A Sobering Wake Up Call

The Federal Government will spend almost $31,000 per household! What part of that are any of you getting? I know it costs to fund an army, etc... but come on - I think avg. household income is $50 - $55,000. Can we keep this up? - MBC

http://blog.heritage.org/2009/08/26/morning-bell-a-sobering-wake-up-call/

"...Washington Post reports:

The extra $1.9 trillion in red ink mainly reflects the Office of Management and Budget’s adoption of more realistic — that is, more pessimistic — estimates of economic growth and unemployment. White House officials protest that their original, rosier numbers made sense at the time; actually, plenty of forecasters, including those at the nonpartisan Congressional Budget Office, made more accurate calls. This situation was foreseeable and should have been acknowledged earlier.

"...good that the Obama administration is finally admitting that the fundamental assumptions driving their economic policy were wrong, the reality of our current budget deficit, and what President Obama’s policies threaten to do to our national debt over the next decade, are truly sobering. Heritage senior policy analyst Brian Riedl details the carnage:

• Since World War II, the largest budget deficit recorded was 6.0 percent of GDP in 1983. The Bush Administration oversaw budget deficits averaging 2.0 percent of GDP. The projected 2009 budget deficit of 11.2 percent of GDP would nearly double the post-war record.
• The 2009 budget deficit will be larger than all budget deficits from 2002 through 2007 combined. More than 43 cents of every dollar Washington spends in 2009 will have been borrowed.
• While President Obama claims to have inherited the 2009 budget deficit, it is important to note that the estimated 2009 budget deficit has increased by $400 billion since his inauguration, and the whole point of the “stimulus” was to increase deficit spending to nearly $2 trillion based on the unproven notion that would it alleviate the recession.
• The 22 percent spending increase projected for 2009 represents the largest government expansion since the 1952 height of the Korean War (adjusted for inflation). Federal spending is up 57 percent since 2001.
• In 2009, Washington will spend $30,958 per household–the highest level in American history–and under President Obama’s budget, the figure will rise above $33,000 by 2019.
• The White House brags that it will cut the deficit in half by 2013. The President does not mention that the deficit has nearly quadrupled this year. Merely cutting it in half from that bloated level would still leave budget deficits twice as high as under President Bush.
• The public national debt–$5.8 trillion as of 2008–is projected to double by 2012 and nearly triple by 2019. Thus, America would accumulate more government debt under President Obama than under every President in American history from George Washington to George W. Bush combined.

And now for the real kicker: none of these numbers include the costs of Obamacare which would create another $1.5 trillion health care entitlement on top of our existing unsustainable entitlement obligations. The OMB’s Mid-Session Review should serve as a wake up call to the American people. President Obama’s policies are leading us down a path of unsustainable spending and borrowing.

Daily Pfenning 8-26-09

http://www.dailypfennig.com/

"...radio interview on Bloomberg yesterday with a panel of investment strategists, and some were of the opinion that, and tell me if this at all sounds familiar, the dollar will continue to weaken this year as the global economy recovers from recession and investors seek currencies linked to growth...

The idea was simply that too many investors had cash tied up in T-Bills, and T-Notes, and that as the global economies recover ahead of the U.S. there will be higher yields to be gotten in those global economies. So, when the investors sell their T-Bill and T-Notes to buy overseas, the dollar will get sold, and thus lead it to weaken more and more...

Speaking of Treasuries... once again the U.S. Treasury is going to the well... And they will auction $197 Billion in new Treasuries this week... Is it just me, or does any one else wonder just how much more debt foreigners can choke down? I guess the thing to do this week and next is to check the cartel's, I mean the Fed Reserve's balance sheet to see if they take back any of these auctioned Treasuries like they did last month with the 7-year T-Note auction. Monetizing the debt, printing more paper dollars like it's Monopoly money...

And in a follow up from yesterday's report on the Budget Deficit being forecast for the next 10 years... The total of the deficit for those 10 years is now forecast to be $9 Trillion dollars... And in a follow up from yesterday's rant about forecasts... The $9 Trillion is more than $2 Trillion more than was forecast just 6 months ago! Hmmm... Another $9 Trillion!

Hey! A month ago, when I prepared for the Agora Financial Reserve Wealth Symposium in Vancouver, the National Debt stood at a level that put each citizen's piece of the debt at $37,000... Today, just one month after I pulled that data, each citizen's piece of the debt now stands at $38,191! That's absolutely shameful, folks..."

White House, Congress projects record deficits

Comment that continues to be paraded "..."This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter," said Obama economic adviser Christina Romer..." The information was there but the ones who missed it float this out as some plausible excuse and still expect us to have confidence in them being the folks to lead us out of this mess. Scary part is many folks are buying it! - MBC

http://www.comcast.net/articles/news-general/20090825/US.Obama.Economy/

"...White House Office of Management and Budget and the nonpartisan Congressional Budget Office predicted the budget deficit this year would swell to nearly $1.6 trillion, a record, and far above the then-record 2008 budget deficit of $455 billion.

