Third Party & Independents Archives

David -

I agree that this is - already - a defining moment for Obama.

If ‘I’m the decider’ was the hallmark of the Bush Presidency, then I hope that ‘I take responsibility’ becomes the hallmark of Obama’s.

Posted by: Jon Rice at March 18, 2009 09:53 PM

Ultimately, the furor over the bonuses received by AIG execs is as tangential to the actual problem at hand, as was that concerning the earmarks on the recent spending bill. The real scandal is not that AIG execs got their piddling $165 million, it’s that AIG and its counter-parties have received upwards of $200 billion and counting from US taxpayers with little oversight and even less transparency.

Posted by: d.eris at March 18, 2009 10:19 PM

Jon, I hope his actual ability to respond appropriately to the demands upon his office become his hallmark, not his words “I take responsibility”. If he doesn’t demonstrate that ability, the words are rendered as meaningless and hollow as GW Bush’s words about taking responsibility.

Posted by: David R. Remer at March 18, 2009 10:20 PM

d.eris,

Only 30 billion of that amount has come from the Obama administration, and it does come with oversight as the W. H. is fast learning, media and public oversight. As for transparency, well, it is too soon to make that call. AIG is just getting the 30 billion from the Obama administration over the last couple weeks.

Those are the facts. We will have to wait and see whether transparency will be in the offing. And oversight was implemented in reactionary part by the W.H. as Geithner attempted and partly succeeded in getting AIG’s planned bonuses reduced. Dismal performance for what we would consider adequate oversight, I admit. But, oversight was not entirely absent. And when the Treasury manpower is up to peak, I suspect oversight will have a large number of corporations screaming ‘oversight’ as a four letter word.

Posted by: David R. Remer at March 18, 2009 10:29 PM

David I guess it is tough for Obama to find someone that can serve in the treasury that is not tainted with the deregulatory fever and resultant speculation that has brought us to this financial meltdown we are in today. The pickings are slim when hunting for those that are both qualified and without sin. The unfortunate part is the positions left unfilled to date by the Obama Administration are being filled by those left from the previous administration. That is the sad part and it is also why I can appreciate Obama accepting responsibility for his higher standards delaying the process.

“The tough rules scuttled the agency’s hiring of at least one top official. The appointment of John Molot, a well-respected Georgetown University law professor, was undone by his personal financial interests, according to people familiar with the matter.”

http://online.wsj.com/article/SB123517668905437643.html

Posted by: j2t2 at March 18, 2009 10:53 PM

J2T2, kind of like looking for 3 righteous men in all of Sodom or Gamorrah, eh? Or, an ‘enlightened’ human being before Siddhartha.

Old lessons. New context. Finding a qualified person to serve in government who hasn’t cheated on their taxes is proving to be pretty tough these days, as well. Almost makes ‘qualified’ mean demonstrably capable of getting away with cheating on one’s taxes.

Posted by: David R. Remer at March 18, 2009 11:29 PM

david

“Only 30 billion of that amount has come from the Obama administration,”

this maybe true, but did obama sign on to the tarp funds dispensed under the bush admin., when he was a senator? if so would he still not bear partial blame for the rest?

Posted by: dbs at March 19, 2009 01:05 AM

I for one am glad to see a President of the United States of America stand up and accept Responsibility. Now, if we can just get the rest of Washington to accept responsibility for their actions and words. For why the “Blame Game” is cute among the Frat Boys, facing a Phantom Enemy from within and without I do believe that it is time for the American Males to let go of the Moms’ Apron Strings and stand up for what they know to be Right Regardless.

For why you can blame President Obama, his Administration, Congress, the CEO of AIG, or anybody else involved in getting or stopping the bonuses. While not a Lawyer, I do wonder how such an item got into the contracts ar all. For I do believe that if one cares to retrace the Actions of the Legal Staff of AIG and the Words of the Executives in charge of AIG at the time the contracts were signed by the not so learned employees, One would find that the bonuses were nothing more than “Hush Money” to be paid after the Election of 2008.

Why else would you pay to retain the employees who destroyed your company? Certainly the Upper Management of AIG and the Regulators should of been aware in 2007 that the 10 year projections did not add up and that unwanted circumstances were likely to occur. Because why else would you want to pay a bonus for your employees losing the company money?

Yes, I do believe President Obama does know what he is doing when he says the “Buck Stops Here” at the door of the President of the United States. And why some may want to blame him for the Stupidity of an Older Generation, I wonder what the same citizens are going to do when he puts his foot down as Americas’ First President younger than the Children of the 70’s. For if you are going to hold him responsible for the Bad than you also have to hold him responsible for the Good.

And starting with finding Qualified Humans to join His Staff is better than any President in My Lifetime has done. Or do My Peers believe that they can bring change to Washington by hiring the Best that the Charlatans and Vagabonds have to offer.

Posted by: Henry Schlatman at March 19, 2009 01:06 AM

Breaking News: Dodd Says loophole that protects AIG Bonuses added per request of the Obama administration. The video is about a fifth of the way down.

“>http://www.butasforme.com/2009/03/17/obamas-stimulus-bill-explicitly-grants-aig-the-legal-right-to-hand-out-bonuses/

Obama should take full and direct responsibility for this mess.

Posted by: jax at March 19, 2009 01:39 AM

jax

your link didn’t work i think this one will.

http://www.butasforme.com/2009/03/17/obamas-stimulus-bill-explicitly-grants-aig-the-legal-right-to-hand-out-bonuses/

Posted by: dbs at March 19, 2009 01:59 AM

Dbs,
Did you notice that the date reflects the passing of the bill and not a retroactive date? Now, I am no Lawyer, but I do know that President Obama has a degree in Constitutional Law. So was the clause designed to stop future bonuses? Yep! However, it does not effect the Grandfather Contracts such as AIG.

Now, go back and look at what the same people who wanted UAW to lower their wages and stand up in support of the AIG Bonuses was saying at the toime the American Recovery and Reinvestment Act of 2009 was signed into Law.

Is it a Double-Standard or an out right protection of Wall Street? For if one cares to listen to the AIG Hearings a few months ago Congress was given the word of Mr. Liddy that he would do everything in his power to stop the bonus payment.

But keep digging please, for why the information is out there somewhere I do believe that the answer will make even the most Conservative or Liberal Citizen realize that this meltdown did not have to happen.

Posted by: Henry Schlatman at March 19, 2009 03:47 AM

Obama’s tone is correct. He understands that the bonus nonsense is an image problem, AND a corporate values problem.

Newsflash. Bernake is taking action on toxic assets by injecting one trillion into treasuries and mortgage backed securities.

I’m frankly impressed with this administration’s actions. The toxic assets issue is not simple, but they are doing the right thing ignoring the completely wrong headed and phony belt tightening talk that is an echo of Hooverites.

Posted by: gergle at March 19, 2009 07:08 AM

Not to excuse AIG’s lack of fiscal and moral bankruptcy, but a lot of this focus on AIG is possibly an opportune (or designed) distraction from the malfeasance of many incumbent politicians in the incompetent, irresponsible, FOR-SALE, corrupt Congress, who were (and still are) in-league with the banks and corporations. For example, Connecticut Senator Chris Dodd (who was the largest recipient of AIG campaign contributions, and a sweetheart loan to boot) created the amendment (by his own admission) that allowed the loop-holes in the AIG bail-out for exorbitant executive bonuses. Surprise, surprise, surprise! Who whould have ever suspected it! Cha Ching!

Of course, Chris Dodd is claiming ignorance and offering excuses to shift the blame elsewhere.

Yet, Congress enjoys 85%-to-90% re-election rates, while Congress continues to borrow, spend and grow debt beyond nightmare proportions, and the Federal Reserve isn’t perceived as the giant Ponzi-scheme it truly is, and while the Federal Reserve creates money out of thin air at a steeply leveraged ratio of 9-to-1 of debt to reserves. As a result, 90%-to-95% of all U.S. Dollars in the U.S. already exists as debt. The U.S. is swimming in debt. Yet, they tell us we a “credit crisis” (not a “debt crisis”)? So now, the solution is to lower interest rates for new loans and help people get deeper into debt, and grow the debt-bubble bigger? So, when do they finally just start air-lifting and dropping money created out of thin air from helicopters?

What does it mean when politicians say “I am responsible” ?
How will they be held accountable?
Especially when voters continue to repeatedly reward incumbent politicians with 85%-to-90% re-election rates, despite the voters’ dismal 9%-to-18% approval ratings for Congress?

gergle wrote: Obama’s tone is correct. He understands that the bonus nonsense is an image problem, AND a corporate values problem. Newsflash. Bernake is taking action on toxic assets by injecting one trillion into treasuries and mortgage backed securities. I’m frankly impressed with this administration’s actions. The toxic assets issue is not simple, but they are doing the right thing ignoring the completely wrong headed and phony belt tightening talk that is an echo of Hooverites.

Then perhaps you can explain how trying to solve a massive debt bubble with more borrowing, debt, money-printing, and spending will work?

Where is the economic theory of any economic model that states massive debt can be solved with more more borrowing, debt, money-printing, and spending will work?
Where is the historical precedent of any nation so deep into debt that solved it with more borrowing, debt, money-printing, and spending?
Where is the math and logic that explains away these 20 reasons why the massive debt-bubble is untenable, and $67 Trillion of nation-wide debt can somehow be solved (or even mitigated) with more massive borrowing, debt, money-printing, and spending?
Since when did any nation so ridiculously deep into debt (the largest debtor nation on the planet) ever solve its debt problem with more massive borrowing, debt, money-printing, and spending?
Why is belt-tightening and fiscal responsibility now invalid?
Since when did the laws of responsible fiscal priciples, math, and the laws of the universe suddenly become invalid?

• If the debt is tenable, why do we have 9,000-to-10,000 foreclosures per day?
• If the debt is tenable, why is unemployment at a 25 year high (8.1%; 12-to-28 Million unemployed; source: www.ShadowStats.com)?
• If the debt is tenable, why are there record bankruptcies?
• If the debt is tenable, why are the banks worried about a $62 Trillion Credit Default Swap/Derivatives bubble?
• If the debt is tenable, why has the federal government been deficit spending for 52 consecutive years?
• If the debt is tenable, why has the federal government borrowed and spent $12.8 Trillion from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching?
• If the debt is tenable, why is the U.S. swimming in $67 Trillion ($220,000 per-capita) of nation-wide debt?
• If the debt is tenable, why is the U.S. dollar much lower today against most major currencies than it was 7 years ago (source: One-Simple-Idea.com/USD_Falling.htm)?
• If the debt is tenable, why does 90%-to-95% of all U.S. dollars in existence in the U.S. exist as debt?
• If the debt is tenable, why is inflation a concern?
• If the debt is tenable, why is year-to-year inflation still rising (2002=1.59%, 2003=2.27%, 2004=2.68%, 2005=3.39%, 2006=3.24%, 2007=2.85%, 2008=3.85%, 2009=??.??)?
• If the debt is tenable, why is the $60 Trillion of unfunded liabilities for Social Security and Medicare a concern?
• If the debt is tenable, why have we had 52 consecutive years of incessant inflaton?
• If the debt is tenable, why is a 1950 Dollar now worth only 10 cents ?
• If the debt is tenable, why aren’t people spending? Maybe it’s largely because they are tapped out and already deep into debt, eh?
• If the debt is tenable, why is the current $11 Trillion National Debt the largest National Debt ever in size, and per-capita?
• If the debt is tenable, where will the money come from to merely pay the interest ($2.7 Trillion per year at only 4.0% on $67 Trillion) on so much debt, when that money does not exist?
• If the debt is tenable, and inflation is not a concern, why not create more money out of thin air?
• If the debt is tenable, why can’t anyone provide a explanation for excerpt from some economic model that justifies trying to solve massive debt with more debt, money-printing, and spending?
• If the debt is tenable, why are 10 more years of deficit spending being predicted?
• If the debt is tenable, why did the Federal Reserve have to pump $3.2-to-$8.5 Trillon into the banks and corporations (source: www.latimes.com/news/printedition/front/la-113008-fi-pricetag-g,0,5292528.graphic)?
• If the debt is tenable, why was it necessary to save the banks, GM, Ford, and Chysler?
• If the debt is tenable, why was it necessary to save AIG over and over ?
• If the debt is tenable, why did Ben Bennake and Henry Paulson appear before Congress to beg for emergency funds?
• If the debt is tenable, why was a $750 Billion Rescue BILL necessary in late 2008?
• If the debt is tenable, why was a $787 Billion Stimulus Bill necessary in Feb-2009?
• If the debt is tenable, why are Americans liquidating, evidenced by foreign-owned assets which have almost quadrupled from $6 Trillion in year 1997 to $22 Trillion in year 2007?
• If the debt is tenable, how do you explain all of the above?

Perhaps some day, enough voters will eventually understand they are culpable too, when enough of the voters are bankrupt, jobless, homeless, and hungry?

Until then … suckers!

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 19, 2009 10:27 AM

CORRECTION: Not to excuse AIG’s lack of fiscal and moral bankruptcy, …

Posted by: d.a.n at March 19, 2009 11:14 AM

d.a.n, Sen. Dodd has definitely made himself a target for voter’s boot by lying on one day saying he didn’t know who put that clause in the bill. And the very next day, realizing he could not keep this a secret, admitting that it was HE who added that clause in the bill. But, he says it was at the behest of someone in Treasury. Given his AIG financial support, a meer hint would likely have sufficed to move him to introduce the clause favoring one of his largest campaign contributors.

Dodd should be an incumbent target for the Vote Out Incumbents crowd.

Posted by: David R. Remer at March 19, 2009 12:25 PM

“did obama sign on to the tarp funds dispensed under the bush admin., when he was a senator”

Sept 17 was the date for the original problem with AIG. Then there was this on Oct 14.

Posted by: ohrealy at March 19, 2009 12:45 PM

d.a.n.

See any text on macroeconomics.

This one comes to mind:

http://books.google.com/books?id=dQD9o31F1N4C&dq=John+Maynard+Keynes&printsec=frontcover&source=an&hl=en&ei=qYTCSZCZKIHasAOq4L33Bg&sa=X&oi=book_result&resnum=4&ct=result#PPR14,M1

Posted by: gergle at March 19, 2009 01:47 PM

d.a.n, you ask the question, how can more debt be the answer to debt problems?

Simple. When you introduce the concept of time in association with debt, more debt can become a solution for debt.

Example: Chrysler was overwhelmed by debt in the last 1970’s and early 1980’s I believe it was. They could have filed bankruptcy, in which case the shareholders would have lost everything, the company broken up and parcelled off to other auto maker buyers, lawyers handling the bankruptcy would have been the only ones coming out ahead.

Instead, Pres. Reagan I believe it was, offered to loan Chrysler the money from the government under the stipulation that Chrysler be headed by new management, Lee Iococa, and that Chrysler, if and when it became profitable again, remunerate a share of its profits back to the government in repayment for the bailout loan.

Net result, Chrysler became profitable again, shareholders lost no money, and tax payers were repaid in FULL for their loans to Chrysler. It took more than a decade for all this to occur, but, going further into debt solved Chrysler’s debt in two fundamental ways. 1) It kept Chrysler in business, and therefore the prospect alive of Chrysler’s once again turning a profit and using those profits to pay off its debts, and 2) the debt repayment was structured over adequate number of years to permit Chrysler to BOTH return a profit to shareholders in the same years it was repaying increments of its debts. As long as Chrysler was reducing its debts overtime, creditors were no threat to Chrysler’s future.

The exact same principles apply to our national debt. If our government bankrupts in an economic depression, everyone loses except those who have illegally shipped their wealth overseas for a rainy day. On the other hand, if more borrowing succeeds in arresting this Recession, and the economy grows and federal tax revenues increase substantially as a result, and if the government restructures its budgetary obligations reducing significantly its outlays, the prospect of budgetary surpluses remains alive and possible. And with budgetary surpluses, creditors confidence is restored, investor confidence in the economy is restored, and tax payers can witness the debt problem receding, for their children and grand children, and all this without a hundred million or more Americans being forced out of jobs, homes, and health care due to some short sighted idea that more debt can never be a way out of debt.

Millions of Americans in debt, get out of debt. And a portion of those do so by refinancing their debt (over a longer period of time) and even increasing borrowing to overcome short - term revenue losses along the way, like being unemployed for several months with a substantial decrease in income during those months.

Posted by: David R. Remer at March 19, 2009 03:43 PM

gergle,

• (1) Please show us exactly where in the “General Theory of Employment, Interest and Money By John Maynard Keynes” (which you linked to above) proposes the solution to a massive, untenable debt-bubble is more debt, borrowing, money-printing, and spending? I looked and I didn’t see anything anywhere that stated massive and untenable debt could be solved with more debt, borrowing, money-printing, and spending. Did you? If so, where? What page?
• (2) Where is the historical precedent of any nation so deep into debt that solved it with more borrowing, debt, money-printing, and spending? When did any nation so ridiculously deep into debt ever borrow, money-print, and spend its way to prosperity? After all, many nations have already tried it, and they discovered another economic terror called hyperinflation. Since when did any nation (in all of world history) so ridiculously deep into debt (i.e. now the largest debtor nation on the planet), ever solve its massive debt problem with more massive borrowing, debt, money-printing, and spending?
• (3) Where is the math and proof that explains away these 20 reasons explaining why the massive debt-bubble is untenable (e.g. $67 Trillion of nation-wide debt, $11 Trillion nation-wide debt, $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 77 Million baby boomer bubble approaching, and a $62+ Trillion Credit Default Swap/Derivatives bubble, etc.). How can so much debt be solved (or even mitigated) with more massive borrowing, debt, money-printing, and spending?
• (4) Why is belt-tightening and fiscal responsibility now invalid? Since when did the laws of responsible fiscal priciples, math, and the laws of the universe suddenly become invalid?
Where are these laws of economics that say the solution to untenable debt is more untenable debt?

You posted a link to the “General Theory of Employment, Interest and Money By John Maynard Keynes” , but no where in it did it say how to handle massive debt of historic and nightmare proportions.

And when inflation starts to climb, how can the Federal Reserve control it with lower interest rates when interest rates are already low (or ZERO), and 90%-to-95% of all U.S. Dollars in existence in the U.S. already exists as debt?

Economic theories and models talk a lot about money supply and interest rates under conditions when the economy is not severely stressed, but that’s not the situation today, is it?
Where in all of those economic models does it lay-out the strategy and theory for what to do with an economy stressed by massive debt built up over many decades?
Where does it lay-out the strategy to deal with so much crushing debt?
There’s a lot of talk about recessions, but not what to do in a depression or what to do with such huge and untenable debt.

It’s not enough to name drop (i.e. Krugman, J. Sachs, Greenspan, Bernanke, Keynes, Mises, Tullock, Friedman, Hayek, Ropke, Fisher, Menger, Bohm-Bawerk, Bastiat, Jevons, Adam Smith, etc.) and point to links about ““General Theory of Employment, Interest and Money By John Maynard Keynes””.
That doesn’t prove squat about this current situation.

In fact, few predicted the 2008 economic crisis, and relatively few economists in the world were able to predict the timing or magnitude of such an occurence.

And if you read Keynes, Friedman, and other writings by other economists, they all warn about a worse economic terror caused by creating too much money out of thin air: hyperinflation.

And please don’t tell us inflation is not a problem, when the U.S. Dollar has been falling (see graphs) significantly against most major international currencies for many years, and one of reasons some foreign currencies have weakened since late 2008 is because many of those foreign nations were also hurt by the toxic debt (rated as AAA) peddled to them for mortgages in the U.S.

There’s a lot of talk about this economic recovery plan for the U.S. but is it:

• (a) really well thought out,


• (a) or mere experimentation, since we appear to be in uncharted waters, and the total federal and non-federal debt has never been so large ever before?

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 19, 2009 04:23 PM

d.a.n.
see WWII.

Posted by: gergle at March 19, 2009 04:58 PM

David R. Remer wrote: d.a.n, you ask the question, how can more debt be the answer to debt problems? Simple. When you introduce the concept of time in association with debt, more debt can become a solution for debt. Example: Chrysler was overwhelmed by debt in the last 1970’s and early 1980’s I believe it was. They could have filed bankruptcy, in which case the shareholders would have lost everything, the company broken up and parcelled off to other auto maker buyers, lawyers handling the bankruptcy would have been the only ones coming out ahead. Instead, Pres. Reagan I believe it was, offered to loan Chrysler the money from the government under the stipulation that Chrysler be headed by new management, Lee Iococa, and that Chrysler, if and when it became profitable again, remunerate a share of its profits back to the government in repayment for the bailout loan.

I commend you on attempting to answer a tough question most seem to want to avoid like the black death.

However, here’s what I think is wrong with that logic and that analogy:

(01) Chrysler was only one auto maker, and the federal government was not nearly so deep into debt (as shown below):

• __Ratio of National Debt-to-GDP ___


• 100% |———————-


• 095% |———————-


• 090% |———————-


• 085% |———————-


• 080% |———————o $11T Debt = 79% of $13.86T GDP


• 075% |———————o


• 070% |——————-o-


• 065% |—————o-o—


• 060% |————-o-o—-


• 055% |————-o——-


• 050% |————o———


• 040% |o——-o————


• 035% |-oo—o————- $389B Debt = 33% of $2.7T GDP in 1979


• 030% |—-oo—————


• 025% |———————-


• 020% |———————-


• 015% |———————-


• 010% |———————-


• 005% |———————-


• 000% |—————————YEAR


• _____ 1 1 1 1 1 1 2 22


• _____ 9 9 9 9 9 9 0 00


• _____ 7 7 8 8 9 9 0 00


• _____ 0 5 0 5 0 5 0 59

(02) When the federal government bailed out Chrysler in 1979, the $900 Billion National Debt-to-$2.7 Trillion GDP was only 33% of GDP. Today, the $11 Trillion National Debt-to-$13.86 Trillion GDP is 79%, and that does not even include the massive $12.8 Trillion dollars borrowed and spent from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching.

(03) The $11 Trillion National Debt in 1979 was not untenable. Today, it is, based on these 20 reasons.

(04) The $11 Trillion National Debt today is the largest debt ever in size and per-capita, and including the $12.8 Trillion dollars borrowed and spent from Social Security, the total $23.8 Trillion federal debt is the largest ever in size, per-capita, and as a percentage of GDP.

(05) Unlike in 1979, 90%-to-95% of all U.S. dollars in existence in the U.S. today exist as debt.

(06) Unlike in 1979, they had not already had 52 consecutive years of deficit spending and incessant inflation.

(07) Unlike in 1979, the U.S. did not have $67 Trillion of nation-wide debt (e.g. $220,000 per-capita), which has almost quintupled from 100% of GDP in 1956 to 483% of GDP in 2008):

• _________ Nation-Wide (D)ebt and (G)DP __________


• $70.0T |——————————————


• $67.5T |—————————————-D (Debt=$67 T)


• $65.0T |—————————————-D


• $62.5T |—————————————-D


• $60.0T |—————————————-D


• $57.5T |—————————————D-


• $55.0T |—————————————D-


• $52.5T |—————————————D-


• $50.0T |—————————————D-


• $47.5T |—————————————D-


• $45.0T |—————————————D-


• $42.5T |—————————————D-


• $40.0T |————————————-D—


• $37.5T |————————————D—-


• $35.0T |———————————-D——


• $32.5T |———————————-D——


• $30.0T |———————————D——-


• $27.5T |——————————-D———


• $25.0T |——————————D———-


• $22.5T |—————————-D————


• $20.0T |—————————D————-


• $17.5T |————————-D—————


• $15.0T |————————D—————G (GDP=$13.86 T in 2007)


• $12.5T |———————D——————-


• $10.0T |—————-D————G———-


• $07.5T |———-D———-G——————


• $05.0T |-D——-G——————————


• $02.5T |-G—————————————


• $00.0T +(1956)————————- (2009)YEAR

(08) Unlike in 1979, the U.S. did not have 9,000-to-10,000 foreclosures per day, and millions of bankruptcies per year.

(09) Unlike in 1979, we did not have two ongoing wars, nor did we have a military presence in 132 foreign nations.

(10) Unlike in 1979, the U.S. doesn’t have the manufacturing base it once had.

(11) Unlike in 1979, inflation, GDP, debt, and unemployment were more accurately reported then than now (source: www.ShadowStats.com). Inflation, GDP, debt, and unemployment are actually worse today than what is being reported.

That is, in 1979, the federal government and nation were not swimming in debt as it is today.

David R. Remer wrote: Net result, Chrysler became profitable again, shareholders lost no money, and tax payers were repaid in FULL for their loans to Chrysler. It took more than a decade for all this to occur, but, going further into debt solved Chrysler’s debt in two fundamental ways. 1) It kept Chrysler in business, and therefore the prospect alive of Chrysler’s once again turning a profit and using those profits to pay off its debts, and 2) the debt repayment was structured over adequate number of years to permit Chrysler to BOTH return a profit to shareholders in the same years it was repaying increments of its debts. As long as Chrysler was reducing its debts overtime, creditors were no threat to Chrysler’s future.

And how many years (or should I say centuries, or millennia) will it take Chrysler, GM, and Ford to pay back their debts? How many years will it take for AIG to repay tax payers? How many years will it take for the banks to repay the tax payers? Where will the money come from, when 90%-to-95% of all U.S. dollars in existence in the U.S. already exists as debt?

David R. Remer wrote: The exact same principles apply to our national debt. If our government bankrupts in an economic depression, everyone loses except those who have illegally shipped their wealth overseas for a rainy day. On the other hand, if more borrowing succeeds in arresting this Recession, and the economy grows and federal tax revenues increase substantially as a result, and if the government restructures its budgetary obligations reducing significantly its outlays, the prospect of budgetary surpluses remains alive and possible. And with budgetary surpluses, creditors confidence is restored, investor confidence in the economy is restored, and tax payers can witness the debt problem receding, for their children and grand children, and all this without a hundred million or more Americans being forced out of jobs, homes, and health care due to some short sighted idea that more debt can never be a way out of debt.

That’s a nice theory but overlooks many harsh realities:

• Where will the money come from, when 90%-to-95% of all U.S. dollars in existence in the U.S. already exists as debt?
• Where will the money come from when it does not already exist?
• Since 90%-to-95% of all U.S. dollars already exists as debt, and the money to merely pay the interest on so much debt does not already exist, the money will have to be borrowed and/or created out of thin air?
• The federal government has been deficit spending for 52 consecutive years, and the debt is now untenable, and you now think the debt will be able to service its debt? Do you seriously believe Congress, who just gave itself its 10th raise in 12 years, gets it? That’s not realistic. The human factor can not be ignored, and Congress doesn’t get it now, and it is not likely to get it any time soon.

