Let’s Get Real

Posted by Ray on July 25, 2011 under Economy, Main, Markets, Politics | Be the First to Comment

Listening to the talking heads TV and our political leaders about this debt crisis is merely subjecting you to unneeded heartburn. First and foremost, the USA is not “defaulting” on anything on August 2nd, period. The USA will not be downgraded on August 2nd by any of the ratings agencies, even though we should not be carrying the AAA rating to begin with. Bonds only default is interest or principal payments which will not happen on August 2nd as the Treasury brings in enough money to cover our debt payments on a monthly basis. Social Security checks and Medicaid/care checks will go out and the sun will rise in the East and set in the West.

All that happens on August 2nd is the Treasury Department looses the ability to issue new debt beyond the stated debt ceiling. I have not witnessed such scare tactics in my entire life and the misinformation the media and politicians are giving the public is shameful. In fact this entire debate is shameful as we are not having an honest discussion about debt and the US government. Everything you hear being discussed is merely kicking the can further down the road and I believe the markets will not let this can kicking continue on forever. Everything comes to an end at some point and our crazy spending will have to end and we all need to pay the Piper.

Let’s get real about our debt problem. We are hearing all sorts of nonsense about $4T in deficit reducing spending cuts or a combination of cuts with higher taxes over a ten year period. That means we are raising taxes or cutting spending, or a combination thereof, of $400B a year, big deal. If we subtract the $400B a year from our recent annual deficits we are still running $1 to $1.2T of deficits per year for as far as we can see. These tax hikes and spending cuts are meaningless to our long-term financial health and all the talk we are hearing from Washington or the other experts is meaningless until they lay out the facts like I just did. In my opinion even if we raised taxes and cut spending by $400B a year the USA will be downgraded within 2 years anyhow, which is what should have happened a long time ago.

The talk we are hearing from the left about wasted tax surpluses is so far off base it is ridiculous. The talk from the right about spending controls and how a 4% tax increase will kill jobs is equally as moronic. The surpluses in the late 1990’s and in 2000 were bogus to begin with. We had massive surpluses on Social Security and Medicare which the government simply took and replaced the entitlement surpluses with IOU’s and called them budget surpluses. It was accounting gimmickry and those surpluses should have remained in the entitlement programs. Do tax cuts really spur more jobs? I don’t think so and there is no proof that it does either. What spurred job growth in the 1990’s was technology. What spurred job growth in the 2000’s was housing, both bubbles I might add, but in both cases it was a new “killer app” that spurred economic growth and I do not believe we have anything like that in today’s world. Not to say we couldn’t have a new technology or other “killer app” materializes as fast as tomorrow, but there simply is nothing I see right now that will spur growth and jobs which is the real problem here.

Most people do not want to hear this, but taxes do need to go up, I hate taxes for the record. To prove my point we often hear the right complain that 47% of the USA’s citizens do not pay anything in taxes. Well, if you are going to use that line you simply cannot support tax cuts. Why would I say such a thing? Well, it was the Bush Tax cuts that caused 47% of people to not pay anything, which is not exactly true either, in taxes. The reductions in middle class tax rates were massive and the lowest tax bracket was erased. It is also important to realize that 20-30% of the population will never pay taxes because they do not earn enough to live on.

The Bush tax cuts, all of them, cost the USA $3.7T over a 10 year period or $370B a year, interesting figure don’t you think? The left says the rich need to pay more, but the rich in terms of the Bush tax cuts only account for $700B over 10 years. Raising the top income tax brackets only raises $70B a year which is nothing when we are spending $4T a year. Simply raising taxes on the rich will do nothing to solve our problems as it is the totality of the Bush tax cuts that are part of the problem. I do not like taxes, but let’s get real about this, OK? We cannot reduce our debt with phantom spending cuts and tax increases on a select few people, everyone needs to pay up.

