By Danny
Disturbing economic news this morning from The Prudent Bear investor's website:
• A Week of Big NumbersScroll down about 2/3 of the way to where it says, "A Week of Big Numbers:" and read it all, To see the size of the problem is to see how ruined we really are. Here's a short excerpt:
February 24 – Bloomberg (Mark Pittman and Bob Ivry): “…the U.S. government has pledged more than $11.6 trillion on behalf of American taxpayers over the past 19 months, according to data compiled by Bloomberg. Changes from the previous table, published Feb. 9, include a $787 billion economic stimulus package. The Federal Reserve has new lending commitments totaling $1.8 trillion. It expanded the Term Asset-Backed Lending Facility, or TALF, by $800 billion to $1 trillion and announced a $1 trillion Public-Private Investment Fund to buy troubled assets from banks. The U.S. Treasury also added $200 billion to its support commitment for Fannie Mae and Freddie Mac…”This will take a long time to get better.
The Administration’s new budget projects an astounding $1.75 TN fiscal 2009 federal deficit - or about 12% of GDP. Federal outlays are expected to surge 32% this year to $3.94 TN. In nominal terms, the deficit is set to quadruple the previous all-time record. In percentage terms one has to return back to the war economy of the 1940s to find anything comparable. [...]
What are the ramifications and consequences associated with U.S. deficits approaching 12% of GDP? [...]
I do fear that we now face Trillion dollar deficits as far as the eye can see. I don’t expect “Keynesian” policies to have much success in reinvigorating busted asset markets. I’ll be surprised if private-sector Credit creation bounces back anytime soon. I fear policymaking will do more harm than good when it comes to needed economic restructuring. And my worst fears of policymaking (fiscal and monetary, democrat and republican, national and local) bankrupting the country are being anything but allayed.
And what about the rest of the world?
• It's Worse Over ThereComments? Anyone?
6 comments:
I am very concerned that the Obama administration is starting to include the same people from the Clinton and Bush administrations that have allowed this financial problem to mushroom. This crisis started several administrations back. It didn't just begin yesterday.
President Obama is a very accomplished orator but he has not had the years of government experience nor the fundamental financial training to know whether he is receiving the right advice or not.
He seems to be focused on the Roosevelt handling of the Great Depression. I lived through that period.
This nation cannot be compared to the way our world was then.
We were not overrun with illegal aliens. We were not involved in sending billions of dollars to almost every country in the universe. We were not enmeshed with international treaties.
Times were very lean but we had a work ethic to produce and take care of our own. We did not have millons of third generation welfare people with their handout for a government check.
We were not entangled with having our troops stationed or fighting all over the world.
We grew our own food. Children valued the opportunity to go to a one-room school to learn to read and write. We were not bribed to get an education. We were taught to get an education by our parents who valued being a part of the process.
We worked for what we got. We built our own houses - there was no government HUD money to make a down payment on a house.
Obama is not going to solve this crisis by throwing billions and trillions of funds we do not have which are going to build such stupid things as a convention center in Myrtle Beach.
Obama is only creating more disharmony by including in the Stimulus package $950,000.00
to go directly to LA RAZA, the anti-American group that is fighting for amnesty for illegal aliens and open borders for anyone who wants to come to this country.
How stupid can we be to be give money that we do not have to install an universal health care system when what we need are jobs created by our own industry and innate abilities.
Socialism or Fascism or whatever you want to call the trend in this government is never going to be the solution to this financial crisis.
There will never be a "chicken in every pot" as the politicians are prone to promise over and over again.
The thing that will help us get back on our dream of a "live and let live" history is to put The United States back on the path our forefathers started for us but which we have allowed politicians to incredibly botch up with a welfare state for the world that we try to finance.
Dorothy
Great comments.
One worry I would like to relieve you of however - as long as the US has printing presses and portable generators to run them we will always have the money to cover any stupid moves our politicians make.
Thanks for the comment, Dorothy. It seems as if every new generation of Americans have to re-learn the lessons of earlier generations who learned "the hard way."
For a quick example, take the Iraq war. As a soldier who wore the uniform of the US Army during the Vietnam war, I assumed the US would learn a lesson about any policy designed to overlay "western democracy" upon cultures who have no such historical tradition or political philosophy. Yet "lo and behold," we were right back into a US colonialization war in Iraq, one generation after the debacle of the Vietnam conflict.
Naively, I thought America learned that lesson about "colonialism" in 1974, when the US government left Vietnam in, shall we say, a undignified rout, wherein Nixon suddenly abandoned US policy, which which was laughably defective in the first place.
To overlay "western democracy" over a non-democratic culture (Vietnam) that went back thousands of years? What a complete waste of 55,000 American soldiers' lives.
Same problem applies with Iraq, which is arguably the oldest "non democratic culture" on the planet.
I'll add that I particularly appreciate your comments on our "economics articles."
Folks like you, successful investors who still remember the blunders of various presidential administrations during the "Great Depression," are increasingly becoming fewer in numbers, which is a real bummer.
Thanks again for the post, Dorothy.
ozboy,
my big concern is that the time will arrive one day that we can't print enough bogus bonds to entice anyone to buy them.
The politicians don't understand basic economics which is that people and nations finally wise up that what you are trying to sell is not worth buying the crap.
When no one nor country will buy our worthless bonds or hold our dollars that is when the shit hits the fan.
And don't think that cannot happen to this USA.
But that is going to have to happen to get this mess to finally hit bottom and start the recovery process.
It is just a matter of how long it is going to take for that to occur.
Probably not in my lifetime but I guarantee that it will happen. I just hope that my government in some form will survive so that it is still recognizable as a free country with opportunities for everyone..
Just remember that this will be inevitable. You cannot create prosperity by printing paper that has no backing.
The only real measure of victory in Iraq is whether a democracy can be sustained. That IS the reason for being there so long, right? If our mission was merely to get Saddam Hussein and make sure he didn't have WMDs then that battle was over long ago.
You can argue about why we're there, but once you break it, you buy it. We'll see over the next several years if we never should have even entered the store, or if it sparks something positive in the region. I'd hate to think all those lives and billions of dollars went for nothing.
Dorothy
Great insight, thanks. I hadn't thought about the bond angle but you are right on the money (no pun) on this subject. My thoughts on the printing press thing was about the government printing money. When the bonds are not worth anything, our dollar bills won't be either.
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