The debt is untenable, and there is no economic theory or historical precedent to support the feasibility of the apparent plan to try to solve our massive debt-bubble with more debt, borrowing, creating money out of thin air, and rampant spending. The tens of trillions being borrowed and created out of thin air will create inflation. Year-to-year inflation (even based on the government’s and Federal Reserve’s fishy numbers) has already been rising for many years, despite reports of delfation:

• ____INFLATION RATE_____
• 4.00%|———————-
• 3.75%|——————xxx 3.85% average for year 2008)
• 3.50%|——————x— (2008 __ 3.85%)
• 3.25%|————xxx-x— (2007 __ 2.85%)
• 3.00%|————x-xxx— (2006 __ 3.24%)
• 2.75%|——xxx-x——— (2005 __ 3.39%)
• 2.50%|——x-xxx——— (2004 __ 2.68%)
• 2.25%|—xxx————— (2003 __ 2.27%)
• 2.00%|—x—————— (2002 __ 1.59%)
• 1.70%|—x——————
• 1.50%|xxx——————
• 1.25%|__________________YEAR
• _____ 2_2_2_2_2_2_2
• _____ 0_0_0_0_0_0_0
• _____ 0_0_0_0_0_0_0
• _____ 2_3_4_5_6_7_8

How will inflation be controlled merely by manipulating interest rates? Once it starts, can inflation be stopped by removing money from the money supply, when so much money still exists as debt?

David R. Remer wrote: Millions of Americans in debt, get out of debt. And a portion of those do so by refinancing their debt (over a longer period of time) and even increasing borrowing to overcome short - term revenue losses along the way, like being unemployed for several months with a substantial decrease in income during those months.

Where will that much money come from merely to service the debt? The interest at only 4.0% on the $67 Trillion nation-wide debt is $2.78 Trillion per year. The interest at only 4.0% on the $11 Trillion National debt is $490 Billion per year. It would take centuries of extraordinary fiscal discipline to pay down that much debt.

QUESTION: How will so much debt be paid off when the current debt is untenable, 90%-to-95% of all U.S. Dollars in existence exists as debt, and the money required to service the debt does not yet exist?

Until some of these simple questions are answered, those analogies and rosy outcomes seem very unlikely.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 19, 2009 05:28 PM

gergle wrote: d.a.n. see WWII.

OK.

The National Debt after World War II was 116% of GDP.
But guess what?
The $259 Billion National debt per-capita (i.e. per person on average) in year 1945 after World War II was 62% less (only $21,719 in 2008 dollars) than it is today.
The $11 Trillion National Debt debt per-capita today is 62% higher ($36,066 per capita), and that does not even include the $12.8 Trillion borrowed from Social Security, leaving it pay-as-you-go, with an 78 Million baby boomer bubble approaching.
So, including that, the total $23.8 Trillion federal debt today is the largest debt ever in size, per-capita, and as a percentage (172%) of GDP (GDP=$13.86T in year 2007).

And federal debt is only part of the problem.
Nation-wide debt is $67 Trillion, which is $220,000 per-capita.
The total nation-wide debt has almost quintupled from 100% of GDP in year 1956 to 483% of GDP in year 2008.

So what is your point about World War II ?

And where exactly in the “General Theory of Employment, Interest and Money By John Maynard Keynes” (which you linked to above) does it reveal that the solution to a massive, untenable debt-bubble is more debt, borrowing, money-printing, and spending?
I looked and I didn’t see anything anywhere that stated massive and untenable debt could be solved with more debt, borrowing, money-printing, and spending. Did you? If so, where? What page?
Where is the historical precedent of any nation so deep into debt that solved it with more borrowing, debt, money-printing, and spending? When did any nation so ridiculously deep into debt ever borrow, money-print, and spend its way to prosperity? After all, many nations have already tried it, and they discovered another economic terror called hyperinflation. Since when did any nation (in all of world history) so ridiculously deep into debt (i.e. now the largest debtor nation on the planet), ever solve its massive debt problem with more massive borrowing, debt, money-printing, and spending?
Where is the math and proof that explains away these 20 reasons explaining why the massive debt-bubble is untenable (e.g. $67 Trillion of nation-wide debt, $11 Trillion nation-wide debt, $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 77 Million baby boomer bubble approaching, and a $62+ Trillion Credit Default Swap/Derivatives bubble, etc.). How can so much debt be solved (or even mitigated) with more massive borrowing, debt, money-printing, and spending?
Why is belt-tightening and fiscal responsibility now invalid?
Since when did the laws of responsible fiscal priciples, math, and the laws of the universe suddenly become invalid? Where are these laws of economics that say the solution to untenable debt is more untenable debt?

QUESTION: How will so much debt be paid off when the current debt is untenable, 90%-to-95% of all U.S. Dollars in existence exists as debt, and the money required to service the debt does not yet exist?

Until some of these simple questions are answered, those analogies (e.g. WWII, Chrysler, etc.) aren’t very useful, and those rosy outcomes seem very unlikely.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 19, 2009 05:50 PM

CORRECTION in Comment # 278054:

(03) The $11 Trillion [$900 Billion] National Debt in 1979 was not untenable. Today, it is, based on these 20 reasons.

Posted by: d.a.n at March 19, 2009 05:55 PM

d.a.n.

I’m not sure I understood two of your questions, or at least the basis of thought in them:

And when inflation starts to climb, how can the Federal Reserve control it with lower interest rates when interest rates are already low (or ZERO), and 90%-to-95% of all U.S. Dollars in existence in the U.S. already exists as debt?

2 questions:

How can someone ever hope to pay their mortgage when over 20,000% of their earnings exist as debt?(assuming I make say $1000 dollar a week and have a $200,000 mortgage)

What economic theory says lowering interest reduces inflation?

Posted by: gergle at March 19, 2009 08:49 PM

gergle, yes, to fight inflation interest rates have to be raised and the money supply reduced, without to the extent possible, interrupting money velocity throughout the economy. Such attempts in the past have never been very optimally efficient, ranging from failing to mostly successful. An inordinate amount of other variables affect whether these efforts will succeed in fending off inflation.

Posted by: David R. Remer at March 19, 2009 10:16 PM

d.a.n, you asked a question. I answered. You don’t agree with the answer preferring instead to maintain that we are doomed. OK. We can disagree on whether or not we are doomed by our debt, and time will prove one of us right and the other wrong. If we succeed however in getting our debt under control through more borrowing today, I will feel good in having not lost confidence in a solution.

If you are right and our current debt is unsustainable, then little is lost by more borrowing, since bankruptcy was going to be the end result anyway.

Posted by: David R. Remer at March 19, 2009 10:22 PM

David

Dodd seemed genuinely surprised about his own involvement. This is probably worse than him actually being a crook. The culture of the politicians as usual in Washington has become so corrupt that they no longer choose to do the wrong thing; they cannot even tell what the right thing is.

It is great that Obama says he is responsible. But let’s see (as you say) what he does. Others have apologized for their misdeeds and went right on doing them. Talk is cheap.

This administration has been unusually slow in filling its vacancies. It is hard for them to govern if they have nobody to do it. It is evidently difficult to find supporters who have paid all their taxes. I guess that is why these guys are willing to raise taxes on others.

Power corrupts, whether we give it to politicians, officials or celebrities. That is why we need to balance them off against each other. Most people are okay, if they don’t get too much power.

But we certainly don’t want Barney Frank or Nancy Pelosi calling all the shots any more than we want Ken Lay or Bernie Madoff. Keep an eye on them all and don’t let any get out of hand.

BTW - inflation is coming. There is no alternative. The government will monetize this massive debt. Some of us will pay with higher taxes; all of us will pay with higher prices.

Posted by: Christine at March 19, 2009 10:31 PM

gergle wrote: I’m not sure I understood two of your questions, or at least the basis of thought in them: 2 questions: How can someone ever hope to pay their mortgage when over 20,000% of their earnings exist as debt?(assuming I make say $1000 dollar a week and have a $200,000 mortgage)

First of all, 20,000% of earnings is 200 times their earnings which means 200 x $1000 per week x 52 weeks per year = $10.4 Million of debt and an annual income of $52K.

• As you say, a person with debt of 20,000% of their earnings of $1000 per week ($4333 per month = $52,000 per year) means they have a debt that is 200 times their annual income, which means that their debt is $10.4 Million.
• At only 4.0% interest, the monthly interest on that loan is $34,667 per month, which is 8 times more than their monthly income.
• And even if they could make a monthly payment of $35,000 per month, it would take 116 years to pay off the loan.

And you don’t see the problem with that math? Seriously?

Any way, if you understand how messed-up that is, you should now be able to understand how $67 Trillion of total nation wide debt is (which is $220,000 per-capita).
Especially when 90%-to-95% of all money in the U.S. already exists as debt.
Especially when 80% of all Americans own only 17% of all wealth, and 1% of the wealthiest own 40% of all wealth.
GDP in year 2007 was $13.86 Trillion, which is $45,443 per person, yet nation-wide debt is $220,000 per person.

However, you also say the person’s mortage is $200,000.
That is 3.85 times an annual income of $52K.
That’s a very bad situation too.
At only a 4.0% interest rate, the interest is $667 per month.
If the debtor pays $900 per month, it would take 33 years to pay down that much debt.
However, that does not include PMI, home insurance (required to get a loan), and other expenses.
Currently, the debtor can use a deductiong for the interest paid on the debt on their income tax, but that’s like spending $5 to save $1.

Any way, that is apples to oranges, because a debt of $200,000 is only 3.85 times their debtor’s $52K income.
The $11 Trillion national debt is 4.58 times the federal government’s annual revenues of $2.4 Trillion, and that does not even include the $12.8 Trillion borrowed from Social Security, leaving it pay-as-you-go, with a 78 Million baby boomer bubble approaching and so many other unfunded liabilities (something the person with the $200,000 mortgage didn’t already have).
Therefore, the total federal debt is $23.8 Trillion, which is 9.92 times the federal government’s total $2.4 Trillion in annual revenues.

And the total federal debt is only part of the nation’s massive debt problem.
The nation-wide debt of $67 Trillion is 4.83 times the nation’s GDP (GDP = $13.86 Trillion in year 2007, probably lower today).
Therefore, that is similar to a person making $52K per year buying a house for 251,160.
But what if 50% of that person’s income is already owed for other things?
That is, the federal government already has huge mandatory spending for things such as (for year 2005):

• Department of Agriculture, Budget: $19.1 billion, Employees: 109,832


• Department of Commerce, Budget: $5.8 billion, Employees: 40,000


• Department of Defense, Budget: $371 billion, Employees: 2,036,000


• Department of Education, Budget: $57.3 billion, Employees: 4,487


• Department of Energy, Budget: $24.3 billion (gross), Employees: 16,100 federal, 100,000 contract


• Department of Health and Human Services, Budget: $66.8 billion, Employees: 67,000


• Department of Homeland Security, Budget: $40 billion, Employees: 180,000


• Department of Housing and Urban Development, Budget: $31.3 billion, Employees: 10,600


• Department of the Interior, Budget: $10.8 billion, Employees: 71,436


• Department of Justice, Budget: $22 billion, Employees: 109,000


• Department of Labor, Budget: $11.9 billion, Employees: 17,347


• Department of State, Budget: $10.3 billion, Employees: 30,266


• Department of Transportation, Budget: $61.6 billion, Employees: 60,000


• Department of the Treasury, Budget: $10.8 billion, Employees: 115,897


• Department of Veterans Affairs, Budget: $51 billion, Employees: 219,000


• Total of Budgets=$794 Billion; Total Employees/Contractors=3,186,965

… with redundancy upon redunancy:
• 342 economic development programs;


• 130 programs serving the disabled;


• 130 programs serving at-risk youth;


• 72 federal programs dedicated to assuring safe water;


• 50 homeless assistance programs;


• 45 federal agencies conducting federal criminal investigations.

That is, the federal government is already borrowing over a trillion per year more than the $2.4 Trillion in annual federal revenues.
There was a $1 Trillion deficit for year 2008.
There is well over a $1.3 Trillion (or possibly much more?) deficit for year 2009.
And deficits are planned for many more years into the future.

So, do you still believe that much debt is tenable?
There are a lot of people saying it is tenable, but so far, they all fail to answer some very simple questions.

gergle wrote: What economic theory says lowering interest reduces inflation?

None that I know of.

So why ask that question when no one here ever asserted that lowering interst rates reduces inflation?

You must have misunderstood the questions/statements about using interest rates to fight inflation, and trying to increase money supply when 90% of each loan is debt.
The Federal Reserve has a few methods to try to control inflation.
One way to reduce inflation is to increase interest rates, which reduces borrowing, which reduces the money supply.
Another way to reduce inflation is to reduce the money supply by reducing the creation of new money at such a steep ratio of 9-to-1 of debt-to-reserves.
Another way to reduce inflation is to withdraw excess money from the money supply.

However, those tools don’t work so good when the debt is already out-of-control and untenable.
That is, it’s damn hard to increase the money-supply when 90%-to-95% of all money in the U.S. already exists as debt.
And it’s damn hard to increase the money supply when money is created as debt, and most peope are already deep into debt.
And it’s damn hard to fight hyperinflation when debt is so untenable that so much money is being created out of thin air to merely keep up with the interest payments.
The $67 Trillion nation-wide debt, at 4.0%, represents $2.78 Trillion per year of interest, which is $9,114 per person in the U.S. for interst alone!

Even if the extraordinary discipline existed to service $67 Trillion of nation-wide debt, at only a 4.0% interest rate, it would take 433 years to pay down.

Even if the extraordinary discipline existed to service the $11 Trillion of federal National Debt existed, at only a 4.5% interest rate, it would take 180 years to pay down: One-Simple-Idea.com/NationalDebt_$10.9Trillion.jpg

Realistically, what are the chances of such sustained discipline ever happening; especially in this era of corruption and rampant greed?
Especially when Congress just gave itself its 10th raise in 12 years and $93,000 per Congress person for petty cash and expense?
If these problems are to ever be resolved, it requires an end to several abuses now, because time is running out.
Yet, there is little reason to think those abuses will be stopped anytime soon (if ever).
There are many things the federal government could do, and not all of them require a lot of new spending either.

Now, I answered your questions.
How about my questions?

• QUESTION # 1: How will so much debt be paid off when the current debt is untenable, 90%-to-95% of all U.S. Dollars in existence exists as debt, and the money required to service the debt does not yet exist?


• QUESTION # 2: Where will the money come from to merely pay the interest on that debt, when that money does not yet exist?


• QUESTION # 3: Where exactly in the document that you linked to (“General Theory of Employment, Interest and Money By John Maynard Keynes”) does it reveal that the solution to a massive, untenable debt-bubble is more debt, borrowing, money-printing, and spending?

Until some of these simple questions are answered, merely saying we can solve our massive debt problem with more debt, borrowing, money-printing, and spending is not very convincing.
Simply saying it is so doesn’t prove anything.
Especially when there is no strategy from any economic theory to support it.
Especially when there is no historical precedent to support it.
Especially wnen other nations have already tried to borrow, money-print, and spend their way to prosperity and it failed miserably with hyperinflation.
Especially when 90%-to-95% of all money in existence in the U.S. already exists as debt.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 19, 2009 10:52 PM

Well, before I answer your questions, please finish answering mine.

You ANNUALIZED my example, although that was not the frame I presented. Yet you take long term national debt and compare it to annualized GDP. What’s wrong with THAT math?
THAT was the point I was making.

Let’s look at debt in a more accurate way.

http://en.wikipedia.org/wiki/United_States_public_debt

Perhaps that is a little more tenable. Not a great picture, I agree, but not insurmountable.

Let’s also not forget we are talking about macro economics here, and there is an inherent dishonesty in any projections, because economic growth (or shrinking) effects the outcomes in gross ways. That is also important to note when using microeconmics to explain a macroeconomic effect, and can be very misleading.

You continue to use the quote that 90% of US dollars exist as debt. What the hell does that even mean? M1? debt to the year infinity? Debt due on Sunday the 22nd? It’s a pejorative figure.

Yes, I guess I misunderstood the direct quote that stated:

And when inflation starts to climb, how can the Federal Reserve control it with lower interest rates when interest rates are already low (or ZERO)….

We all make mistatements from time to time, that often leads to misunderstandings. Admission of that error would forward your argument.

I don’t disagree with your main premise, that we have serious debt issues. I just think you are using misleading stats in this particular post.

The money will come from future GDP. The book is about macroeconomic theory, not specific economic application, but anyone sensible knows and understands the relationship of spending for WWII and it’s effect on the depression. I do not know of an internet usable link to the text. Do You?

Posted by: gergle at March 19, 2009 11:28 PM

David R. Remer wrote: gergle, yes, to fight inflation interest rates have to be raised and the money supply reduced, without to the extent possible, interrupting money velocity throughout the economy.

Simply raising interest rates will not be enough to stop hyperinflation resulting from many of trillions of dollars of new money created out of thin air.

Those mechanisms can work under less stressed situations, but not so much spending from massive borrowing and money-printing.
It will take massive amounts of money to even put a dent in the massive debt problem.
Many trillions have already been used in only a few months, and the nation’s massive debt-bubble not only still exists, but is now much bigger.

David R. Remer wrote: Such attempts in the past have never been very optimally efficient, ranging from failing to mostly successful. An inordinate amount of other variables affect whether these efforts will succeed in fending off inflation.

Apples and Oranges. Never before was the debt-bubble so big, and the level of spending so large.

David R. Remer wrote: d.a.n, you asked a question. I answered. You don’t agree …

Right, and for many very good reasons.

Especially with so many questions are still unanswered, and your example of Chrysler in 1979 is another Apples and Oranges comparison.
Those are a lot of very good questions that nobody wants to answer.
There’s a lot of talk about using manipulation of interest rates to control inflation, but that was under very different circumstances.
There’s a lot of talk about Keynesian Economics, but no one has yet produced the part that says where to solve a massive debt bubble with more debt.
There’s a lot of talk of past events, but there is no historical precedent where any nation so deep into debt ever borrowed, money-printed, and spent its way to prosperity.
Until some of these simple questions are answered, merely saying we can solve our massive debt problem with more debt, borrowing, money-printing, and spending is not even slightly convincing.

David R. Remer wrote: d.a.n, you asked a question. I answered. You don’t agree with the answer preferring instead to maintain that we are doomed.

Not true.

Just because I disagree with the current strategy (and I’m not alone) doesn’t mean I believe we are doomed.
The federal government and Federal Reserve might still figure out that massive debt can’t be solved with more massive debt, when they see things continuing to get worse.
They may yet realize that their methods might be OK for manipulating the economy under less severe conditions, but don’t work on massive, untenable debt.
However, we probably are doomed to more unnecessary pain and misery if we stay on this path of trying to solve untenable debt with more untenable debt.

However, we don’t have to be doomed.
Again, there are a LOT of things the federal and state governments could do, a LOT of abuses that could be stopped, and not all of these things require a LOT of new spending.
I’m not saying there is NO solution.
I’m saying the solution being attempted is most likely doomed.

I’m surprised that you don’t take a more analytical and exploratory approach to this issue.
Surely your’s and others’ inability to answer so many simple questions must be nagging at the back of your mind?
Where’s the proof, economic theory, historical precedent, or math to prove that such massive debt can be solved with more debt, borrowing, money-printing, and spending?

David R. Remer wrote: OK. We can disagree on whether or not we are doomed by our debt, and time will prove one of us right and the other wrong.

True. I hope I’m wrong, while you hope you are right.

David R. Remer wrote: If we succeed however in getting our debt under control through more borrowing today, I will feel good in having not lost confidence in a solution.

I believe there is a solution.

I simply don’t agree that our massive, untenable debt problem will be solved with more untenable debt.

David R. Remer wrote: If you are right and our current debt is unsustainable, then little is lost by more borrowing, since bankruptcy was going to be the end result anyway.

Saying “little is lost by more borrowing” is simply not true.

Saying “bankruptcy was going to be the end result anyway” is closed-minded.
Do you believe there is no better approach?

If hyperinflation results from all of this, it will make everything MUCH, much worse.
There are MANY things the federal and state governments could be doing to help most Americans.
There are solutions.
However, if simply trying to solve our massive, untenable debt problem with more debt makes no sense at all, and will most certainly create inflation, and very likely, hyperinflation.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 20, 2009 12:41 AM

gergle wrote: Well, before I answer your questions, please finish answering mine. You ANNUALIZED my example, although that was not the frame I presented. Yet you take long term national debt and compare it to annualized GDP. What’s wrong with THAT math? THAT was the point I was making.

False. Look again. Since your statement was ambiguous, I did it BOTH ways (for $200,000 mortgage and a $10.4 Million mortgage).

gergle wrote: Let’s look at debt in a more accurate way. en.wikipedia.org/wiki/United_States_public_debt Perhaps that is a little more tenable. Not a great picture, I agree, but not insurmountable.

False.

That is NOT all debt.
$11 Trillion = the current National Debt (interest is charged on this debt)
$12.8 Trillion = the current amount borrowed from Social Security (without interest), leaving it pay-as-you-go, with a 78 Million baby boomer bubble approaching.
________________________
$23.8 Trillion = Total federal debt.

Then there is the non-federal debt too.
Here’s a summary of all current (not future) U.S. nation-wide debt:

• Private domestic financial sector debt=$15.8 Trillion;


• Household debt= $13.88 Trillion;


• Business debt=$10.16 Trillion;


• Federal government National Debt = $10.69 Trillion


• State and local government debt = $2.2 Trillion;


• Other private sector foreign debt = $1.8 Trillion;


• ______________________________________________________________


• Total nation-wide debt = $54.53 Trillion (and that does not even include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 77 million baby boomer bubble approaching);


• If the $12.8 Trillion borrowed and spent from Social Security is included:


• Total nation-wide debt = $67.33 Trillion = $54.53 Trillion + $12.8 Trillion = 4.86 times the nation’s $13.86 Trillion GDP (year 2007) !


• Total federal debt is = $23.49 Trillion = $10.69 Trillion + $12.8 Trillion = 1.69 times the nation’s $13.86 Trillion GDP (year 2007) !

By the way, there is NO Social Security surplus.
That’s a total lie.
There is no money in the Social Security surplus.

gergle wrote: Let’s also not forget we are talking about macro economics here, and there is an inherent dishonesty in any projections, because economic growth (or shrinking) effects the outcomes in gross ways. That is also important to note when using microeconmics to explain a macroeconomic effect, and can be very misleading.

Not always. That gobbledygook doesn’t discount the debt, interest on the debt, or the untenable nature of the debt.

gergle wrote: You continue to use the quote that 90% of US dollars exist as debt. What the hell does that even mean? M1? debt to the year infinity? Debt due on Sunday the 22nd? It’s a pejorative figure.

That is all money currently in existence in the U.S. M3 Money Supply is the broadest measure of the U.S. money.

The reason for 90%-to-95% of all money in the U.S. existing as debt is not hard to understand when you see that savings are so low, and money is created as debt at a steep 9-to-1 ratio of debt-to-reserves.

gergle wrote: Yes, I guess I misunderstood the direct quote that stated:

• d.a.n wrote: And when inflation starts to climb, how can the Federal Reserve control it with lower [higher] interest rates when interest rates are already low (or ZERO)….

We all make mistatements from time to time, that often leads to misunderstandings. Admission of that error would forward your argument.

OK. You’re right. I meant to say higher instead of lower.

gergle wrote: I don’t disagree with your main premise, that we have serious debt issues. I just think you are using misleading stats in this particular post.

Where exactly. I stand behind all of the statistics. They are all verifiable. Feel free to say exactly which figures are wrong. If I’m wrong, I’ll gladly admit it.

gergle wrote: The money will come from future GDP.

Not likely. Not when total nation-wide debt has almost quintupled from 100% of GDP in 1956 to 483% of GDP today (where GDP = $13.86 Trillion in 2007).

gergle wrote: The book is about macroeconomic theory, not specific economic application, but anyone sensible knows and understands the relationship of spending for WWII and it’s effect on the depression.

The debt today is bigger than after World War II.

The $11 Trillion National Debt is larger today in size and per-capita.
The total federal debt of $23.8 Trillion (including the $12.8 Trillion borrowed from Social Security) is larger today in size, per-capita, and as a percentage of GDP.

gergle wrote: I do not know of an internet usable link to the text. Do You?

It’s a scanned image. Just tell us what page and paragraph in “General Theory of Employment, Interest and Money By John Maynard Keynes” that shows the rationale and economic theory that states a massive debt bubble can be solved with more debt, borrowing, money-printing, and spending.

Until some of these simple questions are answered, merely saying we can solve our massive debt problem with more debt, borrowing, money-printing, and spending is not very convincing.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 20, 2009 01:14 AM

Off topic, but today in Paris, 3 million+ people were protesting President Sarkozy’s economic package, maybe the French have more stones than Americans in a time of populism.

In topic, what needs to happen in the long term is the dissolution of the Fed, it dosen’t benefit the American public at all, only those handful of investors (read: families) that own the banks in the Fed. Bernanke and Geithner both are the Fed’s men who helped cause this mess.

Posted by: Jon at March 20, 2009 01:21 AM

M3, the broadest measure of the U.S. money supply, skyrocketed from $135 Billion in 1950 to $10.15 Trillion by year 2005.
No wonder the Federal Reserve doesn’t want to report such glaring inflation anymore.
By the spring of 2007, inflation according to M3 statistics was growing at a rate 11.8% per year.

So, where did all this new money come from?

The problem with inflating the money supply with banking credit is that the process inflates prices.
More money competing for the same goods drives prices up.
The dollar buys less, cheating people of the value of their money.
This rampant, incessant inflation has been going on for the past 52 consecutive years.

Price inflation is only one problem with the central banking model of private money creation.
Another is that banks create only the principal portion, but not the interest portion necessary to pay back loans they create.
Since the money supply is mostly created by banks themselves, new money must continually be borrowed into existence just to pay the interest owed to the bankers.
A dollar lent at 5% interest becomes $2 dollars in 14 years.
That means the money supply has to double every 14 years just to cover the interest owed on the money existing at the beginning of this 14 year cycle.
Figures from the Federal Reserve confirm that M3 has doubled or more every 14 years since 1959, when the Fed began reporting it.
Therefore, every 14 years, banks siphon off as much money in interest as there was in the entire economy 14 years earlier.
This is one of the greatest scams ever perpetrated as the scam now affects the entire global economy.
And when it started collapsing, the banks packaged up bad debt, got it rated it AAA, and peddled it to the rest of the world.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 20, 2009 02:04 AM

Christine said: “BTW - inflation is coming.”

