Posts Tagged ‘Treasury’

‘No Risk’ Of US Credit Downgrade? Clueless Timothy Geithner Has GOT To Go

August 8, 2011

Let the words of Turbo Tax (so named because the man who would be charged with enforcing US tax laws and policy failed to pay his own damned taxes and then blamed it on Turbo Tax) Timothy Geithner now resonate throughout the land:

That now proven-to-be-utterly stupid pronouncement was not what people who had something of an actual clue were saying prior to the debt deal:

Analysis: U.S. credit downgrade ‘inevitable’
By Daniel Stone | The Daily Beast – Mon, Jul 25, 2011

Only seven days stand between the U.S. and the effects of a credit default. But a downgrade of the nation’s stellar AAA credit rating seems a lot more likely, and a lot sooner.

The White House had been alerted repeatedly over the past month by rating agencies that without a strong, long-term plan to restructure the country’s debt, they would lower America’s credit rating as soon as this Friday, according to two officials familiar with the process. The White House was warned that the deal would have to be significant—and not a short-term fix over the next few days to avoid a credit drop.

Which makes it worth asking: Just what DOES this fool actually understand?  And why on earth should anyone believe anything he says after this???

Notice that the following article was questioning Geithner’s basic intelligence well before the S & P decision to downgrade the US credit rating Friday at a time when maybe Geithner could have turned out to be correct.

Geithner Downgrades His Own Credibility to Junk: Jonathan Weil
By Jonathan Weil- Apr 20, 2011 4:00 PM PT

Fox Business reporter Peter Barnesbegan his televised interview with Treasury Secretary Tim Geithner two days ago with this question: “Is there a risk that the United States could lose its AAA credit rating? Yes or no?”

Geithner’s response: “No risk of that.”

“No risk?” Barnes asked.

“No risk,” Geithner said.

It’s enough to make you wonder: How could Geithner know this to be true? The short answer is he couldn’t.

All you have to do is read the research report Standard & Poor’s published on April 18 about its sovereign-credit rating for the U.S., and you will see it estimated the risk of a downgrade quite succinctly. “We believe there is at least a one-in-three likelihood that we could lower our long-term rating on the U.S. within two years,” said S&P, which reduced its outlook on the government’s debt to “negative” from“stable.”

There you have it: Geithner says the chance of a downgrade is zero. S&P says the odds it will cut its rating might be greater than one out of three.  So who are you going to believe? Geithner? Or the people at S&P who actually will be deciding what S&P will do about S&P’s own rating of U.S. sovereign debt?

It would be one thing to express the view that a downgrade would be unwarranted, or that the chance of it happening is remote. Either of these positions would be defensible. Geithner went beyond that and staked out an absolutist stance that reeks of raw arrogance: There is no risk a rating cut will occur. He left no room for a trace of a possibility, ever.

Battling Barney

The mystery is why Geithner would say such a thing. What’s he going to do if S&P or some other rating company winds up disagreeing with him? Send Barney Frank to beat them up?  The problem for leaders who make indefensible claims like this one is that, after a while, nobody knows whether to believe anything they say. Just remember all those government officials inGreece, Ireland and Portugal who kept saying their countries didn’t need bailouts, long after it became clear they did.

This was the same answer Geithner gave during an ABC News interview in February 2010, when asked if the U.S. might lose its AAA rating. “Absolutely not,” he said. “That will never happen to this country.” So, an asteroid could destroy the entire Eastern seaboard 100 years from now. And, in the world according to Geithner, we’re supposed to believe America’s top rating would be safe.

Perhaps Geithner would be well-positioned to make such assessments if he were the only person on the planet with the authority to grade sovereign debt — and if there were zero risk that he would ever die. Not only is Geithner mortal, he doesn’t even work for a nationally recognized statistical rating organization.

[…]

Timothy Geithner needs to go.  He needs to go like three years ago.

Geithner is the epitome of just how profoundly out-of-touch and arrogant Barack Obama and his failed administration is.

Case closed.  Geithner has got to go.

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Who’s Fearmongering The Economy? Obama Speaks, And 30-Year Bond Is ‘Dragged To The Slaughterhouse’

July 19, 2011

The mainstream media would never make this connection (at least, not until a Republican is president again), but let it be known that the slaughter of the 30-year long bond was the DIRECT RESULT of Barack Obama saying he will veto any bill that seeks to balance the federal budget.

