Postponing an Inevitable Financial Doomsday

October 17, 2013

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Postponing an Inevitable Financial Doomsday

The US has a total debt pile of almost $17 trillion, which is expected to rise to almost $23tn in the next five years.

The United States public debt is the amount owed by the federal government of the United States. The measure of the public debt is the value of the Treasury securities that have been issued by the Treasury and other federal government agencies and which are outstanding at that point of time. Gross public debt consists of two components:

  • Debt held by the public, such as Treasury securities held by investors outside the federal government, including that held by individuals, corporations, the Federal Reserve System and foreign, state and local governments.
  • Debt held by government accounts or intragovernmental debt, such as non-marketable Treasury securities held in accounts administered by the federal government that are owed to program beneficiaries, such as the Social Security Trust Fund. Debt held by government accounts represents the cumulative surpluses, including interest earnings, of these accounts that have been invested in Treasury securities.

In general, public debt increases as a result of government spending and decreases as a result of government tax or other receipts, though in practice Treasury securities are not issued or redeemed on a day-by-day basis. The amount that Treasury can borrow is limited by the United States debt ceiling. [ Read more about National Debt of the U.S. >> ]

Obama_Debt_Oct2013

Buying time: US budget deal postpones financial doomsday

October 17, 2013

President Obama and Congress have signed off on extending the debt ceiling through to February. The new legislation only temporarily solves the US budget dispute, begging the question if America will ever limit its borrowing.

The extension deal will reopen the government after 16 days of partial shutdown and fund spending through January 15 while extending the $16.7 trillion debt ceiling through to February 7. The next major deadline is the December 13 target date for budget negotiations

In three months’ time, US policymakers will again rehash the budget and the debt limit, which billionaire Warren Buffett called a “political weapon of mass destruction” in an interview with CNBC, saying it shouldn’t be used by politicians to settle budget disputes, as it brings real financial harm.

Although US policymakers haven’t specified the new borrowing limit, the Bipartisan Policy Centre think tank estimated the debt limit should be raised by another $1.1 trillion to help Washington cover its obligations through to December 2014.

Standard & Poor’s estimates the shutdown cost the US economy $24 billion, or $1.5 billion per day, the rating agency said on Wednesday. The agency also believes the shutdown will pare fourth quarter GDP by 0.6 percent.

Even though the White House and lawmakers nearly avoided a technical debt default this time around, the solution is only temporary.

Wall Street rejoiced after news broke the Senate reached a deal to avert a default, the Dow Jones Industrial Average soared 200 points. At the close of the New York Exchange, the Dow Jones climbed 1.36 percent nearly reaching a record, the S&P 500 increased 1.38 percent, and the NASDAQ Composite jumped 1.20 percent.

Asian floors met the news with split enthusiasm, but general market sentiment was high on news the world’s largest economy wouldn’t experience a sovereign debt default.

“There will be resurgence in global markets until we come to the next round of discussions in February next year,” Malcolm Coates, a partner at Deloitte CIS, wrote in a note to RT.

“Can the US afford to default? The answer is a resounding no. There is nothing to gain from a default,”Coates told RT.

U.S.-National-Debt

 

The sky is falling!

“The short turnaround for politicians to negotiate some sort of lasting deal will likely weigh on consumer confidence,” S&P wrote.

The political stalemate in Washington has already prompted consumers to devalue their outlook of the American economy, and hit its sharpest one-week drop since the collapse of Lehman Brothers.

“If people are afraid that the government policy brinkmanship will resurface again, and with it the risk of another shutdown or worse, they’ll remain afraid to open up their check books. That points to another Humbug holiday season,” the agency said in their report.

When Congress neared the ‘fiscal cliff’ in the summer of 2011, consumer confidence fell to a 31-year low in August.

The beauty of the debt is its payment

Coming very close to defaulting on their debt and a last minute limit increase isn’t a new practice in Washington. The US debt ceiling has been in place for nearly a century, and the country’s policymakers have always raised their spending powers, simply borrowing money and writing a big ‘IOU’ to the American people.

America’s debt ceiling, or the amount of debt the government can hold, has been increased 79 times since 1960, under both Democratic and Republican Presidential administrations. The outstanding debt of the world’s largest economy is currently $16.7 trillion, and is spread through domestic and foreign debt. 

“Nobody’s ever been this deep in debt and its going higher and higher,” said Jim Rogers, chairman of Singapore-based Rogers Holdings, told RT.

