessarily mean material wealth. In many cases, the power of influence and psychological sway over the masses might be considered a far greater prize than money or property.

To continue reading: Watch These Geopolitical Flashpoints Carefully

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Posted in Collapse, Debt, Economy, Energy, Financial markets, Government, Military, War

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Nine years later, Greece is still in a debt crisis… by Simon Black

Posted on March 23, 2017 | Leave a comment

The debt noose is starting to cinch. From Simon Black at internationalman.com:

Sometimes you have to marvel at the absurdity of the financial universe in which we live.

On one side of the Atlantic, we have the United States of America, which triggered yet another debt ceiling disaster last Thursday when the US government’s maximum allowable debt reset to just over $20 trillion.

Of course, the US national debt is pretty much already at $20 trillion.

(That’s roughly $166,000 per taxpayer in the Land of the Free.)

This means that Uncle Sam is legally prohibited from ‘officially’ borrowing any more money.

But far be it from the US government to start living within its means. Sacrilege!

These guys have zero chance of making ends meet without going into debt.

Just last year, according to the government’s own financial report, their annual net loss totaled $1 TRILLION, and the national debt increased by $1.4 trillion.

And that was in a relatively stable year. There was no major war or financial crisis to fight. It was just business as usual.

This year isn’t going to be any different.

So, cut off from their normal debt supply (the bond market), the Treasury Department is resorting to what they call “extraordinary measures.”

They’re basically pillaging government employee retirement funds, and will continue to do so until Congress raises the debt ceiling.

It’s a repeat of what happened in 2015. And 2013. And 2011.

Pretty amazing to consider that the “richest” country in the world has to plunder retirement funds in order to keep the lights on.

Former US Treasury Secretary Larry Summers said it perfectly when he quipped “How long can the world’s biggest borrower remain the world’s biggest power?”

Then, of course, on the other side of the Atlantic, we have Greece, which is now in its NINTH YEAR of a major debt crisis.

Incredible.

Greece has had nine different governments since 2009. At least thirteen austerity measures. Multiple bailouts. Severe capital controls. And a full-out debt restructuring in which creditors accepted a 50% loss.

Yet despite all these measures GREECE IS STILL IN A DEBT CRISIS.

To continue reading: Nine years later, Greece is still in a debt crisis…

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U.S. About to Hit $20 Trillion in Debt: Here’s How It Affects You, by Shaun Bradley

Posted on March 16, 2017 | Leave a comment

If the US government does not get a handle on its debt, it will eventually blow apart your savings and your retirement, perhaps sooner rather than later. It’s just that simple. From Shaun Bradley at theantimedia.org:

As the vulture pundits in the mainstream media pick apart hollow political scandals, the essential bankruptcy of the federal government looms just ahead. The national debt is creeping toward 20 trillion dollars, and the United State’s largest problem is once again staring the world in the face.

Just before the government was slated to shut down in 2015 (as it did in 2013), Congress was able to pass a delay on the debt ceiling decision until March 15th of this year — Wednesday of this week. Recurring uncertainty caused by events like this has implications that extend far beyond our own borders. The amount of leverage in the current system has already forced foreign holders of U.S. debt to question the real value of America’s full faith and credit.

2016 was a record-setting year for the liquidation of foreign-held U.S. bonds, topping out at nearly $405 billion. The selling was led by China, America’s second-biggest creditor, which currently holds over $1 trillion of U.S. debt, almost 28% of the total held by foreign central banks. They weren’t alone, though, and even the U.S.’ number one lender, Japan, has rolled back their positions to protect themselves as the reality of U.S. insolvency comes into focus. A gradual change has been set in motion, and the global superpower status of the United States may be systematically eroded — not militarily, but economically.

If the government does shut down again, the Treasury Department reportedly has as little as $66 billion in reserves and just enough income from taxes to meet its essential obligations. Entitlements like social security and Medicare will likely be unaffected, but if lawmakers can’t collaborate to pass some kind of resolution, the power to allocate additional federal spending will largely be turned over to President Trump. The initial hiring freeze on federal employees that was implemented shortly after his inauguration could be just a taste of what’s to come.

To continue reading: U.S. About to Hit $20 Trillion in Debt: Here’s How It Affects You

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Posted in Collapse, Debt, Economy, Financial markets, Government, Pensions

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No Debt Ceiling Debate in the Presidential Race, by Jacob G. Hornberger

Posted on March 17, 2016 | Leave a comment

From Jacob G. Hornberger, founder and president of The Future of Freedom Foundation, at fff.org:

Among the many issues not being debated in the presidential nomination races in both political parties is the matter of the debt ceiling, which both political parties continue to raise each time it is reached. Given that the debt ceiling is an acknowledgment that too much debt is a very bad and very dangerous thing for a government and a nation (See Greece and Puerto Rico), wouldn’t you think that this would be something that would be discussed and debated in the course of a presidential race? Well, apparently not in this one.

Check out this website, which is called the US Debt Clock.org. It shows that the national debt currently stands at $19 trillion. The amount of that debt allocated to each citizen is $59,150.

Advocates of ever-growing federal spending have long maintained that the national debt doesn’t really matter because “we owe it to ourselves.”

It would be difficult to find a more inane statement than that in the annals of history.

The fact is that the government owes all that money to people who own U.S. government bonds and other U.S. debt instruments, including foreign regimes like communist China, which loaned the George W. Bush regime the money he needed to invade and occupy Iraq.