Yes, it is, when the recession abates, or under some unforeseen circumstances, even before.

“There is no alternative. The government will monetize this massive debt. Some of us will pay with higher taxes; all of us will pay with higher prices.”

How severe the inflation impact will be is not yet knowable. Many variables come into play such as the cost of imports, the pricing power of exports, the effectiveness and timeliness of hiking interest rates and cutting the money supply without reoccurring recession, and others. It could become horrific, or it could be surprisingly mild and fairly short lived. But, there is no question that inflation is coming.

Posted by: David R. Remer at March 20, 2009 03:55 AM

d.a.n said: “Simply raising interest rates will not be enough to stop hyperinflation resulting from many of trillions of dollars of new money created out of thin air. “

And we should take this on your word alone? First I question your figure of many trillions of new money created out of thin air, if you are referring to the increase in the money supply to fight this recession and prevent the financial sector from failing from the top down. Please quote a source and time frame and amount dollar amount of increase.

Then you switch and mix topics to include borrowed money, which of course, is an entirely different issue than printed money in excess of previous money supply levels, when you go on to say:

Those mechanisms can work under less stressed situations, but not so much spending from massive borrowing and money-printing. It will take massive amounts of money to even put a dent in the massive debt problem. Many trillions have already been used in only a few months, and the nation’s massive debt-bubble not only still exists, but is now much bigger.

Debt gets repayed by foregoing spending on other items besides debt. The longer the term of the debt, the lower the annual payments, but, the higher the cost of repayment of debt over that term. Debt is manageable if the interest can be paid (very manageable for the time being, but, with opportunity costs that must be incurred), and the confidence and patience of the creditors maintained.

Inflation due to increasing money supply is a whole other animal. There is no debt per se, attached to printing money. You are talking volume here. The FED has the Treasury print money to LOAN to the banks. As those loans are repaid, the FED passes those dollars back to the Treasury to be destroyed. Expansion and contraction of money supply, which is a very different animal than debt to creditors.

Your comments err, in jumbling these two economic activities together as one and the same. They are not. Their risks, management, and benefits are not the same. Debt is not intrinsically inflationary. Debt comes with large opportunity costs in addition to the principle to be repaid some point, which can be measured by the interest on that debt, which dictates that those dollars are NOT spent on goods and services provided by the government in the year in which the interest is paid.

Printing money to loan is not a debt. And if the loan is repaid with interest, there is actually a gain associated with the printing of the money. Whether the interest gains exceed, or fail to equal, the inflationary costs born by consumers depends on many factors. But, generally in the last 100 years, the interest gains fall short, sometimes even far short, of inflationary costs incurred by consumers and producers, as in the 1970’s.

Inflation occurs when the rising prices of goods and services exceeds the rise in value of the currency. The Federal Reserve can affect the amount of money that is spent by consumers and businesses, by adjusting the effective cost of money. Which it can do by adjusting the amount of money in circulation.

But structural inflation as described above is different than inflation caused by other variables which decrease actual wages, like illegal immigration, or educational failures in preparing citizens to fill jobs which in turn are then filled by legal immigration whose wage demands are less than qualified American workers would demand.

Managing these different sources of inflation require different departments and even branches of government and different methodologies. And they bear no resemblance to the methodologies required to deal with debt which is another animal altogether.

Our debt as a percentage of GDP currently and looking outward 4 years from now, is potentially very manageable. We have seen such percentages and higher before. What is not manageable is the current trajectory for debt based on current entitlement laws governing revenues and outlays 4 years from now and further out.

As yet, we have not seen any concrete plan to effectively deal with that trajectory of federal government debt, to dramatically reduce or eliminate it. That future of debt based on current law obligations is where the insurmountable challenge of debt lies.

The growth of the national debt from 5.65 trillion to over 16 trillion in 12 years is frightening, enormously challenging, and comes with a price tag far larger than the principle owed to paid, not in decades, but over generations. But, that is not necessarily, by itself, a nation killer, nor does it alone portend third world hardships for most Americans in the future.

The same however, CANNOT be said of the debt growth to come from entitlement obligations under current law. That debt growth is unequivocally a nation and economy killer and we have seen many examples of such debt to GDP ratios lethal effects on other nations like Post WWI Germany for example.

Bankrupt nations tend to seek authoritarian leaders and even governments in history. Americans will be no different if our federal government defaults on its debts, which it surely will if sufficient entitlement reforms to alter that debt trajectory dramatically downward are not enacted in this coming four years.

Posted by: David R. Remer at March 20, 2009 04:52 AM

d.a.n said: “M3, the broadest measure of the U.S. money supply, skyrocketed from $135 Billion in 1950 to $10.15 Trillion by year 2005.”

Which means nothing outside the context of real asset growth over the same period, d.a.n. You cannot take such figures in isolation and expect them to mean anything logical or rational. Money supply by itself is meaningless. Its like saying I have increased my sand grain supply from 20 billion to 400 trillion. OK. I went from cupful of sand to a small children’s sandbox of sand.

With all that growth in the money supply, there is no hint of hyperinflation in our current economy nor has there been since the 1970’s. That is because that growth in the money supply has been given real value through productivity gains, quality of life gains, and real asset growth, backed by markets of demand for those assets (real estate assets of course being excepted as of the last 18 months.)

Even with the devaluation of real estate assets in Ca., Fla. Nevada, and Arizona, the losses to those assets as a percentage of the nation’s total real estate current market valuation, is still pretty small. Real estate values here in Texas for example, have hardly dropped at all, which will come as a shock to property owners expecting county school taxes to drop next year.)

Again, it is meaningless to try to make a case based on such economic statistics presented in isolation to any others. Money supply grew, a lot. So? So, did the total value of real assets, labor capital, and expansion of marketable products and services here and overseas. Which held the value of that printed money up enough to prevent hyperinflation, (1970’s with the aftermath of the Viet Nam War and glut of workers exiting the military and commodity price explosion especially with oil and gas prices duly noted as the exception.)

If the U.S. continues to experience qualified labor shortages, wages will keep pace with or exceed inflation in some sectors of the economy after the recession ends. If the Fed strikes an optimal balance in timing and rate of contracting the money supply and raising the interest rates, inflation will be dampened more. If there are shifts in overseas markets as a result of the global recession such that our trade deficits continue their remarkable decline trajectory into surpluses, that will have an anti-inflationary effect. If in the end, the majority of the loans to the private sector are repaid to the government, and those dollars removed from the money supply, inflation will be mitigated even more, even 5 or 6 years from now.

Hyperinflation is not at all a certainty at this point, d.a.n. Though its potential has significantly increased due to the expansion of the money supply and its effects on a post recessionary economy if not removed from that future economy commensurately. And to be sure, it is highly improbable that the shrinkage of the money supply after the recession will equal the expansion of the money supply from late 2007 to the present.

But the smaller the difference, the less inflationary effect will be experienced. A small difference, means a potentially mild inflationary effect. A large difference will mean larger inflationary effect. A huge difference could easily spell hyperinflation.

But, there is no reason to anticipate a huge difference at this point as the budgetary expansion of fiscal spending will be accommodated through debt accrual, not through growth in the money supply, if this recession abates by early 2010. And there are increasing signs that may be the case.

Posted by: David R. Remer at March 20, 2009 05:22 AM

Jon, the only thing wrong with your comment is that the Federal Reserve just saved this country from a complete economic meltdown due to a collapse in the financial sector and run on the money markets.

And that makes your entire comment about the Fed, pretty null and void.

Posted by: David R. Remer at March 20, 2009 05:26 AM

d.a.n.

(and David)

Thanks for the discussion. I think we’ve both made our points.

I disagree with the framework through which you are looking at this problem, but you make valid points.

As to Social Security, I really don’t see a major unfixable problem there. With all us obese Americans, most of us won’t live long enough to collect any anyway.:) That’s the problem with projections. Reality keeps changing.

Posted by: gergle at March 20, 2009 01:06 PM

David or d.a.n. http://news.yahoo.com/s/ap/20090320/ap_on_go_pr_wh/obama_budget Is there a point of no Return and I’m waiting from the white house for some Clarification.

Posted by: Rodney Brown at March 20, 2009 02:06 PM

Rodney, yes, there is a point of no return as to debt growth. A tipping point beyond which saving the economy is no longer possible.

The problem is, ascertaining what that dollar amount is, is impossible, due to the near infinite variables that could play a part in elevating or diminishing that tipping point dollar amount.

When folks attempt to put a dollar figure on that tipping point, they inescapably have to assume a near infinite number of variables remain constant save one or a couple. Those assumptions are the devil in the details that make such projections contestable and debatable.

In general, compounding the return on a deficit dollar spent to day on infrastructure, and innovations which lower future costs, raise export capacity, or maximize employment and minimize unemployment, for examples, will result in longer term debt reductions, IF the returns in increased government revenues are applied to the debt. That is a very big IF given the profligate deficit spending of presidents and congress’ of the past.

On the other hand, if today’s deficit dollars are spent on improving current citizen’s quality of life, and not in lowering costs of living of tax payers in the future and raising their taxes commensurately to pay down the debt, then the tipping point comes upon us very much sooner and a much lower dollar amount.

If it is true: “The Congressional Budget Office figures predict Obama’s budget will produce $9.3 trillion worth of red ink from 2010 through 2019. “, then whether or not 20 trillion dollars of national debt equals or exceeds the tipping point of no return to federal solvency, depends almost entirely on our nation’s creditors and investors, and our government’s ability and willingness to bear the interest costs (assuming about 3.5% on 20 Trillion per year equals 70 Billion dollars per year in budgeted interest payments which is doable but with very high opportunity costs for the public and government in terms of what THEY CAN’T spend that 70 billion on otherwise.)

Will creditors/investors, domestic and foreign, retain confidence in our Treasury’s ability to pay the debt back? I cannot possibly answer that, and neither can anyone else at this point. There is a very basic rule governing debt, which is, debt is not a problem until one’s priorities shift in the direction of no longer choosing to, or no longer able to, honor one’s debt repayment contract.

It is impossible at this time to say what the public and political priorities will be in 2019. Additionally, it is not possible to say what the government’s revenue capacity will be or the public’s tolerance for much higher taxes will be 2019. And these answers are necessary to determine whether or not the American government defaults on its national debts in 2019 or before.

At this moment, given the lack of unity in government and the lack of understanding by the public of just how seriously perilous our economic future is, the odds don’t appear on the side of 20 Trillion in national debt being sustainable. But, there is a whole globally connected economic system in which our own is embedded, and inextricably linked and dependent upon, and calculating whether that global economy will enhance or diminish our debt carrying capacity is also unknowable at this time.

The unknown always pushes people to lean toward pessimistic outcomes in dealing with the unknown. But the historical irony is, the unknown rarely remains unknown for very long (since the industrial revolution anyway, when human time sped way up.) When the unknown becomes knowable, people tend to lean toward optimism and fulfilling those optimistic outcomes with their work and energy and creativity.

America’s current President of color is a stark demonstration of these trends in human nature for non-caucasions and many caucasions around the world. When it became generally accepted that American would one day have a president of color or woman president, (i.e. the unknown became knowable), then the reality of a president of color became entirely possible and a reality.

Posted by: David R. Remer at March 20, 2009 04:04 PM

David R. Remer wrote:

• Christine said: “BTW - inflation is coming.”

Yes, it is, when the recession abates, or under some unforeseen circumstances, even before.

Current year-to-year inflation is already high (and rising on a year-to-year basis):

• ____INFLATION RATE_____
• 4.00%|———————-
• 3.75%|——————xxx 3.85% average for year 2008)
• 3.50%|——————x— (2008 __ 3.85%)
• 3.25%|————xxx-x— (2007 __ 2.85%)
• 3.00%|————x-xxx— (2006 __ 3.24%)
• 2.75%|——xxx-x——— (2005 __ 3.39%)
• 2.50%|——x-xxx——— (2004 __ 2.68%)
• 2.25%|—xxx————— (2003 __ 2.27%)
• 2.00%|—x—————— (2002 __ 1.59%)
• 1.70%|—x——————
• 1.50%|xxx——————
• 1.25%|__________________YEAR
• _____ 2_2_2_2_2_2_2
• _____ 0_0_0_0_0_0_0
• _____ 0_0_0_0_0_0_0
• _____ 2_3_4_5_6_7_8

And if pre-1983 inflation calculations are used, inflation is even higher.

Based on www.ShawdowStats.com, inflation as of 18-MAR-2009 is actually 7.5%

Christine wrote: “There is no alternative. The government will monetize this massive debt. Some of us will pay with higher taxes; all of us will pay with higher prices.”

David R. Remer wrote: How severe the inflation impact will be is not yet knowable.

Not exactly, but it doesn’t require a crystal ball or clairvoyance to know the probabilities of high inflation are very high.

• (1) There is also a historical precedence, because many dozens of nations have already tried to solve a massive debt-bubble with more borrowing, debt, money-printing, and spending, and it resulted in hyperinflation.
• (2) There is also no historical precedent of any country (especially the biggest debtor nation on the planet) ever borrowing, money-printing, and spending its way to prosperity.
• (3) And, there is no economic model or theory that states that the strategy for a massive debt problem is more debt, borrowing, money-printing, and spending.

David R. Remer wrote: Many variables come into play such as the cost of imports, the pricing power of exports, the effectiveness and timeliness of hiking interest rates and cutting the money supply without reoccurring recession, and others. It could become horrific, or it could be surprisingly mild and fairly short lived. But, there is no question that inflation is coming.

Most likely, since we have already had 52 consecutive years of inflation.

Inflation is merely a form of theft.
However, we don’t have to have more inflation.
Unfortunately, the federal government doesn’t know how to do anything else but tax, money-print, and spend.
Therefore, realistically, there will not only be more inflation, but that strategy will probably result in much worse, and continued deterioration of many economic conditions.

David R. Remer wrote:

• d.a.n said: “Simply raising interest rates will not be enough to stop hyperinflation resulting from many of trillions of dollars of new money created out of thin air.”

And we should take this on your word alone?

Of course not. People need to do their own investigations.

David R. Remer wrote: First I question your figure of many trillions of new money created out of thin air, if you are referring to the increase in the money supply to fight this recession and prevent the financial sector from failing from the top down.

Well, that’s easy to prove that trillions of new dollars have been created out of thin air (see below).

Surely you didn’t think the federal government and the Federal Reserve had those many trillions of dollars in savings somewhere did you?

David R. Remer wrote: Please quote a source and time frame and amount dollar amount of increase.

OK:

• From Bloomberg News and the LA Times magazine on 30-NOV-2008, look at the $3.2-to-$8.5 Trillion used to rescue Wall Street. Where did that money come from. Surely you don’t think it was in a savings account somewhere, do you?: www.latimes.com/news/printedition/front/la-113008-fi-pricetag-g,0,5292528.graphic
• And check out this $1 Trillion spike in Jan-2009: the Federal Reserve: research.stlouisfed.org/fred2/fredgraphfile/?graph_id=13009
• Now look at this near $1 Trillion spike from the end of Jan-2009. Where did this money come from? research.stlouisfed.org/fred2/fredgraphfile/?graph_id=13010
The Federal Reserve, between August 2008 and 14-JAN-2009, expanded its balance sheet from about $900 billion to more than $2.2 trillion, creating $1.3 trillion that did not exist to replace some of the billions wiped out in the financial crisis.
• Some of the money was borrowed. The value of outstanding American Treasury bills now reaches $10.6 trillion as of Jan-2009, and it is sure to increase drastically under Obama’s economic rescue plan, due to the $787 Billion Stimulus BILL, $410 Billion budget passed in March-2009, and other stimulus most likely to follow. So, the National Debt jumped by only $1 Trillion (from $10 Trillion to $11 Trillion). Where did the rest of that money come from if it wasn’t borrowed? It was created out of thin air, and anyone who doubts that should simply do some google searches. The evidence of massive money printing is glaringly obvious.

David R. Remer wrote: Then you switch and mix topics to include borrowed money, which of course, is an entirely different issue than printed money in excess of previous money supply levels, …

Not true.

I’ve clearly differentiated borrowed money, printed money, current debt, future debt, etc., despite the incessant attempts to obfuscate and assert otherwise.
See above.
Trillions of dollars have been created out of thin air.
Trillions have been borrowed too.

David R. Remer wrote: Debt gets repayed by foregoing spending on other items besides debt. The longer the term of the debt, the lower the annual payments, but, the higher the cost of repayment of debt over that term.

Yes. That’s why a 30 year mortgage an end up being triple the original principal.

And even if the federal government had the extraordinary discipline to cut unnecessary spending, and pay down the debt, it would take centuries (at only a 4.0% interest rate).

David R. Remer wrote: Debt is manageable if the interest can be paid (very manageable for the time being, but, with opportunity costs that must be incurred), and the confidence and patience of the creditors maintained.

No, it obviously isn’t managable, since the federal government has been borrowing money for 52 consecutive years to merely pay the interest on the National Debt (now over $11 Trilllion dollars).

The interest on the $11 Trillion National Debt is almost $500 Billion per year.
But most of the government’s $2.4 Trillion in total federal tax revenues are already dedicated to numerous things:

• $700 Billion for Health and Human Services (including $432 Billion for Medicare)


• $660 Billion for Social Security


• $640 Billion for Department of Defense
(leave Iraq; reduce military presence in 132 nations).

• $100 Billion for Department of Education


• $100 Billion for Department of Agriculture


• $85 Billion for Veteran Affairs


• $75 Billion for Homeland Security


• $56 Billion for Department of Transporation


• $50 Billion for Housing and Urban Development (HUD)


• $60 Billion for Office of Personnel Management


• $550 Billion for Treasury Department (including $430 Billion for Interest on the National Debt).


• ____________________________________________________________________


• $3.074 ($574 Billion over total revenues of $2.4 Trillion in 2008)

So, how will the debt be serviced when the money to pay the interest is borrowed each of every year for the past 52 consecutive years, and deficit spending is planned for many years to come.

David R. Remer wrote: Inflation due to increasing money supply is a whole other animal. There is no debt per se, attached to printing money. You are talking volume here. The FED has the Treasury print money to LOAN to the banks. As those loans are repaid, the FED passes those dollars back to the Treasury to be destroyed. Expansion and contraction of money supply, which is a very different animal than debt to creditors.

Money is typically created as debt at a very steep ratio of 9-to-1 of debt-to-reserves. That is why 90%-to-95% of all money in existence in the U.S. exists as debt. However, recently, trillions of dollar have been created out of thin air without any reserves (see proof above from Federal Reserve).

David R. Remer wrote: Your comments err, in jumbling these two economic activities together as one and the same.

Not true. I have jumbled nothing. The differences are very clearly specified above.

David R. Remer wrote: They are not. Their risks, management, and benefits are not the same. Debt is not intrinsically inflationary. Debt comes with large opportunity costs in addition to the principle to be repaid some point, which can be measured by the interest on that debt, which dictates that those dollars are NOT spent on goods and services provided by the government in the year in which the interest is paid.

No one ever said debt by itself is inflationary.

What is inflationary is massive increases of the money supply, and that is what is going on, as proven above by the data from the Federal Reserve.
However, massive debt can provide motivation for more money-printing, which can cause more inflation, and that’s the problem we have now with such a massive, untenable debt problem.

David R. Remer wrote: Printing money to loan is not a debt.

False.

Money is most certainly created AS DEBT, because money is typically created as debt by the Federal Reserve at a very steep ratio of 9-to-1 of debt-to-reserves.

Therefore, 90% of each new loan is new money created out of thin air AS DEBT.
More proof that money is created as debt is that 90%-to-95% of all money in existence in the U.S. exists AS DEBT.
The evidence of money created AS DEBT at very steep ratios of debt-to-reserves (if not created without any reserves at all) is irrefutable.

David R. Remer wrote: And if the loan is repaid with interest, there is actually a gain associated with the printing of the money.

Not always. It depends on the benefits and how well the loan was capitalized upon.

It is most certainly not a gain if more creation of new money produces excessive inflation.
It is possible to increase the money supply without inflation.
In fact, it can become necessary if the population grows significantly.
However, 52 consecutive years of inflation has not produced any net benefit.
Inflation from excessive money-printing is economically destabilizing.

David R. Remer wrote: Whether the interest gains exceed, or fail to equal, the inflationary costs born by consumers depends on many factors. But, generally in the last 100 years, the interest gains fall short, sometimes even far short, of inflationary costs incurred by consumers and producers, as in the 1970’s.

The same high inflation exists today, if you measure inflation using the same formulas used before 1983.

Inflation today is actually much higher than what is reported.

David R. Remer wrote: Inflation occurs when the rising prices of goods and services exceeds the rise in value of the currency. The Federal Reserve can affect the amount of money that is spent by consumers and businesses, by adjusting the effective cost of money. Which it can do by adjusting the amount of money in circulation.

Inflation is most often caused by excessive creation of money out of thin air.

Inflation can also be caused by borrowing when the interest is also borrowed every year (the economy doesn’t distinquish between new money and borrowed money).

Many nations have already discovered this the hard way.
Again, how will the Federal Reserve remove money from circulation when 90%-to-95% of money in existence in the U.S. exists AS DEBT, because money is created AS DEBT at a very steep ratio of 9-to-1 of debt to reserves?

David R. Remer wrote: But structural inflation as described above is different than inflation caused by other variables which decrease actual wages, like illegal immigration, or educational failures in preparing citizens to fill jobs which in turn are then filled by legal immigration whose wage demands are less than qualified American workers would demand.

True. Some other things can exacerbate inflation, but inflation is usually the result of excessive creation of new money out of thin air.

And those other factors still don’t explain away trillions of dollars of new money being created out of thin air, trillions in borrowing, and the massive debt bubble (not only the federal debt-bubble, but the $67 Trillion nation-wide debt bubble).

David R. Remer wrote: Managing these different sources of inflation require different departments and even branches of government and different methodologies. And they bear no resemblance to the methodologies required to deal with debt which is another animal altogether.

These other less minor issues only serve to obfuscate and cloud the issues.

David R. Remer wrote: Our debt as a percentage of GDP currently and looking outward 4 years from now, is potentially very manageable.

False.

The $11 Trillion national debt today is the largest in history, and the largest per-capita, and that does not even include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 78 Million baby boomer bubble approaching. The $11 Trillion debt per-capita is 66% higher now than it was after World War II in year 1945 ($21,719 in 2008 dollars). Including that $12.8 Trillion, the total $23.8 Trillion federal debt is the (a) biggest federal debt in history, (b) per-capita ($78,032; 359% higher than the debt-per-capita in year 1945), and (c) as a percentage of GDP too.

David R. Remer wrote: We have seen such percentages and higher before.

False.

Again, The $11 Trillion national debt today is the largest in history, and the largest per-capita, and that does not even include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 78 Million baby boomer bubble approaching. The $11 Trillion debt per-capita is 66% higher now than it was after World War II in year 1945 ($21,719 in 2008 dollars). Including that $12.8 Trillion, the total $23.8 Trillion federal debt is the (a) biggest federal debt in history, (b) per-capita ($78,032; 359% higher than the debt-per-capita in year 1945), and (c) as a percentage of GDP too.

David R. Remer wrote: What is not manageable is the current trajectory for debt based on current entitlement laws governing revenues and outlays 4 years from now and further out.

Those massive unfunded liabiliities will certainly will make things worse, since $12.8 Trillion was borrowed and spent from Social Security, leaving it pay-as-you-go, with a 78 Million baby boomer bubble approaching.

David R. Remer wrote: As yet, we have not seen any concrete plan to effectively deal with that trajectory of federal government debt, to dramatically reduce or eliminate it. That future of debt based on current law obligations is where the insurmountable challenge of debt lies.

Yes, the future debt is a train wreck approaching, and could possibly represent another $60-to-$70 Trillion based on some forecasts.

They current $67 Trillion of current nation-wide debt (federal and non-federal combined) is bad enough, without including future debts too.
Here’s a summary of all current (not future) U.S. (One-Simple-Idea.com/Abuses.htm#NationWideDebt):

• Private domestic financial sector debt=$15.8 Trillion;


• Household debt= $13.88 Trillion;


• Business debt=$10.16 Trillion;


• Federal government National Debt = $10.69 Trillion


• State and local government debt = $2.2 Trillion;


• Other private sector foreign debt = $1.8 Trillion;


• ______________________________________________________________


• Total nation-wide debt = $54.53 Trillion

(and that does not even include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 77 million baby boomer bubble approaching);

If the $12.8 Trillion borrowed and spent from Social Security is included:

Total nation-wide debt = $67.33 Trillion

= $54.53 Trillion + $12.8 Trillion = 4.86 times the nation’s $13.86 Trillion GDP (year 2007) !

Total federal debt = $23.49 Trillion = $10.69 Trillion + $12.8 Trillion = 1.69 times the nation’s $13.86 Trillion GDP (year 2007) !

Total non-fedeal debt = $43.5 Trillion

David R. Remer wrote: The growth of the national debt from 5.65 trillion to over 16 trillion in 12 years is frightening, enormously challenging, and comes with a price tag far larger than the principle owed to paid, not in decades, but over generations. But, that is not necessarily, by itself, a nation killer, nor does it alone portend third world hardships for most Americans in the future.

It will most likely be devastating when it is combined with the combined $11 Trillion National debt, $43.5 Trillion non-federal debt, and the $12.8 Trillion borrowed from Social Security.

David R. Remer wrote: The same however, CANNOT be said of the debt growth to come from entitlement obligations under current law. That debt growth is unequivocally a nation and economy killer and we have seen many examples of such debt to GDP ratios lethal effects on other nations like Post WWI Germany for example.

I agree.

David R. Remer wrote: Bankrupt nations tend to seek authoritarian leaders and even governments in history. Americans will be no different if our federal government defaults on its debts, which it surely will if sufficient entitlement reforms to alter that debt trajectory dramatically downward are not enacted in this coming four years.

That danger exists. All the more reason not to play chicken with hyperinflation.

David R. Remer wrote:

• d.a.n said: “M3, the broadest measure of the U.S. money supply, skyrocketed from $135 Billion in 1950 to $10.15 Trillion by year 2005.”

Which means nothing outside the context of real asset growth over the same period, d.a.n.

Not true.

