I’ve been scanning the news pages for anything that reads like common sense in this whole debt ceiling issue. With very little success. And with less than twelve hours to go before Brucker Bummer, the American Precedent, must sign off on any such legislation or render the world’s largest nation formally insolvent, all I seem to be able to read is droning “insider” punditry and the empty rhetoric of sectional interests.
Obama, from what I can make out, in return for about 900 billion in spending cuts over 10 years, gets an immediate increase in the debt ceiling of 400 billion. With the U.S. government spending over 3 billion a day more than it earns, and given the Fed actually ran out of cash back in May, and has been fiddling the books ever since, this merely keeps the repo man from the White House garage until sometime September. Big deal. Then in return for yet more spending cuts, the ceiling will be raised a further 2 trillion or so. Enough to give The Prez what he really wants, which is to kick the issue beyond the election in November next year.
Like most “peace in our time” compromises (a picture today of Joe Biden waving a copy of the deal brought this comparison to mind) few people outside the professional political class give it much credence. The Tea Party Republicans, if they are faithful to the constituencies which sent them to Washington in the first place, will kick this piece of legislation out of the park. Those whose re-election chances are directly impacted by the spending cuts are making an almighty noise: according to this story, hard-right Republicans are opposed to cuts in military expenditure, while the Congressional Black Caucus called the deal “a sugar-coated Satan sandwich”. Yeah, right.
Congress have to vote on this in the next few hours, and I’ll update this post later today. but the whole issue misses the central point: no-one, not individuals, families, businesses or governments, can go on indefinitely spending more than they earn. Sooner or later, you have to balance the books, and pay off your debt. All the noise today merely concerns the best way in which to kick the problem into the future. In some recent posts I’ve added the proviso of an inflationary default; already there are Keynesian, big-government types in the blogosphere urging Obama to authorise the minting of a trillion dollar coin. The fact that doing this will make all the other dollars worth less, and severely piss off—to put it mildly—foreign governments holding U.S. dollar reserves, seems to pass unnoticed. Not a bad bit of imagery, though.
Anyway, I look forward to your reactions.
Update: Well, with just under four hours till the deadline, Congress has passed the debt ceiling bill, 269-161. the Senate will pass it through tomorrow. As I said, this just kicks the problem into the future a bit, but at least POTUS is now officially on notice.
I’m going for a long walk
It never ceases to amaze me how far they will go to keep the bandwagon rolling, in a sane logical world the party would have ended long ago. However it looks like they have pushed off the inevitable by another 18 months. I honestly think they will keep on going printing money forever. My salary which has already been devalued by inflation I would say 25% since 2007 at some point salary’s will be worthless and every individual will be in default except for the top 10% whose salary’s keep pace with real inflation.
I was really hoping for a default because the whole goddamn financial system is rotten to the core and a default would stop the rot and help the world press the reset button.
What would happen if someone stole those coins? I mean it would be hard to spend them at the local 7/11 I mean a 6 pack some candy a pack of ciggies and can you give me change for trillion?
I’m more interested in what one of those coins would actually look like. What would it be made of? How big would it be? And would Bummer be game to put his own head on the obverse? – Oz
“The Deal” sucks. It is, however, a bit more complicated than you described. First off, the threat of default is a fabricated crisis. The federal government rakes in over $200B per month in tax revenues. They could easily service our debt and pay SS benefits, Medicare, Medicaid and all the other entitlements. They might be forced to furlough a bunch of useless federal bureaucrats, end some vote buying subsidies and cut back on a myriad of things our government wastes money on (e.g. medical and climate research, Pell grants, redundant agencies, etc.). The ONLY way we would default on our debt is if Obama chooses to do so. The media lapped up the whole phony default narrative like starving dogs.
Cutting spending is anathema to both Democrat and Republican politicians. Spending other people’s money is what they do. It is the source of their power and influence. The reality is that the USA doesn’t have a revenue problem…it has a spending problem. Over the last 45 years the Democrats have enslaved a huge segment of the US population with dependence on entitlements. These parasites, just like all the government bureaucrats, are supported by an ever dwindling private sector. This gives the Democrats a mighty stick to wield. The parasite class has historically been their core constituency.