There is one big problem: The U.S. government doesn’t have a giant pool of money that it has saved up to pay what it owes. That means that in order to pay bondholders, including the communist regime in China, what it owes them, the U.S. government must extract the money from the American people.

That’s what taxation is all about. Here is the reality: If the government were to pay off all its debt, it would have to seize and confiscate an average of $59,150 from each citizen. Take a family of four: That would amount to $236,600.

You don’t have that much in savings, you say? Well, let’s add up all your retirement accounts and the equity value of your home. That should get you closer to your share of what the government needs to cover its debt.

What about all the money that the government borrowed? It’s gone. Spent. Poof. You don’t think that the national-security state’s invasion, assassination, and killing machine in the Middle East comes for free, do you? Troops have to be paid. So do “defense” contractors. So do the armaments manufacturers. Don’t forget all the suppliers to the death machine. Everyone, no matter how patriotic, demands to be paid for his service to the national-security state’s death machine.

There is something else everyone should understand: That $59,150 that each citizen owes doesn’t cover what he also owes — and will continue to owe — to seniors for Social Security and Medicare. Ditto for Medicaid recipients. And the same for recipients of education grants, food stamps, farm subsidies, foreign aid, and all the other recipients of welfare largess.

All that money has to be paid too. The reason it isn’t carried on the books as part of the government’s debt is that its welfare, not a bond. Theoretically, a welfare program can be repealed today and so it’s not a legally binding debt. But as a practical matter, as long as the program continues, the money has to be paid. And every American citizen is on the hook for welfare “entitlements” and the federal government’s $19 trillion debt.

To continue reading: No Debt Ceiling Debate in the Presidential Race

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Posted in Debt, Debtonomics, Economics, Economy, Government, Taxes

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US Gross National Debt Jumps $340 Billion in One Day, by Wolf Richter

Posted on November 4, 2015 | Leave a comment

From Wolf Richter at wolfstreet.com:

The US Gross National Debt, that monster that keeps ballooning so much faster than our infamously slo-mo economy, just jumped by $340 billion in one day.

The debt ceiling was hit in March, and from that point forward, the Gross National Debt was stuck at about $18.15 trillion, give or take a couple of billion. But the government continued spending the money that Congress had told it to spend, though Congress also told the government not to issue more debt to pay for this spending. If this sort of debt-ceiling fight looks like a Congressional charade to the world outside the Beltway, it’s because it is a charade.

So instead of issuing new debt, the Treasury relied on “extraordinary measures,” taking the money it needed from other government accounts, robbing Peter to pay Paul so to speak, and ended Fiscal 2015, on September 30, with a total Treasury debt outstanding of, well, the same $18.15 trillion.

That remained the Gross National Debt until just now. In late October, Congress agreed to raise the debt ceiling and end the charade, days before the out-of-money date, as everyone knew it would. The Treasury then embarked on a flurry of activity, undoing these “extraordinary measures” and going on a debt-sales binge. Now it made the accounting entry – adding $340 billion in one day to the Gross National Debt, bringing it to the new phenomenal level of $18.492 trillion.

Over fiscal 2015 plus October, the Gross National Debt rose by $668 billion, up 3.7% over the period, growing nearly twice as fast as GDP, which edged up from Q3 2014 to Q3 2015 a measly 1.95%.

This leaves the Gross National Debt at 107% of 2014 GDP and 105% of estimated 2015 GDP.

This chart shows the peculiar fiscal condition of America over the years: Since 2002, the government has borrowed $12.7 trillion, or two-thirds of the total debt! Since 2008, it has borrowed $9.5 trillion, or about half of the total debt, the biggest “stimulus” package of all times:

To continue reading: US Gross National Debt Jumps $340 Billion in One Day

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They Said That? 10/28/15

Posted on October 28, 2015 | 1 comment

From Speaker of the House John Boehner, referring to an agreement on the budget and the debt ceiling:

Sometimes, the clock works against you, sometimes the clock works in your favor. In a town that isn’t known for a lot of bipartisanship, you’re going to see bricks flying from those that don’t like the fact that there’s a bipartisan agreement. But there is. It’s a solid agreement.

SLL lets fly a brick: this is the oldest “bipartisan” trick in the book. Democrats wanted more domestic spending, Republicans wanted more defense, they met in the middle and gave themselves both. The sequester caps that had been the only brake on Washington’s spending and which had been “temporarily” raised in 2013 were “temporarily” raised another two years, which means the sequester is for all intents and purposes history.

From Representative Jim Jordan, (R. Ohio):

Another last-minute, back-room spending deal by the White House and congressional leaders that busts the budget caps and allows unlimited debt for the next 18 months. No wonder so many Americans distrust Congress.

No wonder indeed! But as SLL recently noted, “The Fix Is In,” and establishment,  “bipartisan” Washington has closed ranks and is fully behind Hillary Clinton’s presidential campaign. In a follow-on piece, “The Empire Strikes Back,” SLL noted that Paul Ryan had agreed to be the next Speaker of the House, and asked: “Can a debt ceiling agreement be far behind?” The Empire will do what it has to do to stay in power. If that means coming together against interlopers Trump, Carson, and Sanders, then so be it.

Quotes are from The Wall Street Journal, “Budget Deal Stirs Anger On The Right,” 10/28/15.

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