17trillion_debt

Investors and central banks shouldn’t continue fixating on the politics, but on the growing danger of the debt itself, Martin W. Hennecke, chief economist at Henley Group Ltd, told RT.

“…the real problem is not a debt ceiling, the problem is a debt. And a real issue, from our point of view, the investors and the central banks should be looking at is the danger of it growing and now, more recently, it’s coupled together with the issue of rising interest rates,” Henley Group said.

Rising interest rates will be important to watch because if Treasuries rise, paying off debt will be more expensive for the US.

“Any further increase in the interest rates, generally and on Treasuries, would send the United States into default, not just by disagreement, just because they run out of money,” Hennecke said.

Source >>

Another-Trillion

PS Thumbs down: Chinese rating agency downgrades US

Despite a temporary budget compromise in Washington, China’s Dagong agency has downgraded the United States. Dangong maintains a negative outlook on the sovereign credit, as revenue and GDP fail to keep up with the country’s massive debts.

The Beijing-based Dagong agency, one of the few notable non-US based credit rating agencies, has downgraded America to an ‘A -‘rating from ‘A’.

The move came shortly after Congress and President Obama narrowly averted a technical default. Fear the world’s largest economy may default on its widely dispersed Treasury Bonds is making investors re-evaluate political and financial stability in the US. 

“The government is still approaching the verge of a default crisis, a situation that cannot be substantially alleviated in the foreseeable future,” the Dagong agency said in a press release.

Ratings by Dagong are not internationally recognized, and will likely hold only symbolic, and not market, implications. 

According the Chairman of Dagong, Guan Jianzhong, current agencies tend to arbitrarily favor developed economies.

On Tuesday, Fitch Agency put the United States’ Triple A rating under a negative watch. The debt ceiling debacle in 2011 prompted a drop in the superpower’s rating from AAA to AA+. 

Standard and Poor’s hasn’t issued a warning or downgrade, but released a statement Wednesday calculating the government shutdown didn’t save, but rather cost the US $24 billion.

“The bottom line is the government shutdown has hurt the U.S. economy,” the S&P statement said. 

Overrated

Dagong thinks the US government debt, currently $16.7 trillion, and spread domestically and internationally, is rated too high. 

60 percent of foreign currency holdings are in dollars, with a total dollar equivalent of $6 trillion.

If the US were to renege on its debt obligations, central banks around the world that hold Treasury Bonds as reserves would be in trouble. 

China, which holds roughly $1.3 trillion in US Treasury bonds, and is quite vulnerable to a US economic collapse, criticized lawmakers handling of the debt ceiling debate. State-owned Chinese media lambasted it as a ‘manufactured crisis’. 

Russia, the 11th largest holder of US debt with $131.6 billion, has significantly reduced its stake in Treasury Bonds.

According to Bloomberg, Russia has trimmed its holdings by 25 percent from a record high on October 31, 2010.  

“Such events result not only in short-term jumps in volatility, but also an erosion of trust in the dollar as a reserve currency and the American financial system as a whole,” Nabiullina told Bloomberg in an emailed statement on October 15. 

Russia’s central bank, though not currently reducing US reserves, is looking to diversify their currency reserves to Australian dollars and New Zealand dollars. 

Trapped Treasure

Political ping pong in Washington may affect future Central Bank reliance on US Treasuries, but for now, most banks are stuck with what they have. 

“For governments and central banks that already hold a lot of treasuries, it’s already too late to exit, from an investment point of view,” Martin W. Hennecke, chief economist at Henley Group Ltd, told RT.

If China or any country starts selling their treasuries, it would send the debt servicing price up, which could quickly inject into markets and kill the sale of all remaining bonds, essentially creating a bubble. 

“China is trying to buy more gold, they actually imported over 2 dozen tons of gold over the last two years through HK, and they are trying to increase the gold part of their reserves. It’s difficult for them to do this without driving prices up. Russia and China are both buying,” the Henley Group expert said.

“China understands they made have to eventually write off part of their US Treasury bond part of their reserve currencies,” Hennecke said. 