M3 Money Supply grew by a factor of 75 times from $135 Billion in 1950 to $10.15 Trillion in year 2005, but we did not become 75 times wealthier.
That’s because of 52 consecutive years of incessant, economically destabilizing inflation.

David R. Remer wrote: You cannot take such figures in isolation and expect them to mean anything logical or rational. Money supply by itself is meaningless. Its like saying I have increased my sand grain supply from 20 billion to 400 trillion. OK. I went from cupful of sand to a small children’s sandbox of sand.

That’s why I provide all calculations (e.g. money supply (see links to charts above), federal debt, non-federal debt, GDP, percentages of each, some in inflation adjusted dollars, etc.) So, to say figures were provided in isolation is the farthest thing from the truth.

David R. Remer wrote: With all that growth in the money supply, there is no hint of hyperinflation in our current economy nor has there been since the 1970’s.

False.

The CPI inflation calculations were modified in 1983 and again in 1998, such that weightings on items (of tens of thousands of CPI items) were lowered on items rising in price and increase on items falling in price. If the pre-1983 forumlas are used, inflation today is 7.5% (source: www.shadowstats.com/alternate_data).
Besides, even by the government’s own fishy data, year-to-year inflation has been rising for years:

• INFLATION (source: government’s BLS web-site)


• (2008 __ 3.85%)


• (2007 __ 2.85%)


• (2006 __ 3.24%)


• (2005 __ 3.39%)


• (2004 __ 2.68%)


• (2003 __ 2.27%)


• (2002 __ 1.59%)

David R. Remer wrote: That is because that growth in the money supply has been given real value through productivity gains, quality of life gains, and real asset growth, backed by markets of demand for those assets (real estate assets of course being excepted as of the last 18 months.)

False.

Inflation exists now, and year-to-year inflation is actually higher than the 3.85% reported by the federal government.
The only reason inflation has not already skyrocketed to the stratosphere is because most Americans are unable to carry more debt, and because 90%-to-95% of all money in the U.S. already exists as debt (as a result of money created AS DEBT at a steep ratio of 9-to-1 of debt-to-reserves).

David R. Remer wrote: Even with the devaluation of real estate assets in Ca., Fla. Nevada, and Arizona, the losses to those assets as a percentage of the nation’s total real estate current market valuation, is still pretty small.

I wouldn’t characterize the losses as trivial at all.

Also, the problem is not all real-estate devaluation.
A major cause of foreclosures is also the greedy banks’ hiking of interest rates, tripling, doubling, and N-tupling many monthly mortgage payments, forcing people into foreclosure.

David R. Remer wrote: Real estate values here in Texas for example, have hardly dropped at all, which will come as a shock to property owners expecting county school taxes to drop next year.)

Texas was not hit as hard because Texas, and it is probably because of the real-estate bubble in the early 1990s that preceded the dot.com bubble and this current debt-bubble.

However, some place have been decimated.
In some states, 1 in 8 mortgages are in trouble (i.e. several months of late payments).

David R. Remer wrote: Again, it is meaningless to try to make a case based on such economic statistics presented in isolation to any others. Money supply grew, a lot. So?

False. I of all people have provided comprehensive economic statistics of federal debt, non-federal debt, GDP, unemployment, inflation, percentages of each relative to the other, historical trends, historical data, etc. (i.e. the BIG picture). So to say it is isolated is simply not true.

David R. Remer wrote: So, did the total value of real assets, labor capital, and expansion of marketable products and services here and overseas. Which held the value of that printed money up enough to prevent hyperinflation, (1970’s with the aftermath of the Viet Nam War and glut of workers exiting the military and commodity price explosion especially with oil and gas prices duly noted as the exception.)

Things are much different now. The debt wasn’t as large in the 1970s as it is today. Many economic factors started deteriorating in 1976. Debt started climbing. Double digit inflation set in. We’ve now had 52 consecutive years of inflation. We have two wars today. The wealth disparity gap doubled since 1976 (i.e. wealthiest 1% who had 20% of all wealth in 1976 grew to 40% of all wealth). The nation-wide debt almost quintupled from 100% of GDP in 1950 to 483% of GDP today. Many economic conditions are worse today than ever before, and/or since the Great Depression (source: One-Simple-Idea.com/NeverWorse.htm).

David R. Remer wrote: If the U.S. continues to experience qualified labor shortages, wages will keep pace with or exceed inflation in some sectors of the economy after the recession ends. If the Fed strikes an optimal balance in timing and rate of contracting the money supply and raising the interest rates, inflation will be dampened more. If there are shifts in overseas markets as a result of the global recession such that our trade deficits continue their remarkable decline trajectory into surpluses, that will have an anti-inflationary effect. If in the end, the majority of the loans to the private sector are repaid to the government, and those dollars removed from the money supply, inflation will be mitigated even more, even 5 or 6 years from now.

That’s quite a prediction. Lots of “IFs”. Sounds like a Bernanke speech.

David R. Remer wrote: Hyperinflation is not at all a certainty at this point, d.a.n.

No, it isn’t a certainty, but it is a high probability, since the strategy chosen is to try to solve our massive debt problem with more debt, borrowing, money-printing, and spending.

However, a very long and deep recession (with no hyperinflation) may also occur, since there is so much nation-wide debt (e.g. $67 Trillion), and because it will take a long time and a lot of money to unwind so much debt.

David R. Remer wrote: Though its [hyperinflation] potential has significantly increased due to the expansion of the money supply and its effects on a post recessionary economy if not removed from that future economy commensurately. And to be sure, it is highly improbable that the shrinkage of the money supply after the recession will equal the expansion of the money supply from late 2007 to the present.

We will see. Did you hear the lastest budget National Debt projection (see Rodney Brown’s comment below: news.yahoo.com/s/ap/20090320/ap_on_go_pr_wh/obama_budget). It’s expected to be $20.3 Trillion by year 2019 (source: CNN). That’s up another $300 Billion from the previous projection. Of course, 2019 is a decade away, and it wouldn’t surprise me at all if the national debt was $50 Trillion by 2019 (due to inflation).

David R. Remer wrote: But the smaller the difference, the less inflationary effect will be experienced. A small difference, means a potentially mild inflationary effect. A large difference will mean larger inflationary effect. A huge difference could easily spell hyperinflation. But, there is no reason to anticipate a huge difference at this point as the budgetary expansion of fiscal spending will be accommodated through debt accrual, not through growth in the money supply, if this recession abates by early 2010. And there are increasing signs that may be the case.

I don’t see signs of improvement by early 2010.

Not when the debt bubble of nightmare proportions has grown much larger.

David R. Remer wrote: Jon, the only thing wrong with your comment is that the Federal Reserve just saved this country from a complete economic meltdown due to a collapse in the financial sector and run on the money markets.

“Saved this country”?

The banks are some of the major culprits in this economic mess (in-league with our FOR-SALE Congress).
The Federal Reserve is a dishonest, usurious, inflationary, “Ponzi-scheme”, which creates money AS DEBT at a steep ratio of 9-to-1 of debt-to-reserves (or out of thin air lately), and has resulted in 52 consecutive years of economically destabilizing inflation, which has everyone running around like chickens with their head cut off looking for someplace to put their savings so that it doesn’t erode away to nothing. As a result, pressure to invest in risking things occurred, and trillions were lost in the stock market, real-estate, and nation-wide. Then the banks bundled up all of the toxic debt, got it rated as AAA, and then peddled it to the rest of the world.

Yeah, the “Federal Reserve just saved this country” , eh?
What is so extraordinary and heroic about creating money out of thin air to shore up banks who gambled badly?

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 20, 2009 04:39 PM

d.a.n said: “I’ve clearly differentiated borrowed money, printed money, current debt, future debt, etc., ….”

Patently false, d.a.n, as evidenced by your quote below. You don’t even attempt to segregate how much of money used to rescue Wall St. will be borrowed money from the issuance treasury bonds, and how much of it is funded by printed money.

“From Bloomberg News and the LA Times magazine on 30-NOV-2008, look at the $3.2-to-$8.5 Trillion used to rescue Wall Street. Where did that money come from. Surely you don’t think it was in a savings account somewhere, do you?:”

You continue to make comments that aggregate total deficit spending and Fed Reserve funding in these current times and refer to the source of the funding for that spending and funding as printed money. When the Congress allocated the 750 Billion in TARP funds, that was borrowed money, d.a.n, not printed money. We borrowed those funds from investors in our Treasury bonds and securities.

Borrowed money is not intrinsically inflationary. Printed money is. To be accurate and logical, it is necessary to segregate printed money from borrowed money. Borrowed money is U.S. Dollars printed long before which is handed back to our government as a loan from investors. What part of this is so hard to grasp? The inflationary effect of borrowed money was already incurred when those dollars NOW held by treasury investors to lend to our government, was first minted in the past. Borrowed money carries no inflationary effect in contemporary time or going forward.

Unless of course, printing money becomes necessary to pay the interest on that debt, which IS NOT the case, now, nor in the near future. Interest on our national debt is budgeted through the appropriations process and paid for by incoming government revenues and additional borrowed money when a deficit attaches to that budget.

Posted by: David R. Remer at March 20, 2009 04:58 PM

d.a.n said: “Yeah, the “Federal Reserve just saved this country” , eh?
What is so extraordinary and heroic about creating money out of thin air to shore up banks who gambled badly?”

Did I miss someone claiming this was heroic? I said their actions prevented an economic collapse in real time. And there was FAR MORE involved than just printing money. Their coordination with other central banks and ability to acquire international cooperation in just hours, was unprecedented in the history of global economics.

No one is claiming it was heroic. It was however sufficient to prevent a global economic meltdown created by a near global financial system collapse. Considering it was unprecedented and global in scope, it was remarkable and historic, and will be remarked upon in economics text books for a very long time to come.

Posted by: David R. Remer at March 20, 2009 05:03 PM

David R. Remer wrote:

• d.a.n said: “I’ve clearly differentiated borrowed money, printed money, current debt, future debt, etc., ….”

Patently false, d.a.n, as evidenced by your quote below. You don’t even attempt to segregate how much of money used to rescue Wall St. will be borrowed money from the issuance treasury bonds, and how much of it is funded by printed money.

I don’t know the exact amount, but the Federal Reserve only had less than a Trillion dollars in reserves before 30-NOV-2008.

The $11 Trillion National Debt has increased $1 Trillion since 30-SEP-2008.

So that leaves the balance of the $3.2-to-$8.5 Trillion that must have been borrowed or created out of thin air.
We know we China and the rest of the world could not have lent us that much money.
Besides, I’ve already provided the Federal Reserve’s own data showing jumps of a Trillion in a very short period of time:

• From Bloomberg News and the LA Times magazine on 30-NOV-2008, look at the $3.2-to-$8.5 Trillion used to rescue Wall Street. Where did that money come from. Surely you don’t think it was in a savings account somewhere, do you?: www.latimes.com/news/printedition/front/la-113008-fi-pricetag-g,0,5292528.graphic


• $1 Trillion spike in Jan-2009: the Federal Reserve: research.stlouisfed.org/fred2/fredgraphfile/?graph_id=13009


• Almost $1 Trillion spike from the end of Jan-2009. Where did this money come from? research.stlouisfed.org/fred2/fredgraphfile/?graph_id=13010
The Federal Reserve, between August 2008 and 14-JAN-2009, expanded its balance sheet from about $900 billion to more than $2.2 trillion, creating $1.3 trillion that did not exist to replace some of the billions wiped out in the financial crisis.

• Some of the money was borrowed. The value of outstanding American Treasury bills now reaches $10.6 trillion as of Jan-2009, and it is sure to increase drastically under Obama’s economic rescue plan, due to the $787 Billion Stimulus BILL, $410 Billion budget passed in March-2009, and other stimulus most likely to follow. So, the National Debt jumped by only $1 Trillion (from $10 Trillion to $11 Trillion). Where did the rest of that money come from if it wasn’t borrowed? It was created out of thin air, and anyone who doubts that should simply do some google searches. The evidence of massive money printing is glaringly obvious.

David R. Remer wrote: You continue to make comments that aggregate total deficit spending and Fed Reserve funding in these current times and refer to the source of the funding for that spending and funding as printed money. When the Congress allocated the 750 Billion in TARP funds, that was borrowed money, d.a.n, not printed money. We borrowed those funds from investors in our Treasury bonds and securities.

False. The $750 Billion TARP money is separate, and I know it was borrowed, and never said it wasn’t.

And just because it was borrowed doesn’t mean it makes the debt bubble and inflation worries are lessened.

David R. Remer wrote: Borrowed money is not intrinsically inflationary.

No one said it was.

However, borrowing can be inflationary too when the interest is also borrowed year-after-year and decade-after-decade. In that case, the economy and Money Supply does not know the difference between borrowed money and money created out of thin air.

David R. Remer wrote: Printed money is.

False again. Money-printing is inflationary only when it is in excess.

David R. Remer wrote: Printed money is.

To be accurate and logical, it is necessary to segregate printed money from borrowed money. Borrowed money is U.S. Dollars printed long before which is handed back to our government as a loan from investors. What part of this is so hard to grasp? Nothing. That’s not the issue.

I’ve separated debt and money-printing pretty well (see above).
The have been trillions of dollars infused into banks that was not all borrowed or pre-existing money.
Much of it was created out of thin air.
If you don’t believe it, feel free to disprove it.
I’ve already provided links to charts from the Federal Reserve showing the Money Supply increasing by a trillion dollars in only a few months.
And since the National Debt grew about $1 Trillion from 30-SEP-2008 to 20-MAR-2009, the other $3.2-to-$8.5 Trillion pumped into the banks are not a result of borrowing by the federal government, was it? So, as you wrote …

David R. Remer wrote: What part of this is so hard to grasp?

Again, borrowing can be inflationary too when the interest is also borrowed year-after-year and decade-after-decade, because in that case, the economy and Money Supply does not know the difference between borrowed money and money created out of thin air. So, as you wrote …

David R. Remer wrote: What part of this is so hard to grasp?

David R. Remer wrote: Printed money is.

The inflationary effect of borrowed money was already incurred when those dollars NOW held by treasury investors to lend to our government, was first minted in the past. Borrowed money carries no inflationary effect in contemporary time or going forward. False.

Again, borrowing can be inflationary too when the interest is also borrowed year-after-year and decade-after-decade, because in that case, the economy and Money Supply does not know the difference between borrowed money and money created out of thin air. So, as you wrote …

David R. Remer wrote: What part of this is so hard to grasp?

David R. Remer wrote: Unless of course, printing money becomes necessary to pay the interest on that debt, which IS NOT the case, now, nor in the near future.

False again. That is exactly what is happening and exaclty the point I’ve been making repeatedly.

We have been borrowing and printing new money to merely pay the interest on the national debt for 52 consecutive years.
The M3 Money supply increased by a factor of 75 times from $135 Billion in year 1950 to $10.15 Trillion in year 2005, but we didn’t become 75 times weatlhier, because of inflation.
That is why a 1950 Dollar is only worth 10 cents today.

David R. Remer wrote: Interest on our national debt is budgeted through the appropriations process and paid for by incoming government revenues and additional borrowed money when a deficit attaches to that budget.

So what. That does not stop the Federal Reserve from creating money from thin air at a steep ratio of 9-to-1 of debt to reserves does it? The Federal Reserve is creating trillions of dollars out of thin air. If not, then how did the M3 Money supply increase by a factor of 75 times from $135 Billion in year 1950 to $10.15 Trillion in year 2005, but we didn’t become 75 times weatlhier, because of inflation. Why is a 1950 Dollar is only worth 10 cents today?

And where does the money for the federal government come from?
It comes from loans from the Federal Reserve which creates it out of thin air at a ratio of 9-to-1 of debt-to-reserves (or no reserves lately).
The major cause of inflation is excessive creation of money out of thin air.
Regardless of who really creates that money, the Federal Reserve and federal government are in-league in creating inflation (or theft by inflation).

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 20, 2009 05:36 PM

David R. Remer wrote: Did I miss someone claiming this was heroic? I said their actions prevented an economic collapse in real time.

Guess so, since you wrote …

David R. Remer wrote: Jon, … the Federal Reserve just saved this country from a complete economic meltdown due to a collapse in the financial sector and run on the money markets.

That sort of sounds sort of like heroic or hero worship.

Besides, the banks cause the economic crisis and the massive debt bubble via their “Ponzi-scheme” and 52 consecutive years of incessant inflation.

David R. Remer wrote: And there was FAR MORE involved than just printing money. Their coordination with other central banks and ability to acquire international cooperation in just hours, was unprecedented in the history of global economics.

Whooopdeedooo ! How hard can that be? Pick up the phone and make a few calls. Big deal.

David R. Remer wrote: No one is claiming it was heroic. It was however sufficient to prevent a global economic meltdown created by a near global financial system collapse. Considering it was unprecedented and global in scope, it was remarkable and historic, and will be remarked upon in economics text books for a very long time to come.

“remarked upon in economics text books for a very long time to come”.

HHMMMmmmmmm … sounds like hero worhip and lot of big-to-do about nothin. Especially when these are the perpetrators of the economic crisis.

News Flash: WASHINGTON, D.C. -

Bernanke finally admits how he arrived at his prediction that the recession would end by the end of 2009:
• Astrology!

:
Yes, Congress, critics, and some other economists have questioned Ben Bernanke’s prediction on Tuesday (17-FEB-2009) that the recession would end by the end of 2009.
Some people are curious how Ben Bernanke could so boldly say the recession would (most likely) be over this year, and the economy would “recover” during year 2010.
Last night, the Federal Reserve Chairman, Ben Bernanke disclosed his method.
It came from a combination of applied voodoo economic theory and consulting the ancient star charts (i.e. astrology).
:
While being careful to include a myriad of “IFs”, Bernanke said that “IF” the Obama administration and the Federal Reserve are able to stabilize the banks, then the planets are in alignment for the recession to end near the end of this year (2009). He went on to say that Venus and Mar will exert an unusual and significant planetary influence.
:
Previously, Ben Bernanke used a mood ring to determine how to manipulate interest rates. The mood ring was a gift from former Federal Reserve Chairman, Alan Greenspan, and has played a big role in shaping U.S. economic policy for many decades.
:
This should not come as a surprise, since this is not the first time clairvoyance has influenced government policies. President George W. Bush started a war in Iraq only after being told they had Weapons of Mass Destruction by a palm reader in Crawford, Texas. It was later discovered the palm reader was a woman who owned a sizeable amount of Halliburton stock (HAL).
:
Bernanke went on to say “In this economic crisis, no ideas can be ignored”. If you have any ideas, please call 1-800-IDEAS.
Bernanke then knocked on wood, picked up his rabbit’s foot and mood-ring, and left the meeting.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 20, 2009 05:50 PM

d.a.n said: “Whooopdeedooo ! How hard can that be? Pick up the phone and make a few calls. Big deal. “

Well it beats the hell out of your comment’s implied doomsday approach, which likely never would have even tried the unprecedented, according to your prognostications that it has been too late to save this economy for a long time now.

I agree with your overall drift, that our economy and government are in perilous territory, both economically and politically.

But, it seems every time anyone offers a potential way out of the mess or any hope in that direction, your comments attempt to remove any and all basis for hope, with voluminous statistics all cherry picked to dispel any hope. And as I have said previously, without hope, there is no action at all. And without action, there is no hope of getting through this.

We can disagree whether there is any hope. But, without it, I would be irresponsible in the extreme to continue to live in this country and guide my daughter to do the same.

So, why do you still hold onto your U.S. residency, d.a.n? Is it an act of faith that all is not lost, or a failure of resolve to act to improve your position elsewhere, given that there is no hope for the U.S? Or perhaps, that your doom and gloom view of the future leaves no place in the world to go?

Your comments of doom beg logically beg these questions.

Posted by: David R. Remer at March 20, 2009 07:33 PM

d.a.n said: ““remarked upon in economics text books for a very long time to come”.

“HHMMMmmmmmm … sounds like hero worhip and lot of big-to-do about nothin. “

Now that is just plain illogical. I was stating the OBVIOUS d.a.n. Has not every major recession in our history been remarked upon in economics text books to date? Are not the actions to counteract previous recessions remarked upon in economics texts of today? I assure you they were in my economics text books.

And my comment that the actions taken in response to this recession will be remarked upon in economics text books for a long time to come strikes you as hero worship and a lot to do about nothin? The most severe economic crisis since the Great Depression and our nation’s responses to it, are a big to do about nothin’, d.a.n?

Sorry, but, logic dictates I disagree with you entirely on this point.

Posted by: David R. Remer at March 20, 2009 07:38 PM

Impossible for me to take those remarks about Bernanke’s statements seriously without quotes from Bernanke, and a hyperlink to the source of those comments, d.a.n. Just appears like so much right wing propaganda as it stands in your comment currently. Was this a Rush Limbaugh excerpt?

Posted by: David R. Remer at March 20, 2009 07:42 PM

d.a.n said: “So that leaves the balance of the $3.2-to-$8.5 Trillion that must have been borrowed or created out of thin air.
We know we China and the rest of the world could not have lent us that much money.”

Wow. So many assumptions without factual basis here.

Is it 3.2 trillion or 8.5 trillion d.a.n? Pretty big spread there. Who is making that estimate? On what basis? You cite the source as Congressional. Suddenly, you have confidence in Congress’ economic predictions and estimates? Suddenly congressional estimates wildly ranging by 5 trillion dollars is without political motive or coloring, d.a.n?

The national debt has increased more than 2 trillion in just the last 12 months d.a.n. That is borrowed money, not printed.

So, if the estimate is 3.2 trillion, and 2 trillion was borrowed, and the Fed Reserve had 850 billion in Nov. and continued to collect obligations through this March, is it not possible the Fed’s reserves are now approximately a trillion, give or take a buck or two?

We aren’t even into printed money yet, at the 3.2. trillion level. The details, d.a.n, they are important. The veracity and reliability of those providing statistics is extremely important in whether those statistics should be given acceptance or not.

And this accounting I provide as plausible, (the real accurate data always lags) is a far cry from your claims of printing trillions and trillions of dollars as precursor argument for hyperinflation certainty, d.a.n.

If you want to make your case, use verifiable sources for your data, plug them into context of possible scenarios going forward and relationships with other economic data, and present your case based on logical and well reasoned probability. Economics is after all, largely a discipline of probability and statistics and all probability and statistics begin with a set of assumptions. Which makes economist’s assumptions underlying their probabilities crucially important to evaluating whether or not their probabilities are even relevant or not.

Posted by: David R. Remer at March 20, 2009 08:00 PM

I don’t feel good about the situation either. All I see is the government loading up the taxpayer with virtually all the risk. Maybe these illegals are really here to save us. Going to take a whole lot of production from somewhere to get us out of this ditch.
Heard what I though was some good news this evening. Hemlock Semiconductor, sub of Dow Corning, has a plant in Mich and is building another in Tenn to produce polysilicone for the solar industry. In Mich. tons of money from grants and stimulus are being spent to build roads, water tower, and other amenities on the taxpayers dime. Tenn has agreed to pay any carbon caps that might be assigned to the company. I’m sure Tenn cut them a fine deal on taxes as well.
Dow Corning (63.25 percent ownership)
Shin-Etsu Handotai Co. Ltd. (24.5 percent ownership)
Mitsubishi Materials Corporation (12.25 percent ownership)

By the time the Co. depreciates all their equipment and facilities, reaps all their perks, etc the taxpayer will put in $10 for every $1 of profit the company may make.

Let’s stop this craziness. Let’s adopt a no tax policy for business. That means no depreciation either. Let’s get on with a flat tax based solely on income as d.a.n has laid out here so many times.

How can we get a flat tax? Not thru this government eni time soon. Will have to be a 3rd party, but not just any 3rd party. Must be a 3rd party with an agenda focused on government reform with candidates sworn to push that agenda or stand to be rejected from the party if they don’t. Do you want more boom and bust? More Franks, Dodds and Grams? The US is now 4th in solar panel production. How could that be? Actually, there is no US manufacturing anything anymore. Just some international conglomerate cutting deals with this government or that. I guess the Japanese are the brains behind this Hemlock thing.
Just to continue going down this road, fully agree with d.a.n, the train will soon be off the tracks for good.

Otherwise, we have the government we deserve.

Posted by: Roy Ellis at March 20, 2009 10:38 PM

David R. Remer wrote: Well it beats the hell out of your comment’s implied doomsday approach, …

Not true.

I’ve never “implied” or advocated a “doomsday approach” and have often offered solutions (One-Simple-Idea.com/Solutions1.htm), which are much better than trying to solve a massive debt-bubble with more debt, borrowing, creating new money out of thin air, and rampant, haphazard spending.

It’s not all about hatred and disrespect for government and everyone in it either.
For example, I have a lot of praise for the former U.S. Comptroller(GAO), who warned us for many years about the debt, and he was also called “Dr. Doom” and “Chicken Little”.
Likewise with many people who correctly warned and predicted of this huge debt problem (not only federal, but all non-federal debt too).
Unfortuantely, those in charge in the federal government and Federal Reserve, who are largely responsible for creating the problem are now in charge of fixing it, and they seem poised to make it worse instead of better, by attempting to do what has already been proven many times to fail. The many trillions of dollars of new money will most certainly lead to inflation and more debt (since money is created “AS DEBT”). And that can very easily turn into hyperinflation, and if hyperinflation occurs, raising interest rates can’t stop it.

David R. Remer wrote: Well it beats the hell out of your comment’s implied doomsday approach, which likely never would have even tried the unprecedented, according to your prognostications that it has been too late to save this economy for a long time now.

Not true.

I’ve said many times that there is a way out of this and ways to mitigate the damage and avoid more pain and misery, but not by trying to solve a massive debt-bubble with more debt, borrowing, creating new money out of thin air, and rampant, haphazard spending.

David R. Remer wrote: I agree with your overall drift, that our economy and government are in perilous territory, both economically and politically.

David R. Remer wrote: But, it seems every time anyone offers a potential way out of the mess or any hope in that direction, your comments attempt to remove any and all basis for hope, with voluminous statistics all cherry picked to dispel any hope.

Not true.

It seems that feeling is completely imagined by some people who don’t want their delusional fantasies shattered by reality.

It is also not true that I try to dispel hope of all ways out of this mess; only the nutty way which tries to solve a massive debt-bubble with more debt, borrowing, creating new money out of thin air, and rampant, haphazard spending. There are other ways that I do agree with, because there are many things that can be done to mitigate the damage and unnecessary pain and misery.

