Can’t. Can’t. Can’t. The National Budget CAN’T be Balanced

Titanic stern (Photo credit: Wikipedia)

To solve the national budget problem, we’ll have to raise taxes by 50% or shut down the federal government.

As I’ve been telling people for five years, “what can’t be paid, won’t be paid.”  The national debt can’t be paid.  It is mathematically impossible.  Those of you who continue to hold U.S. Treasuries or virtually any other paper debt instrument are going to lose your assets.

My only objection to the following video is that it’s based on the government’s claim that the current National Debt is only $16 trillion.  Credible sources estimate that debt to actually be anywhere from $50 to $500 trillion.  I’m inclined to accept John Williams’ (shadowstats.com) estimate of about $80 trillion.

If, as the video below claims, even the $16 trillion National Debt can’t be paid, then an $80 trillion National Debt is even more impossible to pay and more certain to cause catastrophe.  Until we reach the catastrophe, the national budget can’t possibly be balanced.

Other than the claim that debt is only $16 trillion, this video’s analysis of our national debt and national budget is short, easy to understand and brilliant.

video      00:05:37

http://www.youtube-nocookie.com/embed/EW5IdwltaAc?rel=0

 

Debt Limit–A Guide to American Federal Debt Made Easy

US National Debt Clock, NYC (2011-03-04). (Photo credit: Wikipedia)

video

00:03:09

http://www.youtube.com/watch?feature=player_embedded&v=Li0no7O9zmE

 

Kyle Bass: “Capitalism without failure is like Christianity without Hell”

Image via Wikipedia

Kyle Bass is a Dallas, Texas investor who made millions of dollars by anticipating the collapse of the U.S. housing bubble and investing/betting accordingly.  He similarly “bet” in A.D. 2007 at 700 to 1 odds, that Greece would default on its debts.   He’s currently betting that the Japanese yen will eventually collapse.   Mail Online (an English newspaper) reports that Mr. Bass “now stands to make 65,000% profit if Europe goes down the drain”.

When his mother asked him where she should invest her money, he reportedly told her “guns and gold”.

His observation that “capitalism without failure [bankruptcy even for the "too big to fail" institutions] is like Christianity without Hell,” is not merely insightful and eloquent, it’s also a fundamental component of his investment strategies.  So long as governments continue to do dumb things (like bail out the “too big to fail” institutions), he will make investments/bets against governments by buying gold.  Governments are going down because they’re dumb; gold is going up because it’s anti-government and therefore “smart”.

 

“Voluntary” Haircuts

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I remember hearing a Frank Sinatra album fifty years ago.  Between songs, Frank made some introductory remarks including a description about using “little pieces of plastic” in Las Vegas to pay for their rooms, dinners, booze, etc.  That was the first time I’d heard about credit cards.

Fifty years ago, everyone paid in cash or checks.  Credit cards were a mysterious rarity reserved for the super-rich.

Today, cash is a rarity and paying with “plastic” predominates.   In fact, we’re so habituated to paying with plastic, that most people can’t imagine life without credit and therefore live in fear of losing their almighty credit rating.

Dependence on credit ratings is not confined to individuals.  Even nations are so dependent on their credit ratings that they can be terrified by threats of losing their credit ratings.

For example, the current economic debacle in Europe is ultimately about the credit rating of the government of Greece.  Here’s an article from Bloomberg (“Greek Accord Won’t Trigger Credit-Default Swaps, ISDA Rules Say”) that implicitly touched on the Greek government’s desperate need to salvage its credit rating by compelling its creditors to take 50% “voluntary haircuts”:

“The European Union’s agreement with banks for a voluntary 50 percent writedown on their Greek bond holdings means $3.7 billion of debt-insurance contracts won’t be triggered.”

 

The Year of the Rats

Image by Sergey Yeliseev via Flickr

Austin Goolsbee was President Obama’s chief economist.  I saw him interviewed on one of last Sunday’s TV-news talk shows.  He looked anxious and defensive.  But he gamely argued that the previous month’s bad job and manufacturing reports were only one-month aberrations and did not compromise the ongoing “recovery”.