But while figures released by the White House foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May, congressional budget analysts put the 10-year figure at a lower $7.14 trillion.

One reason for the difference: The CBO projection is based on an assumption that all the tax cuts put into place in the administration of former President George W. Bush will expire on schedule by 2011 as dictated by current law. President Barack Obama's budget baseline, however, hews to his proposal to keep the tax cuts in place for families earning less than $250,000 a year.

Beyond the 10-year forecast, the nation will face further challenges posed by rising health care costs and the aging of the population, the CBO said. "The budget remains on an unsustainable path" over the long-term and will require some combination of lower spending and higher tax revenues, it said.

Both forecasts see unemployment rising to 10 percent before falling and both suggest growth will return to the economy later this year but that recovery will be slow after the longest and deepest recession since the 1930s..."

"...continuing stresses on the economy have, in effect, increased the size of the stimulus package because the government will have to spend more in unemployment insurance and food stamps, Orszag said. He said the cost of the stimulus package — which spends most of its money in fiscal year 2010 — will grow by tens of billions of dollars above the original $787 billion..."

Daily Pfennig 8/25/2009

http://www.dailypfennig.com/

"...see where a Manhattan Chief U.S. District Judge ruled against the Fed Reserve? Way to go Loretta Preska, the judge, who has rejected the argument that the Federal Reserve was making about disclosing loan records... The Fed said that loan records aren't covered by the law because their disclosure would harm borrowers' competitive positions... The judge said, that the Federal Reserve MUST identify the companies in its emergency lending programs..."

"...here's where I make sure you understand the difference between China adding economic stimulus, and the U.S. adding economic stimulus... China has the treasure chest of reserves to do so, and the U.S. doesn't! They are working from a position of monetary strength... The U.S. on the other hand, has done a wonderful job of jacking up the national debt! And we still have 1 in 5 people unemployed! We still have banks failing left and right, 77 of them in 2009, and we still have an economy in depression..."

Ron Paul - Texas Talk

I'd like more teeth in this - make it part of swearing in oath that all will read every bill to be voted up on its' entirety before vote. - MBC

http://www.house.gov/htbin/blog_inc?BLOG,tx14_paul,blog,999,All,Item%20not%20found,ID=090824_3501,TEMPLATE=postingdetail.shtml

We Need Sunlight to Disinfect the Legislative Process!

During August recess, many legislators have heard an unexpected amount of discontent from their constituents about what is happening on Capitol Hill, particularly regarding healthcare. Some people are justifiably terrified at what the government could do to healthcare, should it get its claws even further into it. Others demand a public option for health insurance and are adamant that healthcare be treated as yet another absolute entitlement. One thing everyone agrees on is that the final bill needs to be read and understood by all legislators before a vote is taken. To any American, this is common sense. In Washington, that is unlikely to happen.

There is much confusion and debate over what is and is not in the reform plan being considered. Are there or are there not so-called death panels? What are the end-of-life consultations really for? How will private insurance be affected? Can you keep your current plan or will you eventually be forced into a government plan? Will it pay for elective abortions or not? What are the implications for medical privacy? The truth is no one knows what will be in the final bill until it is on the House floor, and provisions could be added in and taken out in the wee hours of the morning before.

In February, the House was forced to vote on an over 1,000 page “stimulus” bill that had first been posted on the internet just after midnight the morning of the vote. It passed. Then in June, House leaders rushed a vote on the cap-and-trade bill, even though an over 300 page “manager’s amendment” making substantive changes to the bill, was introduced shortly after 3:00 a.m. the morning of the vote.

Washington thrives on crisis. If enough people can be convinced that we are in an emergency, they will more likely tolerate rushing legislation to the floor like this. Last minute changes will be slipped in, benefitting who knows what special interests and at what expense to the taxpayer. But the mantra is repeated over and over: We are in a crisis. We must act immediately.

It should be unconscionable for legislators to vote in favor of legislation they have not had the opportunity to read. This is why I have re-introduced the Sunlight Rule, H.Res 216. The Sunlight Rule prohibits any piece of legislation from being brought before the House of Representatives unless it has been available to read for at least 10 days.

The Sunlight Rule allows citizens to move for censure of any House Member who votes for a bill in violation of this act. Because the Sunlight Rule could never be waived, any Member could raise a point of order requiring any bill in violation to be immediately pulled from the House calendar until it can be brought to the floor in a manner consistent with this rule. This rule does not require that Members read the bills. It merely guarantees the opportunity to do so. It has 4 cosponsors.

Justice Louis Brandeis famously said, “Sunlight is the best disinfectant.” The Sunlight Rule would do much towards negating the cycle of pseudo-crises and cleaning up the legislative process here in Washington. I sincerely hope this is the year Congress remembers its deliberative duties and passes it.

We saved the world from disaster

The parts of this I find most telling; "...His history of the crisis essentially begins in September 2008, and ignores the actions and decisions that led to disaster. Of the origins of the crisis, Bernanke's only remark was that, until just before the crisis, "there was little to suggest that market participants saw the financial situation as about to take a sharp turn for the worse."..."