Therefore, a disagreement on the solutions does not equate to removing “any and all basis for hope”, and your statement is simply false.

David R. Remer wrote: But, it seems every time anyone offers a potential way out of the mess or any hope in that direction, your comments attempt to remove any and all basis for hope, with voluminous statistics all cherry picked to dispel any hope.

Cherry picked?

Not true.

Feel free any time to disprove any of it.
Simply google the following: 8.5 Trillion rescue breakdown
Many sources have all been provided. Did you even read any of them?
Most of the data is from the Federal Reserve, on their own web-sites, and has also been reported many times in the news.
Exactly where is any of the data false or cherry picked?
I’ve got multiple sources for all of that data.
If any of it is wrong, let me know exactly what it is, because I (of all people) want to correct it A.S.A.P.

David R. Remer wrote: And as I have said previously, without hope, there is no action at all. And without action, there is no hope of getting through this.

Again, no one is advocating “no action at all”.

Such extrapoalations are obviously for the purpose of obfuscation to distract from weak and failing arguments.
Also, there’s nothing wrong with hope as long as it isn’t delusional, and based on some historical precedent, previous sound economic theory, or mathematical rationale.

David R. Remer wrote: We can disagree whether there is any hope.

Again, I never said there is no hope.

The admininstration and Congress may still figure it out.
Better late than never.
But I do not have much (if any) hope that this massive debt bubble crushing the economy will be solved with with more debt, borrowing, creating new money out of thin air, and rampant, haphazard spending.

A disagreement on that does not equate to “no action at all”, a lack of “any hope”, “cherry picked” statistics, no “way out of the mess”, etc.
Such extreme extrapolations appear desparate and are often a sign of weak arguments.

David R. Remer wrote: But, without it, I would be irresponsible in the extreme to continue to live in this country and guide my daughter to do the same.

UHHMMMmmmmm … then why did you tell us you got your passports just before the election of 4-NOV-2008 ? Remember writing this?

David R. Remer wrote: And there appears to be no encouraging signs from Democrats or Republicans to address the problem in a serious way. And that is truly scary, and the reason we applied for passports last week. It can take up to a year to get them approved.

David R. Remer wrote: So, why do you still hold onto your U.S. residency, d.a.n?

Such a question is sad?

Yet another sign of frustration from weak arguments.
Just because we disagree on whether the debt is untenable and inflation dangers does not equate to hatred for my nation.
The United States is my home.
I was born here and so was my entire family.
I don’t plan to leave it.
The U.S. is still one of the best places to live, and I’ve said so many times.
I’ve even said it is one of the top 26 nations in the world to live.
But that doesn’t mean it is perfect.
That doesn’t mean it doesn’t have serious problems.
That doesn’t mean I can’t advocate solutions such as these (and ending these abuses: One-Simple-Idea.com/Abuses.htm).
If I actually had no hope, why would I support VOID, FOAVC, NumbersUSA, CAGW, Alipac, One-Simple-Idea, TenureCorrupts, etc., etc., etc.

Also, on many occassions, I’ve also listed good things about the United States. For example (repeated below):

Many good things have happened in the last 230+ years:
• (01) The U.S. Constitution


• (02) Slavery was finally abolished (though it came much later than it should have).


• (03) Progress to reduce discrimination based on race, religion, color, ethnicity, gender, etc.


• (04) Entrepreneurial spirit, despite the severely bloated government, incessant bureaucratic nonsense, and corruption.


• (05) Productivity, ingenuity, and diversity.


• (06) Internet (didn’t Al Gore invent that? Not just the MSM that constantly leaves out the facts, spins the facts, or out right lies)


• (07) Technology, and the U.S. has lead in many ways.


• (08) Generosity of Americans.


• (09) The U.S. is still one of the top 26 (of hundreds of nations world-wide) countries to live-in (though it has been slipping lower).


• (10) Freedom of speech, and most Americans that are not afraid to speak up about valid issues, and propose solutions, despite some people that try to unfairly label them as traitors, America haters, and America trashers.

Despite all that, there is no reason to not work to make things better, identify problems, root causes, and also solutions (One-simple-idea.com/Solutions1.htm).

Yet, too often, when some people disagree about something (e.g. debt and inflation), they begin to call you “Mr. Doom and Gloom”, ask you why you even bother to live in the United States, challenge your patriotism, practically call you a liar, accuse you of cherry-picking the data, and practically invite you to leave the United States.

David R. Remer wrote: Is it an act of faith that all is not lost, or a failure of resolve to act to improve your position elsewhere, given that there is no hope for the U.S?

Another sad question, and yet another sign of frustration from weak arguments.

David R. Remer wrote: Or perhaps, that your doom and gloom view of the future leaves no place in the world to go?

Such attacks are yet another sign of frustration from weak arguments.

David R. Remer wrote: Your comments of doom beg logically beg these questions.

Not true.

Funny how it is doom and gloom only when someone disagrees with the solutions to problems.
How typical, when becoming frustrated with the weakness of ones on arguments, to then make it personal, and extrapolating a disagreement to hatred for ones own home nation?

As for doom and gloom, what would you say about someone whose articles frequently bash Republicans, and fuel and wallow in the petty partisan warfare?

David R. Remer wrote: The most severe economic crisis since the Great Depression and our nation’s responses to it, are a big to do about nothin’, d.a.n?

I never said that.

That is yet another extrapolation.
What is a “big to do about nothin’” is merely makin’ a few phone calls between banks to coordinate some activity.

David R. Remer wrote: Sorry, but, logic dictates I disagree with you entirely on this point.

Flawed logic, since you extrapolated the basis for the comment of “big to do about nothin’” to something different.

David R. Remer wrote: Impossible for me to take those remarks about Bernanke’s statements seriously without quotes from Bernanke, and a hyperlink to the source of those comments, d.a.n. Just appears like so much right wing propaganda as it stands in your comment currently. Was this a Rush Limbaugh excerpt?

Which comments are you talking about?

The “News Flash” above about the mood ring and rabbit’s foot?
That was a joke and thought for certain that you’d know it was.
Surely you knew it was a joke, no?
Where’s your sense of humor?

“right wing propaganda” ?
I’m not right-wing, nor Republican.
But fuelin’ and wallowin’ in the partisan warfare is a very effective strategy.

David R. Remer wrote: Wow. So many assumptions without factual basis here. Is it 3.2 trillion or 8.5 trillion d.a.n? Pretty big spread there. Who is making that estimate? On what basis? You cite the source as Congressional.

Read it and weep (see details of breakdown).

As of 30-NOV-2008, $3.2 Trillion had already been spent.
The rest (of the $8.5 Trillion) was allocated.
As of 6-JAN-2009, $7.2 Trillion of the $8.5 Trillion has been spent (source: www.prisonplanet.com/cost-of-bailout-hits-85-trillion.html)
As of today, who knows, since the Federal Reserve announced on 16-Mar-2009 plans to pump in another $1 Trillion to buy toxic assets.
That was all stated very clearly many times, there are countless sources of informaiton about it, and no amount of obfuscation will change it.
Those are huge numbers, and don’t even include the comparatively smaller $750 Rescue BILL, the $787 Billion Stimulus BILL, or the $410 Billion budget extension BILL.

David R. Remer wrote: Suddenly, you have confidence in Congress’ economic predictions and estimates? Suddenly congressional estimates wildly ranging by 5 trillion dollars is without political motive or coloring, d.a.n?

More weak obfuscation.

As shown above, most of the $8.5 Trillion has already been spent.

David R. Remer wrote: The national debt has increased more than 2 trillion in just the last 12 months d.a.n.

• FEDERAL NATIONAL DEBT
• DATE: (NOMINAL)
• 3/21/2009:13:54 CST: $11,060,221,351,715
• 9/30/2008: $10,024,724,896,912
• 9/30/2007: $9,007,653,373,262
• 10/24/2006: $8,554,491,678,667
• 12/6/2005: $8,122,710,788,512
• 9/30/2004: $7,379,052,696,330
• 9/30/2003: $6,783,231,062,744
• 9/30/2002: $6,228,235,965,597
• 9/28/2001: $5,807,463,412,200
• 9/30/2000: $5,674,178,209,887
• 9/28/1990: $3,233,313,451,777
• 12/31/1980: $930,210,000,000
• 12/31/1970: $389,158,403,690
• 12/30/1960: $290,216,815,242
• 6/30/1950: $257,357,352,351
• 6/29/1940: $42,967,531,038
• 6/30/1930: $16,185,309,831
• 7/1/1920: $25,952,456,406
• 7/1/1910: $2,652,665,838
• 7/1/1900: $2,136,961,092

I’m well aware that debt has grown drastically in the last 2 years, and previous years too.

David R. Remer wrote: That is borrowed money, not printed.

Yes and no.

The Federal Reserve creates the money out of thin air and the federal government borrows that money (with interest). Hell of deal, eh?
You didn’t seriously believe that the Federal Reserve had those many trillions of dollars just sitting around in reserves, did you?
That’s why the Federal Reserve, Bernanke, and Henry Paulson went begging to create MORE money out of thin air.
It would be wise to research these numbers before inferring that people liars, cherry picking the data, or asking them why they continue to live in the United States as if they have nothing but hatred for their nation.

David R. Remer wrote: So, if the estimate is 3.2 trillion, and 2 trillion was borrowed, and the Fed Reserve had 850 billion in Nov. and continued to collect obligations through this March, is it not possible the Fed’s reserves are now approximately a trillion, give or take a buck or two?

Again, as of 30-NOV-2008, $3.2 Trillion (of $8.5 Trillion allocated) had already been spent. As of 6-JAN-2009, $7.2 Trillion of the $8.5 Trillion has been spent. As of today (21-MAR-2009), who knows, since the Federal Reserve announced last week to pump in another $1 Trillion to buy toxic assets. HHHMMMMmmmmmm … where is that money coming from? Research it. If you find any of that data to be inaccurate, please let me know.

David R. Remer wrote: We aren’t even into printed money yet, at the 3.2. trillion level.

Only a small fraction of all money actually exists as paper money and coin.

David R. Remer wrote: The details, d.a.n, they are important.

I agree, and I have provided the details and sources. If you find any of that data to be inaccurate, please let me know.

David R. Remer wrote: The veracity and reliability of those providing statistics is extremely important in whether those statistics should be given acceptance or not.

Again, I agree, and I have provided the details and sources. If you find any of that data to be inaccurate, please let me know.

David R. Remer wrote: And this accounting I provide as plausible, (the real accurate data always lags) is a far cry from your claims …

I have provided the details and sources. If you find any of that data to be inaccurate, please let me know.

By the way, the terms “printing money” and “money-printing” are used loosely to also refer to creating money out of thin air, even though there is actually no paper money printed or coin stamped. Only a small fraction of all money actually exists as paper money and coin.

David R. Remer wrote: And this accounting I provide as plausible, (the real accurate data always lags) is a far cry from your claims of printing trillions and trillions of dollars as precursor argument for hyperinflation certainty, d.a.n.

There is ample historical precedent to prove what happens from excessive creation of new money from thin air. So the danger of hyperinflation is real, and those nations who ignore that lesson will repeat history and discover what many other nations (en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation) have already learned the hard way. There is also no encomic theory that states that huge debt can be solved with more debt and spending. There is also no historical precedent of any nation so deep into debt ever spending its way out of deep debt. Therefore, there are ample reasons for concern about so much debt.

David R. Remer wrote: If you want to make your case, use verifiable sources for your data, plug them into context of possible scenarios going forward and relationships with other economic data, and present your case based on logical and well reasoned probability.

I have provided many sources.

Feel free anytime to prove them wrong.
The proof above that most of the $8.5 Trillion (as of 6-JAN-2009) was already spent.

David R. Remer wrote: Economics is after all, largely a discipline of probability and statistics and all probability and statistics begin with a set of assumptions. Which makes economist’s assumptions underlying their probabilities crucially important to evaluating whether or not their probabilities are even relevant or not.

We will see. I hope I am wrong about the danger of more debt and hyperinflation. You hope your right. So there’s hope.

As for the discipline of probability and statistics, it doesn’t require a rocket scientist, a crystal ball, or clairvoyance to see this ecnomic mess approaching.
It’s bad enough that the monetary system is a “Ponzi scheme”.
After all, you replied to …

d.a.n said: “The fractional banking system (i.e. Federal Reserve, a [quasi government controlled and] privately owned bank) actually is little more than a pyramid scheme.”

… and you wrote …

David R. Remer wrote: Not true. It is a pyramid scheme, but also much more, a somewhat independent regulatory body for the economy, and as current events demonstrate, a needed regulatory body. Though not always competent.

Definitely, not competently, considering the steep leveraging of debt at a steep ratio 9-to-1 of debt-to-reserves, resulting in a massive debt-bubble where 90%-to-95% of all money in the U.S. exists as debt, and nation-wide debt has almost quintupled from 100% of GDP to 483% of GDP (nation-wide debt=$67 Trillion, GDP in 2007=$13.86 Trillion).

So, regarding “discipline of probability and statistics”, tell that to Ben Bernanke and his buddies who think we can solve a massive debt bubble with more debt, borrowing, create money from thin air, and rampant spending.

After all, most of Ben Bernanke’s predictions so far have been terribly inaccurate:

• (1) On 17-May-2007, Bernanke said: “As the problems in the subprime mortgage market have become manifest, we have seen some signs of self-correction in the market.” … “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”. Yet, what happened. According to the government’s and the Federal Reserve’s own fishy economic statistics, the U.S. was in a recession just about six months later in late 2007 (and most likely 5 months earlier in early 2007) and less than a year later, the financial system started to implode.


• (2) In August 2007 (www.bloomberg.com/apps/news?pid=20601109&sid=aygqZPuV0y14&refer=home), Bernanke was wrong about the subprime mortgage industries’ problems being contained. It wasn’t, and it spread to many other banks.


• (3) On 28-FEB-2008, Ben Bernanke wrote: “I expect there will be some failures. I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.”


• (4) On 16-JUL-2008 (www.forbes.com/2008/07/16/bernanke-federal-update-markets-econ-cx_cg_0716markets27.html), Ben Bernanke told Congress that he believed Fannie Mae and Freddie Mac would be able to make it through the storm of the U.S housing crisis. In front of Representative Barney Frank’s House Financial Services Committee, Bernanke also said that troubled Fannie Mae and Freddie Mac were adequately capitalized and “in no danger of failing.”. Yet, on 5-SEP-2008, reports started circulating that Fannie and Freddie were about to be taken over by the federal government, which, of course happened 48 hours later after the news broke.


• (5) Bernanke, Henry Paulson, Christopher Cox and their predecessors all failed to produce the regulatory oversight needed for the likes of Lehman Brothers (which failed).


• (6) Do you recall what you called the Federal Reserve’s creation of new money at a 9-to-1 ratio of debt-to-reserves? You called it a Ponzi-scheme when you wrote: “The Ponzi scheme existed long before Bernanke became FED chief.”. So if it is a Ponzi-scheme, what do you call the Chairman of the Ponzi scheme? There is something terribly wrong with a monetary system that leverages debt-to-reserves at such a steep 9-to-1 ratio, resulting in an ever-growing debt-bubble where 90%-to-95% of all U.S. dollars in existence in the U.S. exists as debt? What should we conclude about anyone who thinks this monetary system isn’t a Ponzi-scheme?


• (7) 27-AUG-2007: Ben Bernanke said the private sector and Congress should create new, affordable mortgage products that would help some homeowners refinance their mortgages and keep their homes, Federal Reserve Chairman Ben Bernanke suggested in a letter released Wednesday (source: www.marketwatch.com/news/story/new-mortgage-products-could-help/story.aspx?guid=%7B69E9EB78%2DD404%2D4305%2D82E2%2D7892DB5EA2B8%7D). Greenspan recommended something similar, like Adjustable Rate Mortgages. How well did that work out?


• (8) I showed in AUG-2008 that GDP was falling in year 2007, yet it wasn’t until JAN-2009 that the federal government and the Federal Reserve finally admitted that GDP had been falling since late 2007 (by their estimates; more likely since early 2007 by other measurements). Why did it take so long? Part of what is hurting consumer confidence is continually being lied to. Who at the Federal Reserve and federal government are responsible for these shady numbers, calculations, and economic statistics? Is it any wonder that many people don’t trust the geniuses/gods of the Federal Reserve and the federal government?

In closing, your comments sound angry.
And if all of the data above is correct, will you still be angry?
And again, if you find proof that any of my facts above are wrong, I’ll be the first to admit it and correct it.
Otherwise, try not to blame the messenger.

Roy Ellis wrote: Let’s stop this craziness. Let’s adopt a no tax policy for business. That means no depreciation either. Let’s get on with a flat tax based solely on income as d.a.n has laid out here so many times.

Yes, the very least the federal government could do is make the tax system fairer. Unfortunately, the federal tax system is still regressive. Wages (unlike capital gains) are first hit with a whopping 15.3% (2 x 7.65%) Social Security and Medicare tax, and then they are hit by the federal income tax. That’s how Warren Buffet paid 17.7% in total federal taxes on $46 Million in year 2006, while his secretary paid 30% in total federal taxes on only $60K for year 2006.

Roy Ellis wrote: How can we get a flat tax? Not thru this government eni time soon.

Someday, perhaps when enough voters finally figure out that repeatedly rewarding incumbent politicians with 85%-to-90% re-election rates isn’t working?

Roy Ellis wrote: Will have to be a 3rd party, but not just any 3rd party. Must be a 3rd party with an agenda focused on government reform with candidates sworn to push that agenda or stand to be rejected from the party if they don’t.

That could very likely happen, if things are allowed to deteriorate too much.

Roy Ellis wrote: Just to continue going down this road, fully agree with d.a.n, the train will soon be off the tracks for good.

Thanks Roy. I hope I’m wrong, but based on the history of hyperinflation, lack of any economic theory that promotes more debt to solve debt, and the dismal math, and no precedent for any nation so deeply into debt ever successfully spending its way to prosperity (especially the biggest debtor nation on the planet), I do not believe such a massive debt bubble (of both huge federal and non-federal debt) can be solved with more debt, borrowing, creation of new money out of thin air, and rampant, haphazard spending. Yet, there are reports of federal budgets with $1 Trillion deficits for several years to come and a total Federal National Debt of $20.3 Trillion dollars (in 2009 dollars) by 2019. I’ve got a bad feeling that much new money and debt is a recipe for disaster (and hyperinflation). Yet, like David Walker, I’m called Mr. “doom and gloom”, accused of cherry picking the data, practically called a liar, asked why I live in the United States, and practically invited to leave the United States. And something else interesting and fascinating about much of this is how its coming from the new IN-PARTY and its minions.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 21, 2009 05:03 PM

Yeah, it’s comical how quickly the Rep’s have turned away from Bush and are now espousing the old Party line. And the Dem’s seem to almost enjoy falling on their swords. Also comical as to how quickly the in Party becomes the more corrupt party. Dodd and Obama being the largest recipient of lobbyist largesse,etc.
For what it’s worth, I’ll go on record here and say flat out that the Congress will not recover the bonuses given to employees of the bailed out institutions. While it plays good in Peoria it is just not realistic to think these Congresspersons will cut off the hand that feeds them, and their children, and their grandchildren, etc. Banking is the Dem’s cash cow. Now, I’m not saying that the Senate won’t pass some law against the bad boys receiving bonuses in the future. I’m saying that this time next year bonuses will be given, maybe in a different format, some minor changes, etc. But, bonuses will continue.

Posted by: Roy Ellis at March 21, 2009 06:51 PM

Roy wrote: Also comical as to how quickly the IN-Party becomes the more corrupt party. Dodd and Obama being the largest recipient of lobbyist largesse,etc.

Yeah, there’s a lot of corruption in BOTH parties.

This last election and the events that have followed has served as one of the most obvious examples of how the arguments swap sides when the IN-PARTY and the OUT-PARTY swap places.

Yeah, it won’t surprise me if those exorbitant bonuses paid with tax payer dollars aren’t recovered.
And it is unlikely Congress will give back the raise it got a few months ago (the 10th raise in 12 years for Congress), and the $93,000 per Congress person for petty cash and expenses, while our troops risk life and limb, go without adequate medical care, promised benefits, and have to do 2, 3, 4+ tours in Iraq and Afghanistan.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 21, 2009 07:47 PM

Well, surveying the barren political wasteland out there this morning; makes me extremely thankful I voted for Nader. Just think, this free trade bunch tossed anti-trust and merged them up to the likes of AIG. 74M contracts and operating in 130 countries. At least half of those countries would have to be totally subservient to AIG. Same for many countries where oil companies, or any conglomerate that is too big to fail happens to live. How many of the 74M contracts ever saw the eyes of a human? Born, lived and died in some server/database. The eleven member board of directors met for a total of 9 days last year working out to $30k/day for their services. Just long enuff for a few free lunches and call for some $400M in bonuses for the working stiffs. 11 of the 73 retention bonus recipients had already left the company. Now the government is looking to the smaller, better managed banks to lead the recovery effort. When a company hits $50 or for sure, $100B they should be busted up. That’s what The Republic Sentry Party calls for.
Government is planning to return the border to controlled chaos. Napolitano is to convene a multi-agency task force and tighten up the flow of guns and money going south. N. Am. drug trade now estimated at $65B with $18 - $39B of funds moved by wire transfer, or smuggled cash in planes, vehicles and by mules. I would say the government sees the drug business as ‘too big to fail.’ They just want to take the heat out of the border area, thereby taking the heat off the politicians. Controlled chaos. It’s a given that Mexico would go under without drug money. You could say the same for most countries as far South as Columbia and Peru. And, how many more people would be added to the unemployment list in the US if the drug business was busted?
Fer Shure, the free traders, in some 40 short years has managed the greatest transfer of wealth in the history of the world and trashed this country for the next 50 years. When my grandkids get out of college and take a good $8/hr job they will be looking at $20T of debt. That is so funny! One only has to hope China will understand and help the US to a soft landing.
Well, the country has survived the oil industry, the railroad mangates and industrial robber barrons. But, the free traders have hit a main artery with $25T of debt by 2025.
Could the Founder’s have imagined what their Constitution would have to stand against to survive?

Otherwise, we have the government we deserve.

Posted by: Roy Ellis at March 22, 2009 01:35 PM

No, I didn’t use or try to support d.a.n’s figures on debt. Afterall, Why would one argue about whether the patient was shot 321 times or 567 times?

For those of us who would allow this to happen and take no action against the klepto-plutocracy at the ballot box;

We deserve the government we have.

Posted by: Roy Ellis at March 22, 2009 02:00 PM

d.a.n said: “The Federal Reserve creates the money out of thin air and the federal government borrows that money (with interest). Hell of deal, eh?”

Apparently, you don’t see the contradiction in your own statement, d.a.n. If the treasury prints money, why would it pay interest on it, if it already has it? Why borrow cash from one’s own account and pay interest back to one’s cash account. There is a short cut, d.a.n, print the money and spend it. No interest, and no payback required.

We pay interest, d.a.n, ONLY on the money we borrow from investors in our treasury instruments. We do NOT pay interest on printed money whose purpose is to increase the money supply. Nor do we collect interest when destroying money and shrinking the money supply.

Posted by: David R. Remer at March 23, 2009 09:12 PM

d.a.n said: “Definitely, not competently, considering the steep leveraging of debt at a steep ratio 9-to-1 of debt-to-reserves,”

d.a.n, there is a gamble being taken by the Fed. The gamble is that the corporations it is rescuing will continue into the future as profitable concerns, and if that gamble pays off, the Fed will be paid back, with interest, for its loans.

Increasingly there are signs that this gamble WILL pay off. Geighner’s details of the toxic asset plan released early this morning, combined with existing housing sales rising, and new home construction rising, and the market’s reaction to this news are signs that this gamble will pay off.

My concern is not over whether the Fed will get its leveraging back, but, whether these too big to fail corporations will ever be downsized and separated to eliminate their threat to our economy. There are no signs of this occurring yet, and not a hint of moving in that direction by the Congress or the White House. That is not a good sign, at all.

Posted by: David R. Remer at March 23, 2009 09:19 PM

d.a.n, as for cherry picking your data, I mean you cite data without economic context. You cite data without historical context. You cite data, as if that data alone spelled the future.

I assure you, it does not. The federal government has held debt to gdp ratios as high as this before. And never has our federal government defaulted on its debt. It is an inconvenient fact of history to reply to your data. One which your comments discount, out of hand, rather than place in context to. That is cherry picking.

Your comments fail to distinguish between loans, and handouts with no strings attached. Your data fails to acknowledge how much of each is present in the current economic rescue efforts. The government has a good record of getting its loans to the private sector repaid.

Your data fails to segregate the amount of money infused into the economic recovery via loans of money from the private sector and foreign investors, versus money printed increasing the money supply. Which allows your comments to falsely create an image of many trillions of dollars of inflationary printing of money going on, which in fact, the amount is approximately 2 trillion, and the lion’s share of that is issued in contracts for repayment, and the lion’s share of those contracts carry an interest price to be repaid to the Fed and treasury.

Cherry picking is nothing more than avoiding the facts that don’t support one’s desired view. Your data cherry picks. That is obvious by the lack of economic big picture context for your data, lack of economic historical context, and lack of counter-balancing data which mitigates or water’s down your comment’s conclusion that your data MUST spell the end of our economy without exception.

As I said before, the details are important. Details like how much is printed money and how much is borrowed. Details like the historical probability of our loans being repaid. These are extremely important details, d.a.n and your comments do not reflect any desire to incorporate such details into your picture.

A perfect example of cherry picking is when you say: “(01) Chrysler was only one auto maker, and the federal government was not nearly so deep into debt (as shown below):”

Your comment fails to acknowledge that our GDP was not nearly so large when Chrysler was bailed out, either, nor our federal tax paying work force as large, nor our federal revenues as large. Your data exists outside the economic context of what is relevant. Like much of the bailouts today, Chrysler’s bail out was not a handout. The tax payer’s dollars were repaid, with interest to the government. An historical context very relevant to the bail out loans today being extended to financial institutions. Yet, your data fails to incorporate that context.

With such relevant details and context, your comment’s conclusion of economic doom is not so neatly arrived at nor proved, is it? These are perilous economic times, and our debt is leaping toward unprecedented levels by any measure, and our government cannot assure our economic future without eliminating the entitlement debt projections going forward. But, these facts are not sufficient to make the case that the entitlement debt will not be reformed and lessened, not are they sufficient to conclude that there are no paths which allow our economy to survive and thrive going forward.