We are in serious trouble and no one has put it all together yet. It is unreal to me that the President can say; “I cannot guarantee that Social Security checks will go out on August 3rd” and no one questioned him about why that would be. Social Security was supposed to be fine until 2036 and self funded but if we cannot issue new debt the checks will not go out… what! Well, our Einstein news anchors and the political talking heads simply do not want you to know that Social Security has no money in it, it is broke. I just talked about this earlier, our political leaders took the surpluses in Social Security and spent it replacing those surpluses with IOU’s. Since Social Security has only IOU’s in order for checks to go out the government must issue debt. That should scare you to death, we have to fund Social Security with debt. That is also why Social Security can never be privatized either. However, no one has put this together yet, unreal.

The fact that the US government cannot do anything without issuing new debt should be a real wake up call for the citizens of the USA, but no one seems to get it. The USA, the so called richest nation in the world, is bankrupt! If we cannot survive without using the credit card we are technically insolvent, if I am wrong what would you call it? The USA has also never paid of our debt, except for when Andrew Jackson was president, and simply rolled over all of our national debt year after year and this was hidden from you by using certain terms like we retired the 30 year treasury instead of we called in and paid off all of our 30 year treasuries, we simply rolled that debt into shorter term debt instruments. The USA also has “grown” our way out of recessions and past debt problems. Growing our GDP is a great way to hide the debt problem and it causes the government to do everything possible to always grow our GDP which is why hedonics accounts for over $2T of our annual GDP, hedonics is made up benefits for certain things like free checking, Google it.

You should be terrified about what you are seeing and not because we are going to “default” but because this whole show is basically telling you how bankrupt the USA really is. If our world shuts down because we cannot issue new debt we are in huge trouble and that is exactly what is happening now. The reasons I have listed here are the reason why everyone should own gold and silver as it is the ultimate hedge against out of control government spending and if the truth was ever told we have already defaulted on our debt through depreciation of the dollar and by simply rolling over old debt into new debt. If we ever really got real about our debt issues I can assure you that the story is even scarier than what I have just laid out. Luckily we have politicians that will always lie to us and hide the truth until it is so obvious you already knew it and it is too late to do anything about it. Good day and good luck.

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Andrew Cuomo, can NY ever catch a break?

Posted by Ray on March 3, 2010 under Politics | Read the First Comment

Haven’t we learned anything about legacy political leaders after the Bush years and countless other Congressional leaders who “inherited” their seat from a parent? Part of the reason the US is in shambles is because we elect these people, why I do not know, and they are ignorant about the problems the country faces. It is no secret that Mario Cuomo was extremely liberal and responsible, in my view, for NY States horrible financial condition because of his socially liberal programs. While I was young during his reign even I knew he was a terrible governor, but we elected Pataki twice so New Yorkers are not known for picking the better candidates.

Now we might be living under another Cuomo who is also a terrible leader and, as Dick Bove claims, largely responsible for the GSE’s collapse. According to Bove, Cuomo’s relentless pursuit to force Freddie and Fannie to loan to the poor led to the GSE’s into buying sub-prime mortgages and eventually their collapse. Frankly, in my opinion, Mr. Bove is correct, you will not hear me agree with Bove much I might add. Cuomo took the GSE’s and many banks to court because of discrimination, some of which I am sure is true, but his main problem was that banks were not loaning money to the poor. Now, I am not a rocket scientist, but I do know if you loan money to poor people who do not have the ability to pay back loans they will eventually default. The banks knew this and that is why they did not lend money to the poor, yes, some discrimination probably existed though.

Because of his zealous behavior we know have had to guarantee Freddie and Fannie for unlimited losses, which is also why the Fed will stop buying MBS’s as well because the GSE’s can now pick up the slack. With NY in such dire straits, and we are, is it wise to elect another lawyer to the governors position? I think not. Surprisingly, I actually like our current governor, who is a Democrat, because for all of his faults he realizes what a horrible position NY is in. He is actually trying to cut spending, but is met with the same corrupt response from the unions and Assembly that usually appears when you try to take money away from their interests.

Patterson is a mess and not the best person for the job, but I would vote for him over Cuomo any day of the week. Of course, Obama and other NY Democrats want him out, are you really surprised over the recent scandals breaking? My belief is that these timely scandals are appearing because Patterson is trying to cut spending which will impact many social programs like schools and welfare. Those are the Democrats pet projects and by cutting spending there, which is the primary reason for our fiscal distress I might add, he was a marked man and is now out.