"...He said nothing about how the Fed would unwind its support for the banking system. That day seems to be in the distant future, however. "Although we have avoided the worst, difficult challenges still lie ahead,' including securing a sustainable economic recovery and rebuilding the institutional framework to make sure a similar crisis can be averted..."

Now I have serious trouble buying into this whole thing from a guy who didn't see it coming and who doesn't have a presentable plan for securing a sustainable economic recovery. - MBC

http://www.marketwatch.com/story/we-saved-the-world-from-disaster-bernanke-says-2009-08-21-10100

Daily Pfenning - 8-24-09

http://www.dailypfennig.com/

"...It seems the US government is intent on getting consumers to go back to their borrow and spend habits. This is what created the bubbles, and the administration seems intent on creating another bubble economy. US consumers have made some historic cut backs on the amount of debt they are amassing (whether or not these cutbacks are by choice). The US government should not be encouraging these consumers to go back to their previous ways, but should instead be trying to use the funds to educate and train consumers and to encourage new and innovative companies. Use this downturn to correct some of the bad habits which we had gotten into. Yes, it will be painful, but breaking an addiction is always hard and painful. US consumers need to break our addiction to easy credit and massive debt. This recession/depression has given consumers a much needed wake up call, hopefully the administration won't be able to push consumers back into their old habits..."

"...Nouriel Roubini wrote a commentary in today's Financial Times which agrees with my thoughts. Roubini said the chance of a double dip recession is increasing because of risks related to ending global monetary and fiscal stimulus. He believes the global economy still has further to fall, and will bottom out sometime during the second half of 2009. While some economies such as China, Germany, Australia, and France will likely recover; others such as the US and UK will double dip with another leg down. "There are risks associated with exit strategies from the massive monetary and fiscal easing," Roubini wrote. "Policy makers are damned if they do and damned if they don't."


"...dollar's role as the world's reserve currency has been a continued topic among scholars and was undoubtedly discussed out in Jackson hole last week. China and Russia have both been adamant about discussing the possibility of moving toward a new reserve system to replace the greenback. Since no single currency is strong enough to replace the dollar in today's global economy, most discussion has centered around the idea of creating a 'reserve currency' which is comprised of a basket of the world's largest currencies. This idea is supported by Joseph Stiglitz, a Nobel Prize winning economist and Columbia University economics professor. "The dollar's role as a good store of value is questionable and the currency has a high degree of risk," Stiglitz said at a conference last Friday. "There is a need for a global reserve system. The currency reserve system is in the process of fraying," Stiglitz said. "The dollar is not a good store of value."

"...Frank Trotter was thinking about the same thing...

"Went to the touring musical Mary Poppins Saturday night; it's always great to see a play about a run on a bank. While the books were written in the 1930's and beyond most of you will remember the Disney film set in 1910 - before the Great War when England ruled the waves and empire was returning untold dividends to the mother country. At that time of course there was no questioning the power, status and earning capacity of the British Empire. As George Banks replies to Admiral Boom in the movie, "Credit rates are moving up, up, up. And the British pound is the admiration of the world."

Well that was then and this is now. Soon after, in 1914 England suspended the conversion of Bank of England notes to gold for the period surrounding World War I, and the on again off again slide into today's fiat currency world began. Over the next 100 years England has leaned the lesson of empires that came before. That extending the resources of a country in non-producing capacity leads to the decline of the currency and a fall in the economic power of the country and the economic wellbeing of it's population. In 1910 it took 4.25 pounds to buy an ounce of gold, and 0.2056 pounds to buy a US dollar. Today of course the price of gold has risen 13,447% for British buyers, while the price of a greenback is only up 195%. We are uncomfortably comfortable in feeling that the carabineers have given way for the good old USA in a parallel fashion.

We'll freely admit that there has been a slow motion slide going on in the US dollar since establishment, and especially since the removal from the gold standard and the Bretton Woods Agreement in 1971. But we feel even more strongly that the fiscal and monetary policies put in place starting in 2001, accelerating through the 2000's, and now amplified since January 20th have left us with no legs for our stool. Fiscal policy has been and continues to be out of control. The Federal Reserve policy of the 2000's created the credit bubble and now stands to create the largest monetary inflation experienced in a first world nation. Both political parties have determined that no one can be an adult in government by slashing spending or raising taxes to cover our exploding gap (mathematically the only two options), and instead are hiding behind the invisible tax of currency depreciation. For a country we conclude that a strong currency is essential to long term well being, and by extension that our government has given up on the dream in exchange for election and reelection.

So what's to be done? If you are a believer that the political process can sort things out and return our wonderful nation to fiscal prudence and steady governance go ahead and stay the course. For the rest of us who like Margaret Thatcher believe that "the problem with socialism is that eventually you run our of other people's money", we'll be letting our "tuppance safely invested in the bank" seek diversification across the globe in countries and markets with more opportunity and prudence. We couldn't agree more with the Mary Poppins conclusion, re-written for modern times that "Where stands the banks of [the USA], America stand. Oh, oh, oh, oh! When falls the banks of [the USA], America falls!"