So, I was surprised when it was announced the next day that Mr. Goolsbee had resigned from his White House post.  I don’t know if he actually resigned, or was fired.  But his departure can’t be viewed as evidence of an economic recovery.

The “rats” are leaving—or being driven from—what increasingly appears to be a sinking ship.

 

A Slow Moving Train Wreck

Image via Wikipedia

Watching the US and global economies is somewhat like watching the collision of several, slow-moving trains.  The wreck is not happening suddenly, but the sheer mass and momentum involved and the number of “boxcars” that are slowly colliding, falling off the tracks, and piling up like logs is so fascinating—and horrific—that you can’t turn away.

• For example, we see evidence of these collisions in the recent Supreme Court ruling that will cause California to release over 30,000 convicts.  According to the NYTimes,

“The ruling on has also already inspired a fresh round of political recriminations, with some law enforcement officials and Republicans echoing the Supreme Court’s dissenters by saying the release will result in more violence as released inmates, unable to find jobs, return to their former way of life. . . . It could create real havoc.”

(Y’think?)

 

Austerity Cometh (and criminality, too)

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Over the past several decades, the federal gov-co has repeatedly “tinkered” with the various mathematical formulae used to calculate economic indicators.  As a result of this “tinkering,” government has been able to change formulas to produce results that inspire consumer confidence, but are patently false.

Over the past decade, John Williams (shadowstats.com) has calculated economic indicators using the original mathematical formulas relied on before gov-co started “tinkering”.  Williams’ results reveal a massive deception perpetrated against the American people and predict dire fiscal consequences.

 

Inflation Rising

Image by Paolo Camera via Flickr

Food and gasoline prices are increasing.  The price of gold jumped $60 just last week.

Americans are dimly aware that these price increases are evidence of inflation.  But so far, the rate of inflation has been fairly modest, tolerable, and cause for annoyance, perhaps, but not yet concern.

However, according to the Associated Press:

“GM to raise car prices due to oil, metal costs.  General Motors Co. said it will raise car and truck prices by an average of $123 per vehicle . . . . signaling that the surge in crude is starting to affect car prices for consumers. . . . GM, Toyota and Ford all said higher oil and steel prices played a big role in their price increases.  Oil prices have climbed steadily since November, touching more than $113 this month, the highest since the recession. The surge is due to uprisings in Libya and the Middle East.”

 

National Debt = National Death

Image via Wikipedia

When the federal government first entered into significant borrowing, the debt was excused under the pretext that “we owe it to ourselves”.  I.e., the feds borrowed money from the American people and would have to repay the debt (and interest) to the American people.  America would not be significantly hurt by these debts.

The idea that “we owe it to ourselves” is a fairly reasonable argument because it presupposes that the American people could control the magnitude of the federal government’s debt by their willingness or reluctance to lend to the federal government.

So long as the feds borrowed only from Americans, If Americans didn’t consent to lend more money to the feds, the feds would have to operate “hand to mouth” based strictly on its annual revenues.  Americans could compel the gov-co to “balance the budget” by simply refusing to lend it more money.

 

Balanced Budget Amendment?

Image by unloveablesteve via Flickr

The video (below) focuses primarily on procedural objections to a recently proposed “balanced budget amendment” to The Constitution of the United States.  Those procedural objections are somewhat esoteric and dull.  However, the video makes a couple of observations concerning the nature of money that are insightful.

Foremost among these is the implication that any claims for a “balanced” budget are more or less delusional so long as the budget is denominated in legal tender (fiat currency; Federal Reserve Notes) that can be printed at will and “spun” into the economy.

Given that our current “measure” of legal tender (the fiat dollar) has no fixed value, what does it really mean if the government’s budget indicates a surplus of $100 billion or a deficit of $4 trillion?  If the “$” sign has no fixed value, what, exactly, is the difference between a positive “$100 billion” and a negative “$4 trillion”?  If the only real difference between a $1 bill, $10 bill and $100 bill is the number of zero’s printed on the bills, what does $1 mean?