Cuomo will be a party man upping the spending as much as the market will allow, but that will not be too much more given our deficits. He will do what he is told and not make those hard decisions because he is just like his father, a tax and spend liberal without the knowledge on how to pay for it. It is far easier to get reelected when you make your base happy and paper over the major problems. However, our problems here are so severe they cannot be papered over any longer. They have already robbed the highway and bridge trust fund to pay for the interest on our debt, that money was supposed to be secured for, well, highways and bridges.

How anyone can look to this man or to the Democratic Party in NY is beyond me. They have shown themselves to be horrible when it comes to financial issues and refuse to make the hard decisions. I am referring to NY Democrats not Democrats nationwide. I will not vote for him and I will find it difficult to vote for the Republican challenger, Rick Lazio is potentially the R’s candidate, because politics in NY have not changed. They simply pick the next person in line who is ‘due’ for the next run at a major office. I almost hope we go into receivership as it will let some sane court appoint conservator to get rip of the ridiculous contracts the unions have and, ultimately, uncover all of the corruption we know exists, but has been masterfully hidden from the public.

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Uneasy feeling

Posted by Ray on February 28, 2010 under Politics | Be the First to Comment

As I conduct my regular daily readings of various blogs and news sites I cannot help to get a very uneasy feeling brewing out there. The negativity is running very high in the political realm and from those who report on economic events. I keep seeing tag lines like; “expect more social unrest” when people report on things like the Berkley protests, which are disturbingly violent I might add. When I hit my favorite Libertarian blogs the feeling is more uneasy as I keep seeing words like revolution being used.

When you add in the Washington factor where our elected leaders are going to hammer unpopular legislation through, with no compromise, it makes me even more uneasy. There is no doubt that we need to make painful decisions in order to get our fiscal house in order, but that usually means less spending, not more. Unfortunately, our current political leaders do not see it that way and are hammering through more spending, in particular the health care reform bill. Look, I know we need to do something, but not this. Deducting money from Medicare and then adding it back in to other areas is not rational, this bill is not paid for and will make costs rise not fall.

Regardless, people are not happy about unpopular legislation being thrown down their thoughts. The kicker is that people like Nancy Pelosi come out and say that programs like Social Security and Medicare were unpopular when they were enacted. I guess what she means is that politicians know what is best for Americans and we should keep our mouths shut. We all know how right politicians are their track record speaks for itself just look at the stellar decisions they made over the last 10 years. Iraq was a great decision, the prescription drug coverage was fantastic (albeit unpaid for), the PATRIOT Act was a winner, free speech zones were fantastic, how many stimulus bills did we have again – they worked out well, eliminating a paper trail for voting is a sure disaster waiting to happen, and need I go on?

Politicians do not know what is good for Americans, they know what is good for them and getting reelected. Well, they did used to know how to get elected until now. If they pass this next unpopular batch of legislative nightmare on the docket they are in for a rude awakening come November because the people are coming for them. My only hope is that people come for them at the polls and not in any other way. Based on what I have read combined with the recent plane crash in Texas into the IRS building I think we might see more people going out to make a statement. Meaning, some nut job will more than likely blow something up or worse.

Who knows what will happen in the future, but we know that the average person feels left out right now. Wall Street got their massive bonuses and, for them, nothing really changed with the exception of having to play defense in the media. At the end of the day, the average person knows they got nothing over the past 2 years except for a higher future tax bill and, maybe, they got to keep their job, but we know about 20% of Americans were not so lucky as they are either unemployed or underemployed. Wall Street though, they are fine. Washington, well, they are doing OK as well as campaign contributions, from Wall Street, are still coming in and many have received raises. Clearly, there is a double standard and John Edwards was completely right when he said there are 2 Americas.

Discontent is here and that discontent could become a powder keg if not rectified. The unfortunate thing is I do not see how the public can be pacified, especially as this thing we are in deepens as we are now seeing. Things could get ugly and politicians need to figure out that they are representing the people and start acting that way. It is beyond me how they cannot see that Americans view them as being on the wrong path, but, again, that is politics and they will be surprised if they get voted out in November.

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