Source >>

 

Books

Bailout

BAILOUT

An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street by Neil Barofsky
 
In this bracing, page-turning account of his stranger-than-fiction baptism into the corrupted ways of Washington, Neil Barofsky offers an irrefutable indictment, from an insider of the Bush and Obama administrations, of the mishandling of the $700 billion TARP bailout fund. In vivid behind-the-scenes detail, he reveals proof of the extreme degree to which our government officials bent over backward to serve the interests of Wall Street firms at the expense of the broader public—and at the expense of effective financial reform. 
 
During the height of the financial crisis in 2008, Barofsky gave up his job as a prosecutor in the esteemed U.S. Attorney’s Office in New York City, where he had convicted drug kingpins, Wall Street executives, and perpetrators of mortgage fraud, to become the special inspector general in charge of oversight of the spending of the bailout money. From his first day on the job, his efforts to protect against fraud and to hold the big banks accountable for how they spent taxpayer money were met with outright hostility from the Treasury officials in charge of the bailouts. 

Barofsky discloses how, in serving the interests of the banks, Treasury Secretary Timothy Geithner and his team worked with Wall Street executives to design programs that would funnel vast amounts of taxpayer money to their firms and would have allowed them to game the markets and make huge profits with almost no risk and no accountability, while repeatedly fighting Barofsky’s efforts to put the necessary fraud protections in place. His investigations also uncovered abject mismanagement of the bailout of insurance giant AIG and Geithner’s decision to allow the payment of millions of dollars in bonuses—including $7,700 to a kitchen worker and $7,000 to a mail room assistant—and that the Obama administration’s “TARP czar” lobbied for the executives to retain their high pay. 

Providing stark details about how, meanwhile, the interests of homeowners and the broader public were betrayed, Barofsky recounts how Geithner and his team steadfastly failed to fix glaring flaws in the Obama administration’s homeowner relief program pointed out by Barofsky and other bailout watchdogs, rejecting anti-fraud measures, which unleashed a wave of abuses by mortgage providers against homeowners, even causing some who would not have lost their homes otherwise to go into foreclosure. Ultimately only a small fraction (just $1.4 billion at the time he stepped down) of the $50 billion allocated to help homeowners was spent, while the funds expended to prop up the financial system—as Barofsky discloses—totaled $4.7 trillion. As Barofsky raised the alarm about the bailout failures, he met with obstruction of his investigations, and he recounts in blow-by-blow detail how an increasingly aggressive war was waged against his efforts, with even the White House launching a broadside against him. Bailout is a riveting account of his plunge into the political meat grinder of Washington, as well as a vital revelation of just how captured by Wall Street our political system is and why the too-big-to-fail banks have only become bigger and more dangerous in the wake of the crisis. 

 
From Kirkus Review:

A former watchdog in the federal government attacks the officials who perpetuated the financial meltdown by kowtowing to behemoth banks and Wall Street firms while abandoning the public interest.

Barofsky was a federal prosecutor in New York in 2008 when his boss encouraged him to apply for a newly created position in Washington, D.C., as inspector general overseeing the Troubled Asset Relief Program. Created during the waning months of the Bush administration and inherited by President Barack Obama, TARP allocated hundreds of billions of dollars of taxpayer money to allegedly stabilize too-big-to-fail banks, strengthen investment firms and rescue homeowners from foreclosure. Ignorant of cutthroat Washington politics, Barofsky, a Democrat, won confirmation by the U.S. Senate despite Republican Party dominance and set out to account for the TARP spending in a transparent, nonpartisan manner. However, as he demonstrates in his energetically written first-person account, he and his staff met resistance every time they tried to share the truth with Congress, the White House and the American public. The villains are numerous, with Treasury Secretary Timothy Geithner at the top of the list. Of course, it’s possible that some of the negative characterizations shared by Barofsky involve score-settling or well-intentioned differences. That seems unlikely, however, since the author provides copious evidence of the petty attacks on his office by Geithner, other Treasury Department officials, White House staff members, senators and representatives, coddled journalists and ill-informed bloggers. Barofsky’s account contains enough self-deprecation that he does not come off as a holier-than-thou hero.   A courageous, insightful book that offers no cause for optimism.  [from Kirkus review]

FROM BAILOUT 

The further we dug into the way TARP was being administered, the more obvious it became that Treasury applied a consistent double standard. In the late fall of 2009, as I began receiving the results of two of our most important audits, the contradiction couldn’t have been more glaring. When providing the largest financial institutions with bailout money, Treasury made almost no effort to hold them accountable, and the bounteous terms delivered by the government seemed to border on being corrupt. For those institutions, no effort was spared, with government officials often defending their generosity by kneeling at the altar of the “sanctity of contracts.” Meanwhile, an entirely different set of rules applied for home- owners and businesses that were most assuredly small enough to fail. 