What there are, are IF statements. IF this, If that, then our economy will survive, or collapse, if the IF, assumptions hold true. Those if statements are the only logical basis upon which to make an argument for the future, one way or another.

And to make a convincing argument, the argument must incorporate all the known assumption IF premises upon which the conclusion rests.

If the entitlement debt trajectory is not averted, and our national debt grows well beyond any historical debt to GDP levels creating doubt amongst government debt investors as to the safety of such investments going forward, then, continued borrowing will no longer be possible. Which in turn will result in default on entitlement obligations, which in turn will drastically curtail economic activity, reduce government tax revenues, and increase social unrest and demands for government spending, with the result of greater demands being made upon government spending and debt service than the government can provide for. Which is a definition of a government defaulting on its obligations.

With the government in default, its contracts with the private sector both foreign and domestic also become defaulted. And that will truly constitute and economic collapse of the American way of life.

This is a valid logical argument, complete with a number of assumptions which must be true for this conclusion and end result to be valid. This is the kind of format for your argument, that if employed, would have far more persuasive impact on me, and even find agreement, that if the assumptions become true, the conclusion will also become true.

No need for crystal balls, or partisan or ideological fears or boasts, no need for cherry picking data without a logical context, which isn’t convincing anyway.

What makes such a format difficult, is the complexity of the economic context and data. I know enough about economics to know that I don’t know a lot of the relevant details of our current economic condition. My ignorance of both the calculus of economics and the details of the relevant economic actions taking place, forces me to acknowledge that I have three positions I can take on our economic future. I can take no position on the prospects of success or failure of our economic future, or, favor a success or failure projection based on some other criteria.

The criteria I use is our history, and my understanding of the writings of Adam Smith. Our history demonstrates that our government fails to act responsibly during times of relative peace and prosperity, and rises to overcome the threats to our nation’s integrity. While it is historical, and since the past is not necessarily prologue to the future, I have to acknowledge that history is no guarantor of our future.

But, combined with Adam Smith’s understanding of human nature, most especially of normal well intentioned folks in adverse times, such folks will flock to leaders whose capabilities appear sufficient, and whose good intentions reflect those of the the people. Again, this understanding, even if proven valid in our current and future circumstances, is no guarantor of success going forward.

But, combined, and in the absence of omniscience regarding our economic present and future, these criteria fill me with a sense of hope and some assurance that our democratic elected process, which has not failed in the face of past threats, will again demonstrate the underlying strength and resolve when needed to meet the challenges that threaten the integrity of our nation.

Also, I have to ask myself, where else on our planet would I and my family be better off if the United States fails as a nation, either politically or economically? I have yet to be able to answer that question definitively. So, I choose to understand as best as my abilities permit, and choose to hope and have confidence in our nation, our history, and the best of our elected leaders to bring the rest in line behind them or render their voices irrelevant, to assure our future prospects.

Posted by: David R. Remer at March 23, 2009 10:23 PM

David R. Remer wrote: Apparently, you don’t see the contradiction in your own statement, d.a.n. If the treasury prints money, why would it pay interest on it, if it already has it?

First of all, the U.S. Treasury prints money and stamps coins, but not all money is printed paper money and coin.

The Federal Reserve is allowed by federal law to create new money at a steep ratio of 9-to-1 of debt-to-reserves.
The federal government via the U.S. Treasury also borrows money via the sale of bonds and government securities all over the world.
That’s why the federal government is paying interest on $11 Trillion of National Debt (about $430 Billion in interest in year 2007).

However, the federal government also allows the Federal Reserve to create new money out of thin air with only 10% reserves.
And lately, the federal government has allowed the Federal Reserve to create new money out of thin air with ZERO reserves with no interest.
Did the federal government directly get some interest free money too?
Maybe.
If not, the federal government can get new money indiredctly via taxation of new money created by the Federal Reserve and loaned and circulated in the economy.
They’ve got it all figured out. Cha Ching!
Citizens of the U.S. getting loans from banks are most certainly paying interest on new money created from thin air, since 90% of each new loan is money created from thin air.
The banks borrow money at low rates, loan it to everyone possible, and then charge usurious rates as high as 35% or higher.
So, I don’t really see the contradiction you speak of, since the money supply is increased BOTH by borrowing from foreign sources and also from new money created from thin air.

David R. Remer wrote: Why borrow cash from one’s own account and pay interest back to one’s cash account.

Like borrowing from a 401K retirement plan?

I’m not sure what your point?

Some new money created from thin air also requires interest be paid, because the Federal Reserve is allowed to create new money at a steep 9-to-1 ratio of debt-to-reserves.
This is not the way the federal government gets all of its new money, but there is no doubt that the Federal Reserve is creating many trillions of dollars of new money from thin air.

David R. Remer wrote: There is a short cut, d.a.n, print the money and spend it. No interest, and no payback required.

That happens too.

There is BOTH borrowing and creating money from thin air.
Again, the Federal Reserve is allowed by the federal government to create new money from thin air at a steep ratio of 9-to-1 of debt-to-reserves.
It charges the member banks interest for those low-to-nearly-zero-interest loans.
Then the member banks charge more interest on those loans in which 90% of each loan is new money created out of thin air.
So it is no wonder at all that 90%-to-95% of all money in existence in the U.S. exists as debt.
So it is no wonder that the $69.8 Trillion nation-wide debt has more than quintupled from 100% of GDP in year 1956 to 503% of GDP today (where GDP=$13.86 Trillion in year 2007).
Is the Federal Reserve giving new money (interest free) to the federal government?
Maybe.
If not, it is almost free if the interest rates are low for the federal government (source: www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml).
If not, the federal government can get new money indiredctly via taxation of new money created by the Federal Reserve and loaned and circulated in the economy.
So, I don’t really see the contradiction you speak of, since the money supply is increased by BOTH borrowing and new money created from thin air.

David R. Remer wrote: We pay interest, d.a.n, ONLY on the money we borrow from investors in our treasury instruments.

I assume you mean the federal government when you write “We”.

True, and I don’t think anyone has disputed that fact.

However, as noted above, the federal government can get low interest loans, and can get interest free money indirectly via taxes on new money created at a steep ratio of 9-to-1 of debt-to-reserves.

David R. Remer wrote: We do NOT pay interest on printed money whose purpose is to increase the money supply. Nor do we collect interest when destroying money and shrinking the money supply.

Again, I assume you mean the federal government when you write “We”, in which case that is true.

However, if you mean citizens and businesses when you write “We”, that is false.

The federal government doesn’t pay interest on all new money created from thin air, because most of the nation-wide loans from the Rederal Reserve are to the member banks who make loans to the people and businesses.

However, lately, the Federal Reserve has been creating many trillions of new money to keep banks from collapsing.

David R. Remer wrote: d.a.n, there is a gamble being taken by the Fed. The gamble is that the corporations it is rescuing will continue into the future as profitable concerns, and if that gamble pays off, the Fed will be paid back, with interest, for its loans.

Yes, it’s fairly obvious what the federal government and the Federal Reserve are attempting, and I am not only unconvinced that it will work, but I think it will almost certainly cause high inflation and/or hyperinflation.

The federal government and Federal Reserve are “playing chicken” with inflation (and possibly hyperinflation).
But there is no historic precedent of any nation so deep into debt ever successfully solving a massive debt-bubble with more debt, borrowing, new money, and rampant spending.
There are no macro economics model that states that a massive debt-bubble can solved with more debt, borrowing, new money, and rampant spending.
There is no mathematical rationale that demonstrates how any nation so ridiculously deep into debt (much less the biggest debtor nation on the planet) has ever successfully solved a massive debt-bubble with more debt, borrowing, new money, and rampant spending?
If inflation were easy to control, why did the U.S. have many years of double digit inflation in the late 1970s and early 1980s?
If inflation (and hyperinflation) were easy to control, then why were these 33+ nations unable to control inflation?

Insuring bank deposits was and is a good idea.
Increasing the limits on FDIC insured deposits was a good idea.
Propping up the currency by propping up money-market funds was a good idea.
Propping up some border-line banks was a good idea.
But saving insurance divisions of corporations, bailing out the perpetrators of this greed ridden mess, and saving companies like Chrysler is a bad idea.
Some of these corporations should be allowed to fail, because they will fail anyway, and rewarding failure is not fair to the failing corporations’ competition.
There are many other things the federal government could do, but few of those things are being done, and many of those other solutions do not require a LOT of spending.

David R. Remer wrote: Increasingly there are signs that this gamble WILL pay off.

I hope it works, but we are far, far from being out of the woods yet, because these questions still have not been answered:

• (a) Is there any historical precedent of any nation so deep into debt ever successfully solving a massive debt-bubble with more debt, borrowing, new money, and spending?
• (b) Is there any macro economics model that states that a massive debt-bubble can solved with more debt, borrowing, new money, and spending?
• (c) Is there any mathematical rationale that demonstrates how any nation so ridiculously deep into debt (much less the biggest debtor nation on the planet) has ever successfully solved a massive debt-bubble with more debt, borrowing, new money, and spending?

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that

David R. Remer wrote: Geighner’s details of the toxic asset plan released early this morning, combined with existing housing sales rising, and new home construction rising, and the market’s reaction to this news are signs that this gamble will pay off.

Not if it leads to high inflation or hyperinflation.

David R. Remer wrote: My concern is not over whether the Fed will get its leveraging back, but, whether these too big to fail corporations will ever be downsized and separated to eliminate their threat to our economy. There are no signs of this occurring yet, and not a hint of moving in that direction by the Congress or the White House. That is not a good sign, at all.

That’s a very good point, and I agree. And there is also little (if any) sign of other absues (One-Simple-Idea.com/Abuses.htm) being stopped that are costing most Americans hundreds of billions of dollars per year in net losses and lost lives.

David R. Remer wrote: d.a.n, as for cherry picking your data, I mean you cite data without economic context. You cite data without historical context. You cite data, as if that data alone spelled the future. I assure you, it does not.

Not true.

I cite data with a LOT of context, historically, comparatively, and analytically.
Much more than most.

David R. Remer wrote: You cite data, as if that data alone spelled the future. I assure you, it does not.

Nonsense.

That claim is getting pretty old, don’t ya think (among other obfuscations)?
No one knows the future, but that doesn’t mean predictions and educated guesses are worthless.

David R. Remer wrote: I assure you, it does not.

You are trying to allege 100% predictions when we’re only really talking about probabilities.

This is a tactic you use over and over, and it is still just as weak as it was the first time.

David R. Remer wrote: The federal government has held debt to gdp ratios as high as this before.

FALSE.

Not during the Great Depression or in year 1945 after World War II.
Not when including total federal debt (the $11 Trillion national debt + $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching).

And especially not debt-per-capita even for the current $11 Trillion National Debt alone.
Debt per-capita for the $11 Trillion National debt alone is 66% higher today than in year 1945 after World War II (the previous record high).
Debt per-capita for the $23.8 Trillion of total federal debt is 175% higher than in year 1945 after World War II.
Those are the fact which you still have not disproven.
Simply saying facts are wrong proves nothing.
Please show us exactly where those numbers are incorrect.

The debt may have been worse possibly in the American Civil War and the Revolutionary War, but not during the Great Depression or in year 1945 after World War II.
Are you sure you want to continue down this path?

David R. Remer wrote: And never has our federal government defaulted on its debt.

Not yet. And that certainly is not proof that it can’t happen, since neither of the total federal and total non-federal debt has never been larger.

David R. Remer wrote: It is an inconvenient fact of history to reply to your data. One which your comments discount, out of hand, rather than place in context to. That is cherry picking.

False.

Your comments above were just blown out of the water.
Your facts are wrong about debt as a percentage of GDP, and you very conveniently omitted the debt per-capita, and $12.8 Trillion Social Security debt.
So, you have yet to disprove any of the facts.

Your conclusions above about larger Debt-to-GDP ratios are false, and conveniently omit the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching), making the total federal debt the biggest debt ever in size, per-capita, and as a percentage of GDP. And federal debt is only part of the nation’s massive debt problem. The $69.8 Trillion natiow-wide debt has more than quintupled from 100% of GDP in 1956 to 503% of GDP today. You also conveniently overlooked that, among other things.

David R. Remer wrote: Your comments fail to distinguish between loans, and handouts with no strings attached. Your data fails to acknowledge how much of each is present in the current economic rescue efforts. The government has a good record of getting its loans to the private sector repaid.

False again.

While the numbers are changing very fast ( source: www.bloomberg.com/apps/news?pid=newsarchive&sid=aZchK__XUF84 ), the following table (below) details how the U.S. government has pledged more than $11.6 Trillion (up from the previous $8.5 Trillion) on behalf of American taxpayers over the past 19 months, according to data compiled by Bloomberg. Changes from the previous table, published 9-FEB-2009 include a $787 billion economic stimulus package. The Federal Reserve has new lending commitments totaling $1.8 Trillion. The Federal Reserve expanded the Term Asset-Backed Lending Facility (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, the country’s two largest mortgage-finance companies.

• (24-FEB-2009)====================== LIMIT =======CURRENT
• Total (amounts in Billions) ____________ $11,623.63 ___ $3,800.18
• ————————————————————————————-
• Federal Reserve Total _______________ $7,565.63 ___ $1,478.88
• _Primary Credit Discount _____________ $110.74 ______ $65.14
• _Secondary Credit ____________________ $0.19 _______ $0.00
• _Primary dealer and others ___________ $147.00 ______ $25.27
• _ABCP Liquidity _____________________ $152.11 ______ $12.72
• _AIG Credit _________________________ $60.00 ______ $37.36
• _Net Portfolio CP Funding _________ $1,800.00 _____ $248.67
• _Maiden Lane (Bear Stearns) _______ $29.50 ______ $28.82
• _Maiden Lane II (AIG) ____________ $22.50 ______ $18.82
• _Maiden Lane III (AIG) ____________ $30.00 ______ $24.34
• _Term Securities Lending __________ $250.00 _____ $115.28
• _Term Auction Facility ____________ $900.00 _____ $447.56
• _Securities lending overnight _______ $10.00 _______ $5.59
• _Public-Private Investment Fund ___ $1,000.00 _______ $0.00
• _Term Asset-Backed Loan Facility __ $1,000.00 _______ $0.00
• _Currency Swaps/Other Assets _______ $606.00 _____ $417.86
• _MMIFF ___________________________ $540.00 _______ $0.00
• _GSE Debt Purchases ______________ $600.00 ______ $33.58
• _Citigroup Bailout Fed Portion ______ $220.40 _______ $0.00
• _Bank of America Bailout ____________ $87.20 _______ $0.00
• —————————————————————————————-
• FDIC Total _____________________ $1,551.50 _____ $400.30
• _FDIC Liquidity Guarantees ________ $1,400.00 _____ $261.30
• _GE ______________________________ $139.00 _____ $139.00
• _Citigroup Bailout FDIC ___________ $10.00 _______ $0.00
• _Bank of America Bailout FDIC ______ $2.50 _______ $0.00
• —————————————————————————————-
• Treasury Total ____________________ $2,206.50 ___ $1,621.00
• _TARP ____________________________ $700.00 _____ $387.00
• _Tax Break for Banks ______________ $29.00 ______ $29.00
• _Stimulus Package ________________ $168.00 _____ $168.00
• _Stimulus II _____________________ $787.00 _____ $787.00
• _Treasury Exchange Stabilization ____ $50.00 ______ $50.00
• _Student Loan Purchases ___________ $60.00 _______ $0.00
• _Citigroup Bailout _________________ $5.00 _______ $0.00
• _Bank of America Bailout ___________ $7.50 _______ $0.00
• _Support for Fannie/Freddie ________ $400.00 _____ $200.00
• —————————————————————————————-
• HUD Total ________________________ $300.00 _____ $300.00
• _Hope for Homeowners FHA _________ $300.00 _____ $300.00

Separate from that is the $11 Trillion National Debt (excluding the $787 Stimulus II BILL).
Also, that does not include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching).

David R. Remer wrote: Your data fails to segregate the amount of money infused into the economic recovery via loans of money from the private sector and foreign investors, versus money printed increasing the money supply.

False again.

I have separated it out about as good as anyone here.
If you need more detail and breakdown, then you’ll have to do it yourself.

David R. Remer wrote: Which allows your comments to falsely create an image of many trillions of dollars of inflationary printing of money going on, which in fact, the amount is approximately 2 trillion, and the lion’s share of that is issued in contracts for repayment, and the lion’s share of those contracts carry an interest price to be repaid to the Fed and treasury.

False again.

Did you not see the figure above of $3.8 Trillion already spent of the $11.6 Trillion on the hook?
And that is as of 24-FEB-2009.
Who knows how much bigger it will be by 24-MAR-2009, in view of reports of another $1.15 Trillion to buy up toxic assets.

David R. Remer wrote: Cherry picking is nothing more than avoiding the facts that don’t support one’s desired view.

There’s no cherry-picking.

Just because you don’t like the facts does not mean the facts are wrong.
Feel free anytime to disprove any of those facts above.

David R. Remer wrote: Your data cherry picks.

Not true, and you have yet to prove it.

Feel free anytime to disprove any of those fact above.
You’ve had ample opportunity to do so, and haven’t yet.
Please show us exactly what is false, cherry picked, or out of context.
Simply saying something is cherry picked without showing exactly what it is doesn’t prove a thing.
You may be trying to fool others here, but that most certainly isn’t foolin’ me one bit.

David R. Remer wrote: That is obvious by the lack of economic big picture context for your data, lack of economic historical context, and lack of counter-balancing data which mitigates or water’s down your comment’s conclusion that your data MUST spell the end of our economy without exception.

No. What is obvious is general claims of cherry picking data, false data, and data out of context.

Again, please show us exactly what is false, cherry picked, or out of context.
Nebulous and vague conclusions that still fail to provide any proof are not convincing to say the least.

David R. Remer wrote: As I said before, the details are important.

Yes, they are.

Yet you have still failed repeatedly to provide credible and detailed account of exactly what cherry picked, incorrect, or false.

That should be so hard.
So why haven’t you done that?
The facts are all there with sources and references.
Why not show us exactly where the facts are not detailed, cherry picked, false, or out of context?
How hard can that be?
Simply cut-and-paste each sentence that is false, and prove it.

David R. Remer wrote: Details like how much is printed money and how much is borrowed.

You can look at M1, M2, and M3 money supply, and other sources if you want to know that.

That still does not explain away $69.8 Trillion of nation-wide debt (a considerable percentage of the entire nation’s net worth).
That still does not explain away $11 Trillion of National Debt.
That still does not explain away $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching).
That still does not explain away $62 Trillion Credit Default Swap/Derivatives bubble still looming.

Are you trying to now say the debt problem isn’t serious?

David R. Remer wrote: Details like the historical probability of our loans being repaid.

That probability is not good since the $11 Trillion national debt is the worst debt per-capita ever, and that doesn’t even include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching).

The probability is not good (including the $12.8 Trillion borrowed and spent from Social Security and the $11 Trillion National Debt) since a total of $23.8 Trillion of federal debt is the largest debt ever in size, per-capita, and as a percentage of GDP.

That probability is not good since the total $69.8 Trillion nation-wide debt is the worst ever in size, per-capita, and as a percentage of GDP (having more than quintupled from 100% of GDP in year 1956 to 503% of GDP today).

Are you trying to now say the debt problem isn’t serious? The seriousness of the situation has a bearing on the probability of loans being repaid.

David R. Remer wrote: These are extremely important details, d.a.n and your comments do not reflect any desire to incorporate such details into your picture.

Yes, details are important, and I’m better at details than most, despite your claims of otherwise.

So your statement is ridiculous.
In fact, you’re battin’ ZERO so far.
Personally, I’d be embarrassed to be making such conclusions about others attention to details, while doing everything possible to avoid showing exactly where any details are false, cherry picked, or out of context. Do you really think anyone who reads this thread thoroughly will be fooled?

Again, exactly where are the details wrong?
So far, all of your claims of details that are false, cherry picked, or out of context are completely unsubstantiated.

David R. Remer wrote: A perfect example of cherry picking is when you say: “(01) Chrysler was only one auto maker, and the federal government was not nearly so deep into debt (as shown below):”

Not true again.

You really messed up on this one.

In year 1979 (the year Chrysler was bailed out):

• (1) Nominal National Debt was $900 Billion ($2.7 Trillion in 2008 dollars)


• (2) Nominal GDP was $2.7 Trillion ($8.0 Trillion in 2008 dollars)


• (3) Debt-to-GDP ratio was 33%


• (4) U.S. population was 225 Million


• (5) National Debt per-capita was $4000 = $990 Billion/225 Million (or $11,862 in 2008 inflation adjusted Dollars).


• (6) Federal revenues were $163 Billion (18.1% of GDP; $483 Billion in 2008 dollars)

Today, MAR-2009:

• (1) Nominal National Debt is $11 Trillion ($3.8 Trillion in 1979 dollars)


• (2) Nominal GDP is about $13.86 Trillion (based on 2007 GDP; )


• (3) Debt-to-GDP ratio is 78% (45% larger than in year 1979)


• (4) U.S. population is about 310 Million (38% larger than in nyear 1979)


• (5) National Debt per-capita was $35,484 = $11 Trillion / 310 Million (300% larger today than in year 1979 using inflation adjusted 2008 values);


• (6) And that $11 Trillion National Debt does not even include include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching).


• (7) Including the Social Security debt, the $23.8 Trillion total Federal Debt-to-GDP ratio is 172% .


• (8) Including the Social Security debt, the $23.8 Trillion total Federal Debt per capita is $76,774 (657% larger today than in year 1979).


• (9) Federal revenues are about $2.4 Trillion (about 18% of GDP; same percentage as in year 1979).

So, uhhhmmmmmm … your point was what?
So, exactly where are the details false, cherry picked, or out of context?

David R. Remer wrote: Your comment fails to acknowledge that our GDP was not nearly so large when Chrysler was bailed out, either, nor our federal tax paying work force as large, nor our federal revenues as large.

Not true again. Look above. Read it and weep.

This is all doing wonders for your credibility.

Are you seriously going to try to make us believe things were as bad (or worse) in 1979 than today (i.e. MAR-2009) with respect to debt, debt-to-GDP ratios, debt-per-capita, federal revenues as a percentage of GDP, economic conditions ( One-Simple-Idea.com/NeverWorse.htm ), etc.? I guess you realize that your counter arguments are failing miserably? You talk a lot about details, and the fail miserably to show exactly where the details are false, cherry-picked, or out of context.

It would be wise to do some basic calculations first before trying to use statistics to prove 1979 was worse than Mar-2009.
Are you going to admit your error here, or simply ignore this too?

David R. Remer wrote: Your data exists outside the economic context of what is relevant.

Not true again.

Who else around here provides more data with dates, ratios, comparisons, trends, etc.?
Seriously, do you think such nebulous, vague, and unsubstantiated conclusions, and bluster are going to fool anyone?

Your use of 1979 was lame to say the least, in trying to somehow prove economic conditions in 1979 wre worse than today (2008/2009) and that the bail-out of Chrysler in 1979 was some much bigger deal then than today.

Also the $1 Billion bailout of Chrysler is only $3 Billion in 2008 Dollars.
That’s puny compared to the $9.9 Trillion Chrysler has received as of 18-FEB-2009. In Jan-2000, Chrysler had $42+ Trillion of debt.

David R. Remer wrote: Like much of the bailouts today, Chrysler’s bail out was not a handout.

Yes, Chrysler may have paid back that loan in 1979.

However, the bailouts of today have not been paid back, so there is no such thing as “Like much” yet.

David R. Remer wrote: The tax payer’s dollars were repaid, with interest to the government. An historical context very relevant to the bail out loans today being extended to financial institutions. Yet, your data fails to incorporate that context.

As you are so fond of saying, “past is not prologue”.

The conditions are much worse today than in 1979, as evidenced above by those GDP, debt, and other economic statistics.
Therefore, you can’t know if the bailouts will be paid off or not.
The probabilities are bad based on the worst economic statistics ever, and/or since the Great Depression.

David R. Remer wrote: With such relevant details and context, your comment’s conclusion of economic doom is not so neatly arrived at nor proved, is it?

First of all, despite your incessant mischaracterizations, I never said economic doom was a forgone conclusion.

I’m only speaking in terms of probabilities.
The situation is serious, and you’ve already acknowledge that (above and below), so that comment makes no sense.
Especially since all of your arguments above have been refuted.

David R. Remer wrote: These are perilous economic times, and our debt is leaping toward unprecedented levels by any measure, and our government cannot assure our economic future without eliminating the entitlement debt projections going forward. But, these facts are not sufficient to make the case that the entitlement debt will not be reformed and lessened, not are they sufficient to conclude that there are no paths which allow our economy to survive and thrive going forward.

You’ll get no argument on that comment.

David R. Remer wrote: What there are, are IF statements. IF this, If that, then our economy will survive, or collapse, if the IF, assumptions hold true. Those if statements are the only logical basis upon which to make an argument for the future, one way or another. And to make a convincing argument, the argument must incorporate all the known assumption IF premises upon which the conclusion rests.

Agreed. Even then, it is about probabilities, and based on historical precedent, the dismal math, and no proven economic theories for such massive debt, the probabilities don’t look good at all. If that upsets you, don’t blame the messenger. If you don’t like the facts I’ve presented, then feel free to disprove them.

David R. Remer wrote: If the entitlement debt trajectory is not averted, and our national debt grows well beyond any historical debt to GDP levels creating doubt amongst government debt investors as to the safety of such investments going forward, then, continued borrowing will no longer be possible. Which in turn will result in default on entitlement obligations, which in turn will drastically curtail economic activity, reduce government tax revenues, and increase social unrest and demands for government spending, with the result of greater demands being made upon government spending and debt service than the government can provide for. Which is a definition of a government defaulting on its obligations. With the government in default, its contracts with the private sector both foreign and domestic also become defaulted. And that will truly constitute and economic collapse of the American way of life. This is a valid logical argument, complete with a number of assumptions which must be true for this conclusion and end result to be valid. This is the kind of format for your argument, that if employed, would have far more persuasive impact on me, and even find agreement, that if the assumptions become true, the conclusion will also become true.

Those are all good points, and I’ve made those same points too many times.

David R. Remer wrote: No need for crystal balls, or partisan or ideological fears or boasts, no need for cherry picking data without a logical context, which isn’t convincing anyway.

I agree.