The debt ceiling deal provides Obama with two “tranches” of $1.2 trillion in debt ceiling increases in exchange for almost a trillion in spending cuts over 10 years. So immediately Obama gets $1.2 trillion in debt ceiling increase and we cut chump change out of next year’s budget. Once he burns through the first $1.2 T he can request the second tranche $1.2 T in about 6 months. What’s complete bullshit about all this is that we’ll have a new Congress in 2013 and they won’t be beholden to anything any previous Congress agreed to “in the future”. There are a bunch of details too numerous to go into here, but mostly it sucks. We won’t have a chance at real reform until 2012 when hopefully the GOP will win the WH, the Senate and expand their majority in the House.
Have a listen to this:
[audio src="http://downloads.bbc.co.uk/podcasts/radio/worldbiz/worldbiz_20110723-0030a.mp3" /]
And dare I keep harping on it… but spot gold closed today on the U.S. markets at US$1617; up from just under $1500 when I wrote this; annualized to about 44%. Not bad 😀
Someone mentioned that Obummer has veto’d mining a massive gold and copper deposit in Alaska, any sane President would say yes but not this one.
Ozboy as part of the Ned Kelly appreciation society whereabouts did you hide the gold again?
Sure and it’s at the end of the rainbow, me boy – Oz 😉
Well looks like the debt rodeo continues until even our wonderful Lords and Masters call time personally it’s going to end in war. China has to keep growing or lose the mandate of Heaven with the people and when it looks like the sh*t will hit the fan they will opt for a war to galvanize the people behind nationalism.
When the West can no longer afford their trinkets is when it will happen, Europe is looking shaky as the Germans are increasingly unhappy bailing everyone out. The world will stop buying US debt and has actually started to do that.
Well at least when I have to flog my few bits of gold I’ll get more for them!
“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
We seem to all be waiting for “something to turn up”.
meltemian unfortunately in the USA we are spending more than we can afford which means at some point a lot of social welfare programs are going to be ended. Obummer has just said health insurance comapnies are going to have to fund contraception programs and STD programs which means health insurance for the rest of us will rise. Of course allowing uncontrolled immigration is okay from third world countries to make make up for the shortfall in population, total insanity.
Here’s a great little blog piece that provides some insight:
About 5 years ago I was in a “renaissance man” mode. I bought and started playing electric guitars instead of just strictly acoustics. I bought high carbon steel and started crafting my own knives. I tried my hand at crafting perfumes (very difficult). I went nuts with surround sound audio (which is even installed in the garage), digital photography and ham radio. I’ve been building my own computers for years. One day I got the bright idea that I should try my hand at being a silversmith.
Turns out you can’t just go to Home Depot and buy an ounce of pure silver. So I turned to the internet. I found a site that charged a minimal commission. Trouble is they insisted on a minimum of a $300 initial order. So I bought 20 one ounce ingots of silver (for about $4.85/oz) and one 1/4 oz gold Canadian maple leaf coin. This wasn’t an “investment”. I just wanted the metal to play with.
I never got around to playing silversmith so I just put the gold and silver in a little wooden box I made and stuffed in my gun safe. Today, just five years later, that initial $300 “whim” purchase is worth $1,215 according to today’s spot prices. I’ve since bought more silver but I can kick myself for not buying more gold. Silver was flat at about $5/oz for decades. Companies would hace ingots or coins struck with the company logo and give them away as trinkets to employees or customers. Today silver is over $40/oz.
You won’t get an argument out of me for a precious metal standard for currency. I just need to know how we could possibly make it happen.
G’day Dave. Actually, I occasionally get spam from silver retailers spruiking silver as appreciating even against gold. In my article I mentioned in the U.S. in the nineteenth century there was a fairly steady exchange ratio of fifteen to one, excepting the period following the 1849 Californian gold rush. the August 1 U.S. closing prices were 1617.89 and 39.21, or about 41:1. So if you believe gold is not overvalued, then silver is probably way undervalued at present.
As to how to return to gold, this article by Robert P. Murphy appeared in the Mises Daily last Thursday; well worth a read – Oz
DrDave and Ozboy silver is definitely undervalued and i suspect will take off when people realize there is not enough gold or Platinum in the World to meet demand so they will turn to the next best thing especially when everything goes pear shaped.
OT but I think most people here will appreciate a good read; The Australian’s columnist Janet Albrechtsen published this article today on creeping political correctness and the stifling of open debate. One more German word to my vocabulary.
BBC Radio 4 is holding a Hayek vs Keynes debate, 8pm UK time today.
I’m not sure whether to listen, I’m expecting a very thin straw man as the Hayekian.