Nowhere was the favoritism toward Wall Street more evident than with the government’s approach to AIG, where inviolable contract terms were cited to justify the absurd executive bonus payments as well as far richer payouts provided to the megabank counterparties to AIG’s CDS deals, honoring even their most reckless bets. For homeowners and small business owners, though, contracts went from being sacrosanct to inconvenient irrelevancies. So when mortgage servicers blatantly disregarded HAMP contracts by trampling over homeowners’ rights, Treasury turned to an endless series of excuses to justify its refusal to hold them accountable. Similarly, for more than two thousand auto dealerships, Treasury’s auto bailout team sought to void the contractual rights granted them under state franchise laws to shut them down.

Links 

Another Link to the above video: http://youtu.be/hYIC0eZYEtI

The Best of George Carlin

{ 11 comments… read them below or add one }

William John Meegan December 19, 2013 at 2:49 pm

Don’t you think that the government allows this ‘so-called financial crisis’ to exist in the minds of the people to keep them in constant fear. Do you really believe that the corporations of America will allow their pupper-government to go broke? Do you really think the Plutocracy: elite, wealthy and powerful will allow the entire system to crash?

Believe me the government and its corporate sponsors have not forgotten France’s Bastille Day. There is nobody in power that will not suffer the consequences (forfeit their lives wealth and families) of a meltdown and they know it. It will send this country into total absolute chaos. The military and police will not be able to contain the wrath of the people. You cannot control a people that have nothing to lose.

CORPORATE EXECUTIVES and all persuasions of the elite and wealthy
LAWYERS: the filthiest trash on earth
POLITICIANS OF ALL SORTS
TEACHERS of all institutions
POLICE OFFICERS of all grades
MILITARY PERSONAL of all ranks
ANYBODY IN AUTHORITY will be held accountable.

We as American Citizens do not fear a financial meltdown. THEY DO.

Reply

JAY March 21, 2014 at 3:07 am

and too stay on course those governments that are in major financial doomsday dont blame other nation states for the crumbles because as any good citizen can say it is better to accept the losses than to loose the world THIS HAS COST A LOT OFF TIME ENERGY AND SPACE TO DO MY WORK HERE WHAT STUFF DID THEY EXPECT FROM THE mystery AGREEMENT.

Reply

Ron O. Cook November 5, 2013 at 12:27 pm

TO LEVERAGE EXISTENCE AND NON EXISTENCE… THE BIGGEST GAME IN TOWN.

Not that one is, but that whereby Is, is. Humans leverage from the instant their souls flash forth from the void of the monadic collective to move light into their domain. The light is utilized to amplify their knowing and thereby allows them to ascertain an edge for every event sequence that requires an act of power and control to be used for the SELF. To LEVERAGE the tools of this realm issues from mind that seeks to amplify itself with knowing for knowledge is power and it can be sold to others who are the unknowing if they cannot see past their own selves in the realms of existence. I have billions of tools to leverage all facets of existence here in Time/Space as do my other parts that appear as entities who seek to circumscribe their talents to LEVERAGE. The nuances of leveraging are such fine aspects to know. A woman who has the tools of beauty can wink and move mountains. The key to knowing the power of this universe and all the others is the word LEVERAGE. It allows one to manipulate all known elementals that manifest and some that have not been seen since the prior issuance of tools, to create a universe few of us have ever known. One can go into himself and review his own Akashic memories and ascertain the abject meaning of his/her own passage of merit and ill. The Law of Consequence will eventually catch up with all of us but perhaps we can LEVERAGE that also.

Cheers, Ron O.

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JAY March 21, 2014 at 3:00 am

and too stay on course those governments that are in major financial doomsday dont blame other nation states for the crumbles because as any good citizen can say it is better to accept the losses than to loose the world THIS HAS COST A LOT OFF TIME ENERGY AND SPACE TO DO MY WORK HERE WHAT STUFF DID THEY EXPECT FROM THE mystery.