I haven’t and am stil waiting to see the proof of exactly what is false, cherry picked, or out of context.
After all, every counter argument you posed above was invalid. Especially the issue of the 1st Chrysler bailout in year 1979.
I can do this all day long if you want to keep diggin’ that hole deeper and deeper.
And that is most likely the source of frustration. Not me. I’m just the messenger.

David R. Remer wrote: What makes such a format difficult, is the complexity of the economic context and data. I know enough about economics to know that I don’t know a lot of the relevant details of our current economic condition. My ignorance of both the calculus of economics and the details of the relevant economic actions taking place, forces me to acknowledge that I have three positions I can take on our economic future. I can take no position on the prospects of success or failure of our economic future, or, favor a success or failure projection based on some other criteria.

Fine.

But you are questioning facts and numbers above that are easily provable, and you have yet to disprove any of it.
Simply saying it is cherry-picked or out-of-context is a lame obfuscation that just don’t cut it, unless you can provide specifics.
The specifics you have tried to provide so far to refute the data, such as the attempt to use the Chrysler bailout of 1979 and comparative economic conditions in 1979 and today, is not proof.

David R. Remer wrote: The criteria I use is our history, and my understanding of the writings of Adam Smith. Our history demonstrates that our government fails to act responsibly during times of relative peace and prosperity, and rises to overcome the threats to our nation’s integrity. While it is historical, and since the past is not necessarily prologue to the future, I have to acknowledge that history is no guarantor of our future. : But, combined with Adam Smith’s understanding of human nature, most especially of normal well intentioned folks in adverse times, such folks will flock to leaders whose capabilities appear sufficient, and whose good intentions reflect those of the the people. Again, this understanding, even if proven valid in our current and future circumstances, is no guarantor of success going forward.

I agree. But I know human nature too, and I know that pain and misery is often the only fail-safe motivation for reforms.

David R. Remer wrote: But, combined, and in the absence of omniscience regarding our economic present and future, these criteria fill me with a sense of hope and some assurance that our democratic elected process, which has not failed in the face of past threats, will again demonstrate the underlying strength and resolve when needed to meet the challenges that threaten the integrity of our nation.

Hope is good.

But that ain’t enough.
People can have blind faith, stick their head in the sand, and merely believe things will work themselves out.
Apathy, complacency, laziness, greed, and other manifestations of unchecked selfishness should not be underestimated.
This economic crisis is serious and I intend to keep spreading that message, because too many Americans don’t yet understand that fact.
Also, many (as you) believe that we can grow the debt larger and continue deficit spending for one or more years to come.
After all, no one has yet provided credible answers to these simple questions:

• (a) Is there any historical precedent of any nation so deep into debt ever successfully solving a massive debt-bubble with more debt, borrowing, new money, and spending?


• (b) Is there any macro economics model that states that a massive debt-bubble can solved with more debt, borrowing, new money, and spending?


• (c) Is there any mathematical rationale that demonstrates how any nation so ridiculously deep into debt (much less the biggest debtor nation on the planet) has ever successfully solved a massive debt-bubble with more debt, borrowing, new money, and spending?

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that

David R. Remer wrote: Also, I have to ask myself, where else on our planet would I and my family be better off if the United States fails as a nation, either politically or economically? I have yet to be able to answer that question definitively. So, I choose to understand as best as my abilities permit, and choose to hope and have confidence in our nation, our history, and the best of our elected leaders to bring the rest in line behind them or render their voices irrelevant, to assure our future prospects.

Hope is good.

But I personally like to err on the side of caution, and I think a LOT of people have swallowed this strategy to solve our massive debt with more debt, hook, line, and sinker. Until several basic questions are answered, that strategy is high suspect.
And that is based on history, math, economics models, and dozens of deteriorating economic conditions.
And it is troubling when so many people can’t answer those simple questions, but refuse to question the strategy.

I think there is a way out of this mess, but not by methods that have already been tried by 33+ nations in the last 150 years, and all have failed.
Not by the type of spending we’ve seen so far.
We need much smarter spending.
We need cuts in waste and bloat to fund smarter spending.
We need an end to several abuses hammering most Americans.
That’s what I hope for.
So how is that doom and gloom?

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at March 24, 2009 04:27 AM

Scientists in possible cold fusion breakthrough
http://news.yahoo.com/s/afp/20090324/ts_alt_afp/usscienceenergynuclear

Posted by: Rodney Brown at March 24, 2009 11:30 PM

Interesting article Rodney. Seems this Navy group and NTT Japan are at the forefront of studies in LENR. Over 100 entities pursuing cold fusion. But, I’m skeptical as usual. With the gov throwing all this energy money around, what a great time to pop cold fusion to the top. But, at the same time, if they could only pump out half and erg I would be in favor of dumping some research money into the effort. Go Navy!

Posted by: Roy Ellis at March 25, 2009 11:15 AM

“The stock market is also demonstrating a lack of confidence in the president’s big government agenda,” said CNN’s Lou Dobbs.
March 16 ,”” I’d like to see him eat those words Where’s the spirit Lou! I expect that from Rush and Hanity, Some of those funds take a lot of time to reach the Market and look at the other day a 500 point gain and climbing, Bernanke Might just be right Folks.

Posted by: Rodney Brown at March 25, 2009 11:25 AM

Roy Said , “”I would be in favor of dumping some research money into the effort. Go Navy! Yes Go Navy my Dad Would Have agreed To!

Posted by: Rodney Brown at March 25, 2009 12:01 PM

And Ford might just do it on there own! http://finance.yahoo.com/news/Ford-confirms-talks-with-apf-14741405.html

Posted by: Rodney Brown at March 25, 2009 12:15 PM

Rodney, don’t get down on my man Lou! He has been nocking the administration for weeks about talking down the economy. But, as I see it, Obama had to talk down the economy to try and get folks to agree to his 3b plan. Maybe he should have done a lot more talking.
Hilary is off to Mex to help in the drug wars. Just listen to these words: “”Our insatiable demand for illegal drugs fuels the drug trade,” she said. “Our inability to prevent weapons from being illegally smuggled across the border to arm these criminals causes the deaths of police officers, soldiers and civilians.”

‘Our insatiable demand’? Is Chelsea on drugs? Aren’t we just so smuggie, cheesy with our little feel good business?
‘Our inability to prevent guns’? Is Chelsea using guns? What an admission. Oh, we are so sorry that we can stop guns and drugs.

I’d like to suggest you can’t expect to do well by giving the truckers and railways EZ passes to fly across the border at 100mph. The truth Hilary, is that government treats the drug trade as a too big to fail. Estimated to be around $65B (ABC news) these days. If he drug trade was stopped countries from Mexico to Argentina would go to hell in about 60 seconds. Governments will do what is necessary to keep the lid on it, controlled chaos as I like to say.

Well, the troops in Afghan are walking around the poppy fields. Another situation where the drug business is just too economically good to be disturbed.

Wouldn’t suprise me a bit if there isn’t a little annex off some USAID post using Afghan development dollars to buy up all the poppy product coming out of Afghan. Sorta helps the trade balance you know.

Otherwise, we have the government we deserve.

Posted by: Roy Ellis at March 25, 2009 03:38 PM

d.a.n, our only main point of disagreement then, appears to center on the question of whether NO stimulus and financial sector rescue spending (meaning none of these deficits), would result in a sounder more prosperous economic future.

On this question, the consensus clearly favors deficit spending to keep the economy from collapsing under weight of the debt that the private sector has brought upon itself. The media consensus, the economic journal’s consensus, and the political consensus in Congress, and the CBO and GAO, repeatedly state that non-intervention by the government to offset the private sector losses would result in a domino effect of failure throughout the economy starting at the financial institutions and quickly working its way down to small businesses via lack of cash flow and short term loans. And it is small businesses who employ the bulk of our American workers.

Even today, with unemployment between 8 and 14%, the enormous losses in retail product shipment containers at the LA Port pretty much says it all. The 60% reduction in shipping of imports and exports at our ports since Sept. 2007, signifies how much loss in economic activity has already taken place, and that is with only the current levels of unemployment and constricted flows of loan cash.

If the government were not issuing forth TARP funds, the constriction on loan cash would several times worse than now, shutting down small businesses in dramatically larger numbers.

If the government had not effected the Economic Recovery and Reinvestment Act (so called stimulus bill), many more thousands of American workers would either be pink slipped now, or scheduled to be this year, in the computer health care information area, in the teaching area of our schools, in energy research labs and university energy engineering graduate school programs, and in the private sector road, bridge, and infrastructure maintenance and construction fields.

The consequence of not deficit spending on these programs would be less spending. But, not zero deficits. Since, with the advent of large losses in economic activity, federal government revenues would drop commensurately further as well.

While the deficits would in all probability be lower, the GDP picture would also continue worsen in the absence of current government efforts, such that, this recession would likely become, at the very least, a long and protracted recession as has been Japan’s experience as a result of timid efforts spread out over a decade by its government to stimulate the financial and consumer economy without incurring much national debt. Japan’s exports, its primary source of GDP revenues, have dropped 64%, creating a previously inconceivable potential for social and political unrest in this homogenous culture.

Imagine the social and political unrest in our own country under similar circumstances of a decade long recession with very high unemployment, ever widening wealth gap, and shrinking middle class? These are also costs of inaction by our government in arresting this recession, and cannot be ignored when weighing the costs of intervention and growing national debt, vs, non-intervention and protracted decline in economic activity for years to come at a significantly lower national debt, but a growing one, nonetheless, due to revenue shortfalls and dramatic rise in government costs to fight growing black and underground markets as we saw with prohibition in the 1920’s, or the vast multi-billion underground economy in drugs, guns, illegal alien labor, and prostitution and porn industries we see today, which provide attractive incentives to those facing unemployment in the above ground economy.

We simply disagree that the absence of government deficit spending in fighting this recession would be less costly in the long run. Failure to halt this recession would have many very costly consequences ranging exacerbating the war on our Mexican border as unemployed Americans become part of the Mexican drug cartel’s plans to continue growing their influence, intimidation, and drug/gun sales plans in the U.S., to a near collapse of our export markets, as our protracted recession gives other nation’s like China and Saudi Arabia years of competitive advantage in future trade, resources ownership and development, and investment attraction, over the U.S.

I see a vastly bigger picture when I look at this recession and its positive and negative potential, than you appear to in looking narrowly at the national debt growth, real and opportunity costs, which we both agree are very high, and if allowed to grow without limit will destroy our economy. For you, this debt growth poses the greatest of all possible dangers to our economy. For me, growth in the shrinkage of the middle class, wealth gap, and unemployment, constitute a vastly shorter term route to the demise of our economy. I therefore, opt for rescuing the economy in the short term while not losing sight of the growing debt threat in the longer term, and addressing it just as vigorously after this current short term threat to our economy has been dispensed with.

When, a few years ago, I called for dramatic attention and addressing of the growing national debt, it was a time of growing economic activity without declines in the middle class numbers or wealth. It was a time in which we could afford to raise taxes, cut government spending, and reduce our national debt without compromising the integrity of our economy or employment significantly in the future. That was the time to address the national debt.

I hope and remain confident that we can get back to that place again in just 3 or 4 years. But trying to rein in national debt during a recession threatening depression, seems to me to be the most destructive route possible for our economy, now.

Republicans simply haven’t a clue what is going on, as their demonstration in power proved, since raising government spending and cutting tax revenues was their answer to both healthy economic growth and recession. I am fairly confident that you and I can agree that the best time to cut government spending and raise tax revenues to address debt is during times when economic growth is underway.

The trick going forward is going to be to get Congressional Democrats to understand that when the economy is growing again, the national debt has to be a vastly higher priority than expanding government programs and government spending. Obama gets this. Congressional Democrats, save the Blue Dogs, show no signs of understanding this at all. And there lies the challenge going forward.

Just as surely as Democrats have always championed expanding government spending during the good times to address the marginal needs of ever small minorities suffering injustice, poverty, or lack of opportunity, there will be many other major hits on our economy going forward in the form of natural disasters, man made disasters, and global economic imbalances which will negative affect our economy, and the only way to prepare for the deficit spending that these future challenges will demand, is by buying down our national debt during the economic positive times between emergencies.

This should be as obvious as Pinocchio’s nose to Republicans and Democrats alike on Capitol Hill. But, it isn’t. And that is where we, as voters, must unite to educate them, and remove from power those who refuse to learn.

Posted by: David R. Remer at March 25, 2009 05:27 PM

d.a.n said: ” David R. Remer wrote: Why borrow cash from one’s own account and pay interest back to one’s cash account.

Like borrowing from a 401K retirement plan?”

The government doesn’t invoke punitive rules for its own borrowing, d.a.n, like it does with our 401K plans. That should be obvious.

The Congress, to prevent wanton unnecessary withdrawals from savings, invoked an interest on 401K’s, (most of which is paid back into the 401K fund under some plans, btw, like ours). The government DOES NOT have a savings account, d.a.n, and therefore does not require interest be paid in borrowing from its own savings.

Your reference to 401K’s is irrelevant to my charge that the government does NOT charge itself interest on printed money. Only on borrowed money. Printed money by the treasury (as opposed to borrowed money already in circulation), is interest free. The treasury attaches NO interest rate to be repaid for such printed money upon its return.

But printed money does come with an inflationary pressure cost to be born by consumers and producers alike, if that same money is NOT subsequently withdrawn from circulation and destroyed during times of economic growth or prosperity. Inflation reduces the taxing potential on income earners. And therein lies the cost to government as a result of printing money which is allowed to become inflationary.

Posted by: David R. Remer at March 25, 2009 05:47 PM

David,
Why I look at President Obamas’ proposed $3.9 trillion Budget as more of a Federal Investment Plan than a Federal Budget. I do have to say that there is another way that the government can get off the hook for the money that they are printing. For why paying the bills would be considered Business as the Status Quo, doesn’t the spending of money on products and services that lower operating cost increase the value of the government just as it does in buisness?

So, if America prints $1 trillion dollars today, but can show a $1.5 trillion in savings by the end of the year doesn’t that mean that “We the People” gain $.5 trillion in assets?

Now, why I can point out how to do that with a Federal Investment Plan I wonder if the Members of Congress can pull off the same stunt using the Federal Budget. Any bets?

Posted by: Henry Schlatman at March 25, 2009 08:12 PM

David R. Remer wrote: d.a.n, our only main point of dissagreement then, appears to center on the question of whether NO stimulus and financial sector rescue spending (meaning none of these deficits), would result in a sounder more prosperous economic future.

Not exactly.

I believe stimulus spending is needed.

However, it is disappointing that it isn’t funded by the elimination of massive bloat and waste.
Debt reduction may be impossible now; but more deficit spending and growing the debt bigger (as it has been for 52 consecutive years) seems like a very bad idea.
Especially with a $1.7 Trillion deficit for 2009.
We also need several badly needed reforms to end these 10 abuses now, which don’t cost much (if anything).
We need much smarter spending and many reforms now.
Also, an end to many of those abuses will save hundreds of billions per year, and save lives too.

David R. Remer wrote: On this question, the consensus clearly favors deficit spending to keep the economy from collapsing under weight of the debt that the private sector has brought upon itself.

The private sector debt per-capita ($148,387 = $46 Trillion / 310 Million) is almost double the total federal debt per-capita ($76,774 = $23.8 Trillion / 310 Million people).

The total nation-wide debt per-capita is over $225,000.
Is that tenable?
What if the debt is already untenable?
How is encouraging more borrowing, debt, and spending going to make untenable debt more tenable?

David R. Remer wrote: On this question, the consensus clearly favors deficit spending to keep the economy from collapsing under weight of the debt that the private sector has brought upon itself.

Yes, that seems to be the consensus amongst those in power.

But does that mean they are right?
Most Americans don’t seem to agree, based on several polls.
Some Polling Report polls (2/20-22/09) shows the following (source: www.pollingreport.com/budget.htm)…

Regardless of whether you favor or oppose the economic stimulus bill that Congress passed, do you think it would have been better for the government to spend more money to stimulate the economy, better for the government to spend less money, or is the amount of spending in the bill about right?”
• Better to Spend More: 14%
• Better to Spend Less: 41%
• About Right: 40%
• Unsure: 1%
|
In thinking about the trade-offs between spending government money to improve the economy versus adding considerable amounts of money to the federal debt, which do you think is the greater risk: spending too little to improve the economy or adding too much to the federal debt?”
• Spending too little: 37%
• Adding too much to debt: 59%
• About Right: 4%
|
“Regardless of whether you favor or oppose the steps the government has taken in recent months to address economic problems, how worried are you about each of the following: very worried, somewhat worried, not too worried, or not worried at all? How about [see below]?”

|

“The amount of money being added to the federal debt”
• Very worried: 54%
• Somewhat worried: 28%
• Not too worried: 11%
• Not at all worried: 5%
• Unsure: 1%
|
“The possibility these steps might not work and the economy will get worse”
• Very worried: 46%
• Somewhat worried: 37%
• Not too worried: 11%
• Not at all worried: 6%
• Unsure: 1%
|
“The possibility that increased government borrowing could produce inflation”
• Very worried: 43%
• Somewhat worried: 35%
• Not too worried: 14%
• Not at all worried: 6%
• Unsure: 2%
|
“The increasing role of the government in the U.S. economy”
• Very worried: 34%
• Somewhat worried: 35%
• Not too worried: 19%
• Not at all worried: 10%
• Unsure: 2%

So, most people polled seem to be against growing the debt larger.
And it’s extremely unlikely that GDP growth (which is currently negative) will outpace the debt?

David R. Remer wrote: The media consensus, the economic journal’s consensus, and the political consensus in Congress, and the CBO and GAO, repeatedly state that non-intervention by the government to offset the private sector losses would result in a domino effect of failure throughout the economy starting at the financial institutions and quickly working its way down to small businesses via lack of cash flow and short term loans. And it is small businesses who employ the bulk of our American workers.

Doing nothing is not the solution.

There are lots of things Congress can do, and lost of abuses they could be stopped, that don’t cost a LOT of money, and don’t make the debt more untenable.

David R. Remer wrote: Even today, with unemployment between 8 and 14%, the enormous losses in retail product shipment containers at the LA Port pretty much says it all. The 60% reduction in shipping of imports and exports at our ports since Sept. 2007, signifies how much loss in economic activity has already taken place, and that is with only the current levels of unemployment and constricted flows of loan cash.

I’m not disputing the seriousness of the situation; only the solutions being attempted which grow the debt MUCH larger.

But here’s one question:

• If the debt is already untenable, should it be grown any larger?

I believe you’ve already written that you don’t think the debt is untenable.

David R. Remer wrote: I see a vastly bigger picture when I look at this recession and its positive and negative potential, than you appear to in looking narrowly at the national debt growth, real and opportunity costs, which we both agree are very high, and if allowed to grow without limit will destroy our economy.

The debt is already destroying the economy, because it is already untenable at $225,000 per capita.

David R. Remer wrote: For you, this debt growth poses the greatest of all possible dangers to our economy. For me, growth in the shrinkage of the middle class, wealth gap, and unemployment, constitute a vastly shorter term route to the demise of our economy.

Debt is the major cause of that shrinkage of the middle class, because the nation-wide debt has more than quintupled from 100% of GDP in year 1956 to 503% of GDP today.

David R. Remer wrote: I therefore, opt for rescuing the economy in the short term while not losing sight of the growing debt threat in the longer term, and addressing it just as vigorously after this current short term threat to our economy has been dispensed with.

If the debt is untenable, will growing the debt rescue the economy?

If questions like these can’t be answered, then promoting more deficit spending is going to continue to be a tough sale.

David R. Remer wrote: I hope and remain confident that we can get back to that place again in just 3 or 4 years. But trying to rein in national debt during a recession threatening depression, seems to me to be the most destructive route possible for our economy, now.

And reining in debt may be impossible if it is already untenable now, and becomes more untenable 3 or 4 years from now.

David R. Remer wrote: Republicans simply haven’t a clue what is going on, as their demonstration in power proved, since raising government spending and cutting tax revenues was their answer to both healthy economic growth and recession.

Few (if any) in Congress have a clue. Don’t forget that Democrats have had the majority in Congress for 2 years prior to the last election.

David R. Remer wrote: I am fairly confident that you and I can agree that the best time to cut government spending and raise tax revenues to address debt is during times when economic growth is underway.

True. And when times are hard, it seems logical to cut spending, bloat, and waste, spend smarter, and eliminate abuses. Yet, little of that is occurring.

David R. Remer wrote: The trick going forward is going to be to get Congressional Democrats to understand that when the economy is growing again, the national debt has to be a vastly higher priority than expanding government programs and government spending.

Why does the economy have to grow?

Why do we need bubble after bubble?
Why can’t we target sustainability?
Why can’t we target ZERO inflation (or deflation)?
Why can’t we target ZERO population growth?
Why can’t we stop importing 1.5 Million foreign H-1B visa workers per year?
Why can’t we stop importing millions per year of illegal aliens who cost tax payers an estimated $70-to-$327 Billion per year in net losses?
Why must we always grow, and grow, and grow ?

David R. Remer wrote: Obama gets this. Congressional Democrats, save the Blue Dogs, show no signs of understanding this at all. And there lies the challenge going forward.

Few (if any) of them have a clue, as evidenced by decades of decline and this economic crisis. Yet, Congress just gave itself its 10th raise in 12 years and $93,000 per Congress person for petty cash and expenses. Cha Ching!

David R. Remer wrote: Just as surely as Democrats have always championed expanding government spending during the good times to address the marginal needs of ever small minorities suffering injustice, poverty, or lack of opportunity, there will be many other major hits on our economy going forward in the form of natural disasters, man made disasters, and global economic imbalances which will negative affect our economy, and the only way to prepare for the deficit spending that these future challenges will demand, is by buying down our national debt during the economic positive times between emergencies.

Not if the debt is already untenable. That is what is different this time. $225,000 of nation-wide debt per capita.

David R. Remer wrote: This should be as obvious as Pinocchio’s nose to Republicans and Democrats alike on Capitol Hill. But, it isn’t. And that is where we, as voters, must unite to educate them, and remove from power those who refuse to learn.

We agree on that.

David R. Remer wrote: Why borrow cash from one’s own account and pay interest back to one’s cash account.

• d.a.n said: Like borrowing from a 401K retirement plan?”

The government doesn’t invoke punitive rules for its own borrowing, d.a.n, like it does with our 401K plans. That should be obvious. The Congress, to prevent wanton unnecessary withdrawals from savings, invoked an interest on 401K’s, (most of which is paid back into the 401K fund under some plans, btw, like ours). The government DOES NOT have a savings account, d.a.n, and therefore does not require interest be paid in borrowing from its own savings. Your reference to 401K’s is irrelevant to my charge that the government does NOT charge itself interest on printed money. Only on borrowed money. Printed money by the treasury (as opposed to borrowed money already in circulation), is interest free. The treasury attaches NO interest rate to be repaid for such printed money upon its return.

I only asked a question. Notice the question mark?

I did not understand your question, and was merely looking for an analogy.

I never said the government charges itself interest on printed money (physical paper money and coin) that wasn’t borrowed.
So I still don’t know where you are going with that question.
I’m not disputing whether the government charges itself interest on printed money (physical paper money and coin) that wasn’t borrowed.

David R. Remer wrote: But printed money does come with an inflationary pressure cost to be born by consumers and producers alike, if that same money is NOT subsequently withdrawn from circulation and destroyed during times of economic growth or prosperity.

How can any significant amount be withdrawn when 90%-to-95% of all money in the U.S. exists as debt, because most money is created on compters (as debt) at a steep ratio of 9-to-1 of debt-to-reserves?

David R. Remer wrote: Inflation reduces the taxing potential on income earners. And therein lies the cost to government as a result of printing money which is allowed to become inflationary.

Most of the inflation in this nation does not come from the phycisl printing of money (i.e. physical paper money and coin). It comes from the creation of new money (on computers) at a very steep ratio of 9-to-1 of debt-to-reserves. That ratio is too high. And since 90% of each new loan is new money which exists as debt, it can’t be withdrawn from circulation. This nation has too much debt, and not enough savings. It took years to get this bad, and it will take years to get out of it.

Our biggest problem is not the lack of credit.
Our biggest problem is too much debt.
So, I repeat this question:

• If the debt is already untenable, should it be grown any larger?

Posted by: d.a.n at March 26, 2009 12:38 AM

D.a.n,
Why I am not sure of how much it will cost to have America become Energy Independent. I do know that without the government investing the Taxpayers dollars into that argument the American Consumer and Small Business Owner will not be caring how big the problem of debt is.

So call it investing or spending, but the sooner the American Consumer and American Small Business Owner are energy independent the quicker “We the People” can start paying and repaying down the National Debt since our Democratic and Republican Civil, Political, and Religious Leaders see no advantage of allowing Americas’ children to invest in building a More Sustainable Society.

Posted by: Henry Schlatman at March 26, 2009 03:21 AM

d.a.n said: “However, it is disappointing that it isn’t funded by the elimination of massive bloat and waste.”

I agree. I would add that I am prejudicely disappointed by more cuts in discretionary spending in wasteful defense spending, NASA program initiatives of a non-maintenance nature, and foreign aid. I say prejudicely, because I have not yet perused the Obama budget proposal, but, with a 1.8 trillion dollar deficit, it sounds like we should be able to cut significantly more from this budget.

d.a.n said: “Debt reduction may be impossible now; but more deficit spending and growing the debt bigger (as it has been for 52 consecutive years) seems like a very bad idea.”

It is counter-intuitive that greater government spending is an avenue out of a recession. But, then, government wasn’t designed to run on the same economic principles as the family or ‘for profit’ business. Non-profit enterprises like the federal government or VOID for that matter, are held to a fiduciary duty to spend and even borrow its revenue resources, where responsibly possible, to further the objectives in its charter or articles of incorporation. In a very real sense, the Declaration of Independence is the United State’s articles of incorporation, and promoting the general welfare of the citizenry is one of its fiduciary duties.

In my family budget, saving and borrowing for our daughter’s education, is a vastly more important objective than foregoing her education in order to invest in growing the family wealth. If our family were a business, we would fire our daughter from her daughter status, and direct the savings in far more lucrative returns on our own financial futures, not hers. This is a fundamental and even philosophical difference between for profit and not for profit organizations. For profit organizations have but one primary fiduciary duty, maximizing profitability. There are different approaches to this objective based on differential equations involving time and maximizing profits in the short term against maximizing profits over the long haul. Smaller individual or family owned businesses tend to focus on maximizing profits over the long haul, whereas, corporate publicly traded organizations focus on maximizing profits in the short run, the future be damned, as was the case with the mortgage and financial mega-bank institutions.

d.a.n asked: “The total nation-wide debt per-capita is over $225,000. Is that tenable?”