OT as well, I’ve updated my story on Australian Federal MP Craig Thomson. This by itself could be sufficient to bring the Gillard government down. More news as it comes to hand.
Interesting news Ozboy….. Is thomson a smoking gun? Time will tell.
Gillard was always going to have to defy history to get through this term anyway; on average, there have been about three by-elections per federal government since Federation. Someone gets sick, or drops dead, or gets arrested, whatever. Normally the main interest in by-elections is as a gauge of the public’s confidence in government mid-term.
But with a one-seat majority, the whole ball game changes. Current polling suggests that, were Labor to face a Lower House election today, they would be wiped out, reduced from their current 72 seats to a rump of just 24. This is exactly what will happen if Thomson is forced to leave parliament, as new PM Abbott will go to the Governor-General the day after she swears him in. So Labor are crossing their fingers, waiting and hoping to defer an election as long as possible. It’s a really high-stakes game now – Oz
Interesting one, I’ve just finished “work” at 20 to midnight, been marking and cutting the nuts off lambs all day, then entertaining [mostly myself and also] Kiwis all evening.
I’m p***ed, my sweet didn’t show up at dinner(blue rump steak),and I told one of my pal’s young workers that if he pee’d off, I’d tell the Kiwi-ess wool wrapper lady (young and very easy on the eye – also deeply involved with a young Maori lad with a way with his …- )that this was a symptom of things to come –
What I actually told her was that our “Rocky horror” look alike’s parents were both company directors and his older brother’s were all doctors…
Anyway, I missed the Hayek straw man, but did hear that the chief cuntstubble of Cleveleand has been dismissed for corruption.
Is this the start of a Post Murdoch avalanche of big cops, falling off their tax payer funded perches?
Did someone already say that lead and brass will (allegedly) get you silver and gold, even when silver and gold won’t readily buy you lead and brass?
Further on the subject of Thomson… holy moley, have a listen to the grilling he got on Monday morning from radio talkback host Michael Smith. I almost feel sorry for the poor bloke: he’s been caught about as red-handed as you can possibly imagine (short of in flagrante delicto, I suppose), and you can tell he’s on the verge of breaking down and confessing all. But I strongly suspect he has at this moment a very large gun pointed at his head which prevents him from doing so.
Ahh, stuff it, enjoy listening to the bastard squirm: schadenfreude!
Holy inquisitions Ozboy!!!……. I was moved to tears.
Are there national differences? I don’t know, but the Australian accent when it rises high and ends as a sort of question, is devastating in that sort of interview!
Well, maybe. I guess we’re more egalitarian than Britain; I can’t imagine a British radio host grilling an MP like that, no matter how despised, or addressing him as “mate”. There ya go – Oz 🙂
Ozboy you must have stolen the “mate” from us we “me marra”
From Old Norse margr.
marra (plural marras)
(Geordie, West Cumbrian, informal) A friend, pal, buddy, mate.
Personally though this sounds like a better meaning…
From Proto-Pama-Nyungan *marra.
Our accent comes about chiefly from the children of the first wave of convicts who arrived here in the late 18th and early 19th centuries. Though their parents never lost their accents, the children of London, Somerset, Northern English and Irish origins growing up and playing together (even throughout winter in the unaccustomed warmth) gave rise to our accent, which is pretty uniform across a country about the size of continental United States. It’s why, for example, we are the only people to use cockney rhyming slang aside from its originators; and why we, along with Liverpudlians and some Irish, are the only ones to use “youse” as a colloquial second person plural.
mate (plural mates)
(especially of a breeding animal) A sexual partner.
The other member of a matched pair of objects.
I found one of the socks I wanted to wear, but I couldn’t find its mate.
So either a mate is a pair of socks or the livestock are nervous.
There is a long and shameful list of hyper inflated currencies. Argentina seems to be one of the worst offenders.
Firehand linked to this the other day:
I remember a few years ago listening to the Test cricket on the radio. British expat commentator Peter Roebuck turned to his mate and says to him, “See this shirt I’ve got on? Look expensive? Guess how much it cost me.” “I don’t know”, replies Glen Mitchell, “How much?” “Two hundred and fifty million dollars” Roebuck tells him, letting a significant pause go by before delivering the punchline: “I bought it last month. In Zimbabwe.”
This might be a good time to get into the wheelbarrow business – Oz 😆
There was common sense out there, with a move to try and reinstate Glass Stegall. However Obama wasn’t about to let that happen with Prince Phillip’s hand up his ass and pulling his strings.