Hiya Guys.

I'm sure some of you have seen recent news and posts:  Riots in Greece.  Mobs attacking royals in Britian.  It isn't particularly pretty.  The mess in Greece is relatively simple.  The government spent a whole ton of money it did not have.  The books did not balance.  Eventually the house of cards crumbled.  Others stepped in to rescue the country but made it clear:  You need to straighten up.  The government finally began to slash spending and the people went nuts.

Sound like it could be familiar?  We are in a similar situation.  Change "Greece, 2010" to "USA, 2011" and it could very well be the same situation.  We've been spending like there is no tomorrow.  Our books don't come clsoe to balancing, and while we haven't needed resuce from other nations, our situation is precarious.  We borrow from other countries to fund out spending spree.  They are not happy.  They are grumbling about pulling the plug.  

Of course our leaders are ignoring the situation.  We have bills piling up in the mail box and we've been stealing from Peter to pay Paul.  The phone is ringing off the hook, and its creditor after creditor asking, demanding 'When are we getting paid?!".  We should be cutting our spending, tightening belts and trying to love within our means.  We shoudl be taking some sort of lesson from Argentina, Greece, Ireland and others.  Are we?  Nope.  Ben Bernake is throwing boatloads of money into the economy, and the politicians are spending more.  The most recent tax cuts might be popular, and extended unemployment benefits sounds "moral" but the effect is simple:  Its another expenditure of money we don't have.

Some will argue that Greece isn't the USA.  "We're too big to fail", etc etc ad naseum.  Well, there may be an example much closer to home: California.  It's a very large part of the USA and its larger than many countries.  Gov. Brown in Kalifornia is warning of severe budget pressures.  There have been cuts.  There are only two courses of action:  He can ignore the issue (the usual politician's response).  If he does this the State will become insolvent.  Mayhem will ensue.  Or he can tackle it (he's making the right noises about severe austerity)  If he does he'll need to increase taxes and dramatically cut spending.  Expect mayhem to ensue again...  Either way its going to be interesting to watch this unfold.  

Unfortunately California frequently seems to lead the way in some situations.  I can see the nation going the same way.  Keep an eye on California.  While it may be kinda fun to sit back with a big bowl of popcorn and watch that den of liberal hubris and stupidity consume itself, I fear that the same sort of unavoidable financial tsunami is shortly overtake the USA.  Our debt and deficit are simply unsustainable.  Our politicians continually pay lip service to it, but NONE of them have the spine to actually tackle the problem.  I suspect it will continue until others outside the country pull the plug on our little party.  It ain't gonna be pretty.

and to add insult to injury they tacked a whole gob of money for pork projects onto the tax cut bill... The ass hats in DC just don't get it. I think they want this country to fall into mayhem.

CA, IL, and NY are in the same boat.  Expect all 3 to be in the news shortly as they will be seeking a federal bailout.

Of course some of them do, that's how dictators come to power throughout history.

We've been set up for 30 years and the trap is now only a few yrs off. Folks are too stupid to see it.

The few billion in pork earmarks is pretty much meaningless either way.

The feds are already screwed budget-wise.  There really is no solution to the mess using anything resembling actual math.  Many states are in the same boat, and quite a few will get deeper into trouble if/when the federal budget finally takes a crap.  If the feds turn off the money tap, the states are hosed.

That there has been trouble brewing has been obvious to varying degrees for about as long as I've been alive, but there was no real certainty as to when things would get nutty.  The slowly enlarging deficits, money printing, hiding inflation with cheap foreign products, and Pravda/Chinese style games with our gov't economics numbers can hide the rot for a long time but sooner or later it's going to become obvious.

Well, now it is obvious.  They can currently pretend –– if they try really hard and stick their fingers in their ears and go LALALALALALA CAN'T HEAR YOU –– that the debts will be paid off some day, and that the numbers will go back into the black some day.  But all it takes is an uptick in bond rates and the feds are done.  

Last time some of these things got hairy Volcker crushed the problem with high interest rates...  but now they have to avoid having the Fed do that at all costs, because they wouldn't be able to roll their debt.  For every dollar we take in and spend, we're spending another $1-2 that we don't have.   We're printing well over a hundred billion dollars of that a month.  If I'm not mistaken, the amount of debt we're rolling over per year - that's taking out new debt to pay down the old debt - is now somewhere near the trillion dollar range.  Higher interest rates don't make that fiscal suicide - it already is - they just kick out the chair legs for you.  And rising interest rates means rising mortgage rates, which means house values plummet even more as the cost of buying one goes up.  We're already starting to see that happen.

You can't play that sort of rob-Peter-pay-Paul game with your credit cards.  The feds can't either, they can only try to do it longer before the wheels come off.