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Elijah November 4, 2013 at 10:32 am

Perhaps you cannot force the world, only U.N. members, but imagine if country A owes B $200 billion and B owes A $170 billion, the debt should be balaqnced at $30 billion one way A owing B (and not by B or A raising their dollar value the day before the authorization). YES before the vote even goes thru that debt gets settled this way, all countries should agree to freeze their exchange rate, then vote, then balance their debt. With the remainder of who owes who, those being owed do not like bankruptcy, so it should be Chapter 13 budget pay-back. Anybody thoink this would work? And by the way, this is not my first desired suggestion, as an Armageddonist and as Elijah who i know i am, I believe the debt is settled by global destruction and with survivors free of debt.

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William John Meegan October 22, 2013 at 2:12 pm

If the United States is willing to start wars to obtain oil and slave labor and military bases around the world why not do what the Vatican and French Government did to the Templar and declare war on and then the national debt will be wiped clean. It is as simple as that. Case closed.

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j.a. October 21, 2013 at 4:23 am

Security measures on all government traded accounts prime cause act able to be implemented because any clause as an act to follow now be prepared for strong legislation to put in harmony a future with out the downers there is plenty good that deserves better as they should have here in that place just for balance nations are included around the world.

Reply

spiritalone October 18, 2013 at 5:45 am

Diane Reidy HAS opened her eyes, like us.
but the system sent to psychological analysis, as anyone who dares to tell the truth.

http://youtu.be/1XkMgHbqUpg

Reply

Ron O. Cook October 17, 2013 at 4:24 pm

We were fools before Obama and the loud-mouthed practitioners called liberals or democrats. Yes, fools then for listening to their need for our money but now we are at the back door of shear brainlessness. Since I started out as a Democrat and went through being a Republican and later an independent, I guess I know just about all there is to know about Machiavellian Strategy to Leverage Humans out of their money and power. Soon we will be back in the wilderness scratching for worms and eating nuts. One thing, Democrats seem to know how to end civilization for folks. They are the great collective who think they are smarter than the rest of us…what failures they are using Complex Ignorance as their tool. I digress.

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Elijah November 4, 2013 at 10:49 am

Reply to Ron Cook, before he becomes an activist on his own. Genesis says (Jehovah knows what your uncle Laban is doing to you). In this case the surrounding world, the few righteous in it, were Jehovah’s eyes seeing and knowing that it was Jacob getting screwed not Laban. Because Laban did this way with others. Did what? Well Jacob says i live with you, i work free, owing you daily for your welcoming me. And i want your daughter as wife. Your sister my mother sent me, knwing YOU. So Laban plays mr.good-guy provider giving YOU life itself by saying no way, how rude for me to take all your free work. So i expect to pay you for your work. Words sound good, but the translation is, i want to enslave you so you can never go away. And so that i own everything, and you own nothing. This is why when Jacob stupidly believed in Darwin evolution for 7 years, he realized it wasnt his tactics making his sheep spotted and giving Laban few solid-colored sheep. But Laban decided that Jacob did this and knew what he was doing and that Jacob was screwing him over. (Well yeh! Seemed like Jacob’s intent to play out science to win this arrangement over Laban. After all Jacob wanted one wife, (not like the world who went polygamous as if that is prosperity); and now he was tainted by tricked into two. So watch out for those people who get you drunk or drugged. So we can see where Jacob might feel that knowing science from God is the way to get above his family-related abuser. BUT it turned out the science was false. BUT Laban decided to think it true and say see you have science youre screwing me over with. Bottom-line is that Hamurabi came that way and Jacob got the hell out. And Laban tried to make Jacob Israel promise in the name of Jehovah, and Jacob said YOU DO NOT FEAR JEHOVAH nor KNOW JEHOVAH, so i swear and promise in the name that you will fear my father Isaac if you touch me or come near me. And a border stone was set down, as a boundary of threat to Laban not to leave Syria into Canaan. So you see. That was 1761bc. And 50 years later dying at 147, Jacob doesnt say happy i am like grandpa Abram at 175 to die (though ancester Eber died 4 years later at 464), nor did he say happy like dear old dad Isaac who died 27 years ago at 180, but he said miserable has been my life and every one who fucked me over from Esau to Laban to my two sons killing all men of Shechem, to all ten sons lying saying Joseph was dead…. and now you know things are still the same, and that is why they all killed Jesus too. Open your eyes, the hour of collapse is a salvation to those who flee it.

Reply

JAY March 13, 2014 at 3:41 am

must and could be time for a replacement administration if safe too doo soon thats the way the cookie crumbles.

Reply

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