Re: Recession in the US 'has arrived'

On Tue, 08 Jan 2008 21:00:16 -0800, Curly Surmudgeon
<Curly.is.not@xxxxxxxx> wrote:

(snips)

The Democrats aren't going to do any good, it's too late to recover from
this disaster. If Hillary gets the nod then it will be even worse than
Bush43, she still wants to go into Iran!

(beginning of rant)

There is no way to avoid the coming trouble. The U.S.
government has unfunded liabilities of well over 50 trillion
dollars and it can't possibly pay them. Foreigners have
several trillion dollars in U.S. dollars invested in various
dollar-denominated debt instruments and they're starting to
figure out that they can't possibly get that value back.

Any changes any of the politicians could possibly make
wouldn't help. Raising taxes to close the gap between
liabilities and tax receipts would damage the economy.
Cutting the liabilities by cutting the entitlements? Any
party that tried that would be out of office for 20 years.
Not gonna happen. Raising tariffs to increase revenues and
bolster U.S. manufactures? That would trigger retaliatory
tariffs on U.S. goods that would crash the U.S. export
economy. Then foreign goods would be more expensive, U.S.
exports would decline, and we'd be in even worse shape.

The only way out for the politicians is to inflate the money
supply by paying for the entitlements with new money while
continuing to fake the cost of living figures so they can
get ahead of the curve. That's what they're doing now on a
small scale, and the geezers are getting conned by it. So
they'll continue, on a bigger scale. The important change
will have to be away from having the Fed lend the new money
into existence, which also increases the private and U.S.
government debt, and which becomes akin to pushing on a
string as businesses and individuals stop borrowing as they
figure out that they can't possibly pay back the new debt,
and to spending the new money into existence without
bothering to go through the charade of borrowing it. And
that's when the real inflation will kick in.

It helps to understand the difference between illiquidity
and insolvency. When you're illiquid, your assets exceed
your liabilities, and you just need some operating money.
Borrowing makes sense -- stay in business, pay your bills,
make more money, everything's great. (Been there; done
that.) But when you're insolvent, your liabilities exceed
your assets, and borrowing more money just puts you deeper
in the hole, without improving your chances of returning to
financial health. (Never been there; but I've been close
enough to know how much worse it is than mere illiquidity.)
The U.S. government, and some major U.S. financial
companies, aren't merely illiquid; they're insolvent. They
don't need more loans, because more loans would mean more
interest payments, which would make their bottom lines even
worse. They need more net income. And if the government
changes its MO so as to create money without borrowing it,
then the minor problem of being insolvent can be overcome --
at the cost of massive inflation. The government can then
just pay its entitlement liabilities, and literally give
money to the major corporations who need bailing out --
instead of bailing them out with loans which would only make
them worse off.

The trick will be how to disguise such a gift bailout from
the riff raff who still think such things can't, or at least
shouldn't, happen. I suppose simple honesty from the
politicians -- "Citigroup (GM, Ford, whatever) is just too
critical to the U.S. economy to allow it to fail, so giving
them money really is good for everyone" -- would be too much
to expect. Instead, they'll come up with much more creative
ways to do it, such as loans with such low interest rates
that they amount to gifts, or non-recourse loans, or
payments for ill-defined services to the government --
they'll think of something.

We've been going down a dead-end road for a long damned
time. The time to reverse course was at least 70 years ago,
and we didn't. Once we headed down that road, the further
we went, the worse the consequences were going to be when we
finally tried to turn around. Now the road has become so
narrow that we can't even turn around any more. We are
fresh out of options and we're going to go on to the bitter
end. At that end, we're going to have an interesting
combination of commercial and governmental failures, along
with massive inflation. And you know what? We're going to
get what we deserve, having believed all along the way in
the empty promises of our new gods -- the political class.

(end of rant)

--
Robert Sturgeon
Alcohol, Tobacco & Firearms should be a convenience store, not a government agency.
http://www.vistech.net/users/rsturge/
.

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  • Re: Recession in the US has arrived
    ... government has unfunded liabilities of well over 50 trillion ... liabilities and tax receipts would damage the economy. ... The only way out for the politicians is to inflate the money ... don't need more loans, because more loans would mean more ...
    (misc.survivalism)
  • Re: Recession in the US has arrived
    ... government has unfunded liabilities of well over 50 trillion ... liabilities and tax receipts would damage the economy. ... The only way out for the politicians is to inflate the money ... don't need more loans, because more loans would mean more ...
    (misc.survivalism)
  • Re: Recession in the US has arrived
    ... government has unfunded liabilities of well over 50 trillion ... liabilities and tax receipts would damage the economy. ... will have to be away from having the Fed lend the new money ... don't need more loans, because more loans would mean more ...
    (misc.survivalism)
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