A big tip off that the feds realize just how bad the problem is right now is Obama's willingness - his insistence - on having a partial payroll tax holiday this upcoming year on top of the tax cut extensions.  They refuse to reduce spending, and so this really blows the federal budget to the moon.  SS in particular has tipped over into the red, and this latest bit simply gives it a good hard kick downhill.  Obama's position on this is an admission that SS is done for.  But if they didn't do it, we'd start seeing some really drastic economic fallout pretty soon and they know it.   The "work force" has been steadily shrinking, according to the feds, for a decade now.. it's one way they keep the unemployment figures artificially low, but people are starting to see through their BS.

Short story, we've all been had.  When you're a billionaire, it doesn't matter if you have 2 billion USD or 100 billion, and you don't really give a damn about inflation.  The politicians pissed away money we didn't have for decades and covered the shortfall by devaluing the currency .. they made up the difference by stealing wealth from YOU, by making your dollars worth less.  They're still rich, they don't care.

That, and the bailouts (TARP, 1st and second round of money printing, and the 10 trillion USD or so that the Fed currency swapped with central banks and/or used to buy commercial paper/bailout US and foreign companies), constitutes the largest act of theft in human history.

The difference between the US and Greece, Italy, Spain, UK, Ireland, France and every other EU country that is and will have riots is this.

They belong to the EU and can not print there own currency. The US can just keep printing dollars as much as they want.

This reason alone is why I think the Euro will over all gain strength and the dollar will collapse in relative value.

ETA: The fed is able to keep the interest rates down on the debt by 'buying' the debt at what ever low rate they want to establish. And when they do buy it they are buying long term US Treasuries, 30 year bonds. Realize that this kicks the can way down the road ( relatively speaking ), and the fed never has to redeem those bonds, ever, so the US treasury never has to pay back or refinance that debt. The debt that needs to be bought in 2011 is very close to 4 trillion dollars. 1.5 to finance the budget deficit and 2.5 trillion in debt refinance.

Just like the US treasuries that the govt used to take the money in the now defunct SS trust fund, unless those bonds are redeemed by the fed, that 'debt' never has to be refinanced or paid off. It just sits there and after it matures, watch this now, it will be worth face value or more and the fed can use it to 'buy' more US debt with it.

It is the bigest financial scam on earth and gets bigger every month.

you're scaring me dude :)
 

The bottom line is that NEITHER big party will cut spending.  

And the hole gets bigger and deeper.

^THIS^

nuff said.

Then you are beginning to see.

If we do not take some very harsh measures to reign in our deficit spending we will go over the cliff. To put this in perspective the US federal government brings in about 1 trillion dollars a year from income taxes, our deficit this year is about 1.4 trillion dollars. For every $1 we bring in from income taxes we borrow and spend another $1.4.
Simple math, if we were to double the income tax (not possible since that would crash the economy and bring down the government) we would still need to find 400 billion in budget cuts to balance the budget. In reality even if we did close that 1.4 trillion dollar hole we would still be looking at a 70 trillion liability for SS and medicare/medicaid since those cost are "off budget"

Once you take a hard look at the problem and realize the true extent of our liabilities ( I did not mention all of the state liabilities)  the math is truly frightening .

They get it.  They're giving their constituents what they want before the new congress sits.

The way I see it playing out is a domino effect, the Federal government cut back on funding to the states, which in turn cut back on funding to local governments, and all three have to raise taxes, while more financial support of welfare/social programs will be put on the state and local governments.

Bottom line is we the tax payer will always pick up the tab the only thing that will change is who sends the bill.

California is too big to fail.
They will get a bailout, and we all know who's gonna ante up....

it's only money

Since at least as early as the 1950's, California has been standard setter for American Culture.  It has a little less than 10% of the US population.  What happens in California usually happens eventually in the rest of the US.  Pay close attention to the California budget crisis.  It is a baleful precedent for the US as a whole.  Too may benefits, not enough taxes to support the benefits.  Debits don't equal credits.  Fiscal disaster.

US To End 2010 With $13.9 Trillion In Debt, Total Debt Incurred Since Great Financial Crash: $4.4 Trillion


Now that all recent bond auctions have settled, and with no further bond auctions scheduled until the rest of the year, we can look at the final tally of US total debt: the number - $13,879,785,000,000. This represents a $1.568 trillion increase in total US debt held by the public for 2010, and $4.388 trillion since the collapse of Lehman. This is in essence the cost to US taxpayers to keep the financial system solvent, as the US has become the biggest marginal leveraging actor in the world, with everyone else, notably US consumers, and Europe, doing all they can to strip as much debt as they possible can. Of course, since this money does not have to be repaid any time soon, or ever, nobody seems to mind, especially not the politicians in Washington. As we have said before, and pro forma for the Obama tax deal, we expect total debt issuance in 2011 to accelerate once again, and to hit just under $2 trillion, putting total US debt at the end of next year at around $16 trillion. We also fully expect the Fed to monetize the bulk of that issuance. We can't wait to hear the positive spin on this one.

––––––––––––––––––––––––––––––––––––––––––––––
Tic toc, tic toc, tic toc....