Depends on the timeline for repayment, how many generations, and the capacity to maintain a healthy employment economy while paying the interest on that debt over the repayment period.

It may prove to be very tenable, if, over the next 10 years our nation radically reforms entitlement spending in ways that flatten or reduce its debt adding trajectory, and if employment, and therefore tax revenues, remain high on average over the same period. Of course any additional cuts in spending through other reforms cutting waste, fraud, and abusive spending would only make present debt more tenable, and payable in the future.

On the other hand, failure to meet those ‘if’ conditions above, will, in all likelihood result in answering question in the negative. No, that amount of debt is not tenable going forward because those if conditions were not met.

It is however a certainty that if our economy collapses today, the national debt is immediately made untenable, unless debt forgiveness is forthcoming from our creditors.

Posted by: David R. Remer at March 26, 2009 04:48 AM

David,
Ok, now you are taking me to edge of the water. For why I understand that the Federal Government works on the different level than our local and state when it comes to budgeting. But, isn’t one of the things that the Founding Fathers made sure of was that the Federal Government was Never to Make Money but could invest in things privately held that can?

Posted by: Henry Schlatman at March 26, 2009 09:50 AM

Henry Schlatman wrote: d.a.n, Why I am not sure of how much it will cost to have America become Energy Independent. I do know that without the government investing the Taxpayers dollars into that argument the American Consumer and Small Business Owner will not be caring how big the problem of debt is.

More energy independence is one of the nation’s most important goals.

I’m glad to see spending on that, and a few other things.
However, it is very disappointing to see many billions of dollars spent on things that are not even close to being of the highest priority.
Also, it is very disappointing to see the government not only propping up failed businesses, but even rewarding them (which is very unfair to the competition).

Henry Schlatman wrote: So call it investing or spending, but the sooner the American Consumer and American Small Business Owner are energy independent the quicker “We the People” can start paying and repaying down the National Debt since our Democratic and Republican Civil, Political, and Religious Leaders see no advantage of allowing Americas’ children to invest in building a More Sustainable Society.

More energy independence is paramount, and I have no disdain for that sort of spending and investment (provided a lot of waste and corruption isn’t later revealed to also exist in that endeavor).

David R. Remer wrote:

• d.a.n said: “However, it is disappointing that it isn’t funded by the elimination of massive bloat and waste.”

I agree. I would add that I am prejudicely disappointed by more cuts in discretionary spending in wasteful defense spending, NASA program initiatives of a non-maintenance nature, and foreign aid. I say prejudicely, because I have not yet perused the Obama budget proposal, but, with a 1.8 trillion dollar deficit, it sounds like we should be able to cut significantly more from this budget.

The problem with the federal government being the biggest employer in the nation (with more employees than all manufacturing jobs in the nation), so many of those jobs provide no net gain. So many are dead weight and unproductive jobs. The bloat, and waste, and redundancy upon redundancy is mind boggling.

David R. Remer wrote:

• d.a.n said: “Debt reduction may be impossible now; but more deficit spending and growing the debt bigger (as it has been for 52 consecutive years) seems like a very bad idea.”

It is counter-intuitive that greater government spending is an avenue out of a recession. But, then, government wasn’t designed to run on the same economic principles as the family or ‘for profit’ business.

Why? Only because the federal government and Federal Reserve can create new money out of thin air. That is a recipe for disaster, as evidenced by dozens of nations who already tried that and discovered the hard way that it made a bad situation much worse by also destroying the currency, all savings, all pensions, all entitltements, and wages.

David R. Remer wrote: In a very real sense, the Declaration of Independence is the United State’s articles of incorporation, and promoting the general welfare of the citizenry is one of its fiduciary duties.

Yes, but not if it debauches the currency. Not by playing chicken with hyperinflation. Not if the debt is untenable. Based on these 20 reasons and numerous unanswered questions, 52 consecutive years of deficit spending, the current federal and non-federal debt appears to be untenable, which explains a huge leap in the liquidation of U.S. assets resulting in foreign owned assets in the U.S. almost quadrupling from 6 Trillion in year 1997 to $22 Trillion in year 2007, the U.S. being the largest debtor nation on the planet, and the largest debt-per-capita in history (for both total federal and non-federal debt).

David R. Remer wrote: In my family budget, saving and borrowing for our daughter’s education, is a vastly more important objective than foregoing her education in order to invest in growing the family wealth.

Agreed. As for growing weatlht though, in the case of the United States’ federal and non-federal debt, substitute “growing the family wealth” with “growing massive unteneable debt larger”. Is that statement still true? If the debt is untenable now, can it be grown larger? If the debt is untenable now, won’t growing it larger simply make it more untenable? And simply creating more money doesn’t work, because like the First Law of Thermodynamics (e.g. The total amount of energy and matter in the Universe remains constant, merely changing from one form to another), and the Second Law of Thermodynamics (In all energy exchanges, if no energy enters or leaves the system, the potential energy of the state will always be less than that of the initial state.), simply creating more money doesn’t work because it simply devalues the money that already exists. Something can not be created from nothing. Overall wealth can not be created by creating more new money. Growing the government ever larger is a very bad idea. We can’t all ride in the wagon; someone needs to push the wagon too. Creating new money is “theft by inflation” and a very bad approach with substantial historical precendent demonstrating the damage caused by inflation (or worse, hyperinflation: en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation).

Based on reports about $1+ trillion deficits for many years into the future (possibly through to year 2019) are very disturbing.
Especially when the service on the $11 Trillion national debt is already 18% of GDP, and that doesn’t even include the $12.8 Trillion borrowed from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching (i.e. over 13,000 new entitlement recipients per day).

I don’t envy your position, because college costs are skyrocketed.
My son graduated from college in 2004, before costs become truly ridiculous.
Stock brokers and financial analysts criticized my strategy to pay off our home early in 5 years between 1994 and 1998, saving many tens of thousands of dollars on interest, which entirely funded all of the money for our son’s college between year 2001 to 2004. And when the dot.com bubble burst in 1999 and 2000, I was damn glad I had not listened to the stock brokers and financial advisers which would have resulted in massive losses. And after that, again, the stock brokers and financial advisers recommended I stay in the market, but I got out in 2007, and again, I was damn glad I had not listened to the stock brokers and financial advisers. Especially when the economy started a sharp decline … having no debt is a damn good position to be in. There may be some good stock brokers and financial analysts out there, but I’m damn glad I didn’t let them gamble our savings away. Something tells me I also should not be falling for the massive deficit spending now (especially when it is riddled with pork-barrel, bloat, waste, and growing the federal government ever larger beyond already nightmare proportions).

David R. Remer wrote: If our family were a business, we would fire our daughter from her daughter status, and direct the savings in far more lucrative returns on our own financial futures, not hers. This is a fundamental and even philosophical difference between for profit and not for profit organizations. For profit organizations have but one primary fiduciary duty, maximizing profitability. There are different approaches to this objective based on differential equations involving time and maximizing profits in the short term against maximizing profits over the long haul. Smaller individual or family owned businesses tend to focus on maximizing profits over the long haul, whereas, corporate publicly traded organizations focus on maximizing profits in the short run, the future be damned, as was the case with the mortgage and financial mega-bank institutions.

Some of the spending, such as spending to increase our energy independence, is good spending.

An education for your children is a good thing, so that they can be self sufficient, and happier, and more productive.

My problem is with so, so, so much wasteful spending, bloat, pork-barrel, and growing the federal government and federal debt ever larger, excessive creation of new money, rewarding failure for some banks and corporations who will most likely fail anyway, which cheats responsible competitors.

David R. Remer wrote:

• d.a.n asked: “The total nation-wide debt per-capita is over $225,000. Is that tenable?”

Depends on the timeline for repayment, how many generations, and the capacity to maintain a healthy employment economy while paying the interest on that debt over the repayment period.

$225,000 per-capita, amortized at only a 4.0% interest rate and every American paying $760 per month (an amount required to stop the debt from growing larger) would take 50 years to merely reduce the principal by 23,000 per-capita (with $202,000 per-capita still remaining).

• Year _ Month _ PrincipalRemaining
• 2009 __ 00 ____ $225,000
• 2009 __ 01 ____ $224,990
• 2009 __ 02 ____ $225,980
• 2009 __ 03 ____ $224,970
• 2009 __ 04 ____ $224,960
• 2009 __ 05 ____ $224,950
• 2009 __ 06 ____ $224,940
• 2009 __ 07 ____ $224,929
• 2009 __ 08 ____ $224,919
• 2009 __ 09 ____ $224,908
• 2009 __ 10 ____ $224,898
• 2009 __ 11 ____ $224,888
• 2009 __ 12 ____ $224,878
• 2010 __ 01 ____ $224,867
• … … … . .
• … … … . .
• … … … . .
• 2059 __ 09 ____ $205,235
• 2059 __ 10 ____ $205,159
• 2059 __ 11 ____ $205,083
• 2059 __ 12 ____ $205,006

See above; the principal was only reduced by a mere $20,000 in 50 years (from $225,000 to $205,006)! The point is, the longer time taken to pay off debt, the much larger the total debt it grows. That’s why a 30 year loan will cause the nominal price of a house to cost 200%-to-300% more than if paid off in 5 years. And since inflation affects wages as much as debt, there’s little (if any) advantage to taking all 30 years to pay the debt. But who loves those 30 year mortgages, and why? Well, at least until so much toxic debt and usurious interest rates backfired and led to 9,000-to-10,000 foreclosures per day. The math is truly dismal. What are the realistic odds that every man, woman, and child can pay $760 per month for 105 years to pay down the debt of $225,000 per-capita. Such fiscal responsibility would require extraordinary fiscal discipline? Those numbers above should be alarming, but few seem to be alarmed. That’s very disturbing. They either don’t understand how dismal the math is, or simply have faith that we can somehow borrow, create massive amounts of new money, and spend our way out of a massive debt bubble. The math is so dismal, it’s hard to believe that $225,000 per-capita of nation-wide debt is even close to being tenable.

Creating more money out of thin air won’t fix that, unless there was a huge multiplier affect for every new dollar, but that ain’t gonna happen with massive amounts of pork-barrel and massive spending on things that are not of the highest priority.

Borrowing money every year to merely pay the interest on the debt merely grows the interest and debt larger and larger.
Inflation can reduce debt, but not if the borrowing and deficit spending continues each year along the way.
And that is why I do not think Congress or the administration really gets it.
Especially Congress who just gave itself its 10th raise in 12 years, and $93,000 per Congress persons for petty cash and expenses.
Especially since Congress appeared totally surprised in late 2008 when the economic melt-down become critical.
It also can not be blamed merely on incompetence.
Congress is also FOR-SALE.

David R. Remer wrote: It may prove to be very tenable, if, over the next 10 years our nation radically reforms entitlement spending in ways that flatten or reduce its debt adding trajectory, and if employment, and therefore tax revenues, remain high on average over the same period.

10 years?

See above. It would take 50 years to merely reduce the $225,000 nation-wide debt (per capita) by only $25,000 (from $225,000 to $205,000).
Amortize the $11 Trillion National debt at only 4.0% and see what happens.
It would take $37 Billion per month ($444 Billion per year) for 50 years (at only a 4.0% interest rate) to merely reduce the $11 Trillion national debt to 10.3 Trillion.
It would take $37 Billion per month ($444 Billion per year) for 100 years (at only a 4.0% interest rate) to merely reduce the $11 Trillion national debt to about half ($5.5 Trillion by year 2059).
What are the chances of that sort of discipline now, with 52 consecutive years of deficit spending?

• Year _ Month _ PrincipalRemaining
• 2009 __ 00 ____ $11,000,000,000,000 (i.e. $11 Trillion)
• 2009 __ 01 ____ $10,999,666,666,666.70
• 2009 __ 02 ____ $10,999,332,222,222.20
• 2009 __ 03 ____ $10,998,996,662,963.00
• 2009 __ 04 ____ $10,998,659,985,172.80
• … … … . .
• … … … . .
• … … … . .
• 2059 __ 09 ____ $10,341,157,419,224.30
• 2059 __ 10 ____ $10,338,627,943,955.00
• 2059 __ 11 ____ $10,336,090,037,101.60
• 2059 __ 12 ____ $10,333,543,670,558.60

See above; the principal was only reduced by a mere $666 Billion in 50 years (from $11 Trillion to $10.444 Trillion by year 2059)! And that does not even include the $12.8 Trillion borrowed from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching.

If you’d like to verify these calculations, see:

• One-Simple-Idea.com/$11Trillion.xls


• One-Simple-Idea.com/$225K_NationWideDebt_PerCapita.xls

David R. Remer wrote: Of course any additional cuts in spending through other reforms cutting waste, fraud, and abusive spending would only make present debt more tenable, and payable in the future. On the other hand, failure to meet those ‘if’ conditions above, will, in all likelihood result in answering question in the negative. No, that amount of debt is not tenable going forward because those if conditions were not met. It is however a certainty that if our economy collapses today, the national debt is immediately made untenable, unless debt forgiveness is forthcoming from our creditors.

What if it is already untenable?

What if it has already been untenable for many years?

If it is already untenable, won’t more excessive spending make a bad situation much worse a few years later too?

Henry Schlatman wrote: David, Ok, now you are taking me to edge of the water. For why I understand that the Federal Government works on the different level than our local and state when it comes to budgeting. But, isn’t one of the things that the Founding Fathers made sure of was that the Federal Government was Never to Make Money but could invest in things privately held that can?

There is a price for creating too much new money out of thin air, unless there is a significant multiplier benefit from the spending of those new dollars.

How much confidence do you have that all of this spending will produce a net benefit?
How much new money will it take to put a dent in $69.8 Trillion of nation-wide debt?
How would you answer these three questions:

• (a) Is there any historical precedent of any nation so deep into debt ever successfully solving a massive debt-bubble with more debt, borrowing, new money, and spending?


• (b) Is there any macro economics model that states that a massive debt-bubble can solved with more debt, borrowing, new money, and spending?


• (c) Is there any mathematical rationale that demonstrates how any nation so ridiculously deep into debt (much less the biggest debtor nation on the planet) has ever successfully solved a massive debt-bubble with more debt, borrowing, new money, and spending?

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that

Posted by: d.a.n at March 26, 2009 12:36 PM

D.a.n,
Why you may call it creating money out of thin air I do believe that the Founding Fathers of America would call it a much different Beast of Nature. And why I am not permitted to explain how one goes about making a million dollars out of one using the Worlds Financial System. Lets look at this problem from a different political view than the ones taught to our democratic and republican citizens.

For say America is a Farmer who just had his crops wiped out due to an “Act of God” but left the soil intact. What option does the Farmer have?

1) Sale the property and try to pay off the Bank?

2) Try and arrange credit with the General Store for seeds and other such things needed until the next year crop goes to Market.

3) Even though the Farmer owes for this years seed and such, does the Farmer make a deal with the American Small Business Owners and Consumers in his community to borrow the money in order to purchase the seeds and such.

Yes, “We the People” are stuck between a Roch and a Hard Place thanks to some Funny if not illegal Civil Dealings by a few. However, to say that the Government of “We the People” cannot learn to take the opportunities of the problem of paying for two wars by splitting a piece of gold into two has caused is why The Elders and Powers-that-Be of the 70’s limited Americas’ Democratic and Republican Civil, Political, and Religious Leaders to the Sky 30 years ago.

For ask the Children of the 21st Century what their Peers will tell them if they even go to say that Their Generation cannot build a more Sustainable World than the Youth of the 60’s and Silver Spoons of the 70’s. Because why Doom and Gloom worked on most of My Democratic and Republican Peers, their Children have no such option when it comes to dealing with the problems leftover from that time.

So instead of wishing or worrying about failing, don’t you think the Founding Fathers of America and the Ancient Ones of Songs would insist that “We the People” can tackle such issues as Health Care, Energy, and Education like Ladies and Gentlemen with a little bit of Common Knowledge and Common Sense.

Posted by: Henry Schlatman at March 30, 2009 07:31 AM

Henry Schlatman wrote: So instead of wishing or worrying about failing, don’t you think … .

Oh no. Not you too?

What makes you think I am “wishing” about “failing”?

However, I most certainly am “worrying” about the eventual consequences of so much untenable debt, since no one can answer these simple questions, and growing the untenable debt ever larger and more untenable is ample cause for worry:

• (a) Is there any historical precedent of any nation so deep into debt ever successfully solving a massive debt-bubble with more debt, borrowing, new money, and spending?


• (b) Is there any macro economics model that states that a massive debt-bubble can solved with more debt, borrowing, new money, and spending?


• (c) Is there any mathematical rationale that demonstrates how any nation so ridiculously deep into debt (much less the biggest debtor nation on the planet) has ever successfully solved a massive debt-bubble with more debt, borrowing, new money, and spending?


• (d) If the current debt is untenable, how is growing it bigger going to help?
Where will the money come from when 90%-to-95% of all money in existence in the U.S. exists as debt, because money is created as debt at a steep ratio of 9-to-1 of debt-to-reserves.

But many Americans have more to worry about than me.
My homes are paid for.
My cars are paid for.
My land in 3 states are paid for.
So why should I be “worrying”?
Why should I give a damn?
Well, I do care?
I have children and they are about to have a child in a few months.

I think the debt is so large and dangerous, that growing it much larger is a sure path to making a bad situation worse.
Even some Democrats are starting to question the spending and debt.
The sooner the better.
For example, consider what esteemed economist, Ludwig von Mises stated about the end-game brought about by reckless expansion of credit (debt):

“There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.”

Henry Schlatman wrote: So instead of wishing or worrying about failing, don’t you think the Founding Fathers of America and the Ancient Ones of Songs would insist that “We the People” can tackle such issues as Health Care, Energy, and Education like Ladies and Gentlemen with a little bit of Common Knowledge and Common Sense.

Yes, I think there is a way out of this mess, but not by growing untenable debt ever larger and more untenable. Think about those questions above. What does it mean when those simple questions can’t be answered.

Henry Schlatman wrote: So instead of wishing or worrying about failing, don’t you think the Founding Fathers of America and the Ancient Ones of Songs would insist that “We the People” can tackle such issues as Health Care, Energy, and Education like Ladies and Gentlemen with a little bit of Common Knowledge and Common Sense.

I’m all for more energy independence, better education, and a national non-profit health insurance system.

But not by growing the debt much larger.
We need smarter spending and cuts in all wasteful or unnecessary spending.
See example of spending cuts below.
What’s wrong with that?

Again, there are most likely better ways to resolve this nation’s massive debt problem, and growing the debt larger isn’t one of them.
SOLUTIONS (One-Simple-Idea.com/Solutions1.htm):

• (01) Stop these 10 abuses.


• (02) Stop the dishonest, usurious, predatory, lending practices of the banks, and Stop the Federal Reserve’s Ponzi-scheme which steeply leverages debt-to-reserves (i.e. 9-to-1 fractional lending; 90% of every new loan to a member bank is new money created out of thin air). Banks are essentially loan-sharking, jacking up adjustable rate mortgages (foreclosures be damned) with ridiculously high interest rates (commonly up to 10%-to-20% and as high as 64%) and other predetory lending practices. Banks are also preying on the young, poor, minorities, financially naive, and people deep in debt due to outrageously expensive medical fees. As a result, usury has helped widen the wealth disparity gap. 1% of the wealthiest now own 40% of all wealth, while 80% of Americans own only 17% of all wealth. The gap has never been larger since the Great Depression. 40% of Americans have essentially (on average) ZERO net worth. As a result of the Federal Reserve’s Ponzi-scheme, nation-wide debt has never been larger and has steadily grown (now over $67 Trillion; $220,000 per-capita) for decades from 100% of GDP in year 1956 to almost 500% of GDP in 2008. 90%-to-95% of all U.S. Dollars in existence in the U.S. exists as debt. Also, as a result of excessive creation of new money out of thin air, the U.S. has had 52 consecutive years of incessant inflation. A 1950 Dollar is now worth only 10 cents.


• (03) Stop rampant, irresponsible, wasteful federal spending. The federal government has been deficit spending for 52 consecutive years. The National Debt is now over $11 Trillion (as of 22-MAR-2009). It has never been larger in size or per-capita ($36,066 per-capita as of 9-MAR-2009), and is 66% higher than the previous record-high ($21,719 per-capita in 2008 inflation-adjusted dollars) in year 1945, after World War II, and that does not even include the $12.8 Trillion borrowed from Social Security, leaving it pay-as-you-go, with a 78 Million baby-boomer bubble approaching.


• (04) Stop growing and eliminate all of the massive bloat and waste (www.akdart.com/gov1.html) in the federal government now. Prioritize and focus on making the U.S. more energy independent. Prioritize and focus on the most important projects. Create jobs to research, develop, and implement better and more renewable energy resources and rebuild and improve the nation’s infrastructure (which will create long-term savings and benefits). Go through the federal budget with a fine-tooth comb and cut all unnecessary spending and waste. Shift unnecessary spending to spending on highest priority projects.
  For example, cut spending:
  With the federal government’s $2.4 Trillion in annual revenues, change the spending as follows:
  
  • $700 [$590] Billion for Health and Human Services (including $432 Billion for Medicare)
  
  
  • $660 [$522] Billion for Social Security
  
  
  • $640 [$447] Billion for Department of Defense
  (leave Iraq; and reduce military presence in 132 foreign nations).
  
  • $100 [$30] Billion for Department of Education
  
  
  • $100 [$30] Billion for Department of Agriculture
  
  
  • $85 [$100] Billion for Veteran Affairs (no cuts here)
  
  
  • $75 [$75] Billion for Homeland Security (no cuts here)
  
  
  • $56 [$10] Billion for Department of Transporation
  
  
  • $50 [$10] Billion for Housing and Urban Development (HUD)
  
  
  • $60 [$30] Billion for Office of Personnel Management
  
  
  • $550 [$550] Billion for Treasury Department (including $430 [$500] Billion for Interest on the National Debt).
  
  
  • ____________________________________________________________________
  
  
  • $3.074 [$2.4] Trillion ($574 [$0] Billion over total revenues of $2.4 [$2.4] Trillion in 2008 [2009])
  
  What’s wrong with that?
  The federal government is the biggest employer in the nation, and will still be even after those spending cuts.
  More people are employed by the government than all manufacturing (nation-wide).


• (05) Stop the U.S. presence in Iraq;


• (06) Stop the U.S. military presence in 132 nations around the world. That costs a LOT! Is all of that necessary?


• (07) Stop throwing money, subsidies, tax breaks, and welfare at failing banks, financial corporations, the wealthy, and Wall Street; stop rewarding failure, which is also unfair to competitors;


• (08) Stop rampant corruption by increasing and enforcing more transparency and accountability (e.g. One-Purpose-Per-BILL, stop Constitutional violations, etc.);


• (09) Stop Constitutional violations; reduce lawlessness; enforce existing laws (e.g. Article V);


• (10) Stop illegal immigration and enforce E-Verify, and stop the $70-to-$327 Billion in annual net losses due to illegal immigration; prosecute greedy illegal employers;


• (11) Stop H-1/2B abuse and stop importing 1.5 Million (AmericanWorker.org) foreign H-1B workers per year, when there are 12-to-28 Million (www.ShadowStats.com) unemployed American workers.


• (12) Stop despicably pitting American citizens and illegal aliens against each other for votes and profits, disguised as compassion (severely misplaced compassion at best); prosecute greedy illegal employers;


• (13) Stop unfair trade practices; set tarrifs on foreign imports into the U.S. at least equal to other nations’ imports tarrifs imposed on U.S. exports.


• (14) Stop plundering Social Security surpluses; $12.8 Trillion has been borrowed and spent, leaving Social Security pay-as-you-go, with 78 Million baby-boomer bubble approaching;


• (15) Stop regressive taxation). This would also save tax payers tens and possibly hundreds of billions per year by eliminating (or greatly reducing) the cost of calculating taxes, cost of tax software, cost of accounting and record keeping, and the cost of storage of many previous years of tax records.


• (16) Stop killing 195,000 per year due to preventable medical mistakes. Between 1999 and 2004, over 1.5 million people were killed by preventable medical mistakes. That is more than all the American soldiers killed in the American Revolution (4,435), the War of 1812 (2,260), the Indian Wars (1,000), the Mexican War (1,733), the Civil War (462,000), the Spanish American War (385), WWI (53,402), WWII (291,557), Vietnam War (58,209), Korean War (36,574), the Iraq Gulf War (529), and the current Iraq war 19-Mar-2003-to-24-Jan-2009 (4,232), combined! Create a non-profit national health insurance system (get rid of the millions of costly unnecessary middlemen); build more non-profit hospitals and clinics.


• (17) Stop Congress from rewarding itself with a raise almost every year (Congress recently gave itself the 10th raise in 12 years and $93,000 per Congress person for petty cash and expenses; the raises are actually automitic and a BILL is required to stop the automatic raise; must be nice, eh?). Is that necessary? No. What arrogance! ? ! Especially when U.S. Troops go without armor, adequate medical care, promised benefits, and have to do 2, 3, or 4+ tours in Iraq and/or Afghanistan.


• (18) Stop pandering politicians who are virtually FOR-SALE. Allow only equal public financing of elections. Otherwise, politicians will continue to sell-out most Americans!


• (19) Stop pork-barrel; pass a ONE-PURPOSE-PER-BILL amendment; Congress needs a transparent system for prioritizing spending, which it obviously does not have. Currently, most (if not all) Congress persons are more concerned about bringing the pork-barrel home, than solving the nation’s most pressing problems, growing dangerously in number and severity, and threatening the future and security of the nation.


• (20) Stop career politicians and judges; pass TERM LIMITS for all offices;


• (21) Stop the unfair incumbent advantages: One-Simple-Idea.com/FAQ.htm#UnfairAdvantages


• (22) Stop the deterioration of public education; eliminate the bloated, over-paid, and incompetent adminstrative staff; limit education administrative costs to a sepcific percentage of the budget. More education solutions: One-Simple-Idea.com/Education.htm


• (23) Stop repeatedly rewarding irresponsible, FOR-SALE, incompetent, and/or corrupt incumbent politicians with 85%-to-90% re-election rates. Stop rewarding corruption, or suffer the painful consequences: One-Simple-Idea.com/NeverWorse.htm

There are lots of solutions and ideas.

Unfortunately, it appears (at least for many decades now) that Congress is where good ideas, solutions, and 730+ amendments go to die.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at April 1, 2009 08:24 PM