Obama wants reckless spending until America financially implodes.  Investors are going to get wise to the fact that there won’t BE a 30-year Treasury bond in thirty years.  Because there won’t be a viable United States to make good on it.

As Obama Says He Will Veto Any Republican “Cut, Cap” Deficit Bill, Long Bond “Dragged To Slaughter House”
Submitted by Tyler Durden on 07/18/2011 12:38 -0400

Just because someone is dead set on making Apple the only flight to safety in the world (and Gold of course, but unlike the iPad one can’t really eat this particular tradition), around the time (10 minutes ago) Obama threatened he would veto the Republican proposed vote to raise the debt ceiling coupled with a cap on spending and balanced budget amendment to the constitution, the selling off spilled over to Treasurys, which as the chart below demonstrates are broadly lower across the curve, but most emphasized at the 30 Year spot, which as Russ Certo says (see below) is being “dragged to the slaughter house.” Alas, judging by bank trading today the 2s30s steepening is completely irrelevant for bank stocks, for the simple reason that i) nobody needs any new mortgages and ii) nobody actually pays their mortgages. This is the second day since last week in which there is coordinated selling in stocks and bonds. Expect much more bond weakness with each day there is no bond deal.

Commenting on the move, Gleacher’s Russ Certo told Bloomberg that “vigilantes make a symbolic statement” about debt ceiling negotiations. “It’s the issue most sensitive to government ineptitude” Certo says of 30-yr bond “It’s all about the long bond as the 10-yr is being dragged to the slaughter house.” We couldn’t have said it better.

It’s long past time to realize that Barack Obama is an enemy to business, he is an enemy to the U.S. economy.  And either Obama goes or America goes.

I’ve been pointing out that business leaders have predicted that Barack Obama would destroy the U.S. economy.  I can literally quote myself quoting myself quoting those business leaders on that.  From my February 13, 2009 article titled, As Economy Tanks Under Obama, CEOs, Investors Say, “We TOLD You So”:

And what is causing this incredible momentum to the economic meltdown under Obama’s watch?

Let me quote myself – even as I quote from the September/October issue of Chief Executive Magazine:

People are most concerned about jobs right now; maybe they should stop listening to mainstream media ideologues and start listening to the people who actually create jobs:

Chief Executive Magazine’s most recent polling of 751 CEOs shows that GOP presidential candidate John McCain is the preferred choice for CEOs. According to the poll, which is featured on the cover of Chief Executive’s most recent issue, by a four-to-one margin, CEOs support Senator John McCain over Senator Barack Obama. Moreover, 74 percent of the executives say they fear that an Obama presidency would be disastrous for the country.

“The stakes for this presidential election are higher than they’ve ever been in recent memory,” said Edward M. Kopko, CEO and Publisher of Chief Executive magazine. “We’ve been experiencing consecutive job losses for nine months now. There’s no doubt that reviving the job market will be a top priority for the incoming president. And job creating CEOs repeatedly tell us that McCain’s policies are far more conducive to a more positive employment environment than Obama’s.”

Disastrous for the country.” That doesn’t sound good.  And that’s about as optimistic as the CEO’s get about Barack Obama:

“I’m not terribly excited about McCain being president, but I’m sure that Obama, if elected, will have a negative impact on business and the economy,” said one CEO voicing his lack of enthusiasm for either candidate, but particularly Obama.

In expressing their rejection of Senator Obama, some CEOs who responded to the survey went as far as to say that “some of his programs would bankrupt the country within three years, if implemented.” In fact, the poll highlights that Obama’s tax policies, which scored the lowest grade in the poll, are particularly unpopular among CEOs.

Bankrupt the country within three years.” There.  You want socialism, you can have it.  “Spread the wealth around” so that country itself ultimately becomes as broke as the defaulting homeowners and the defaulting mortgage houses we keep hearing about.

The Chief Executive Officers were very clear in their assessment: an election of Barack Obama would result in an economic disaster.  And don’t think that a significant part right now of the terrible climate for the economy, and for business and jobs, is who is running the show.

Obama’s disastrous economic policies would “bankrupt the country within three years.”  And here we are, two years and seven months later, facing default.  We’re right on schedule.  And the CEOs had the economic understanding to recognize that it would ALL be Obama’s fault.

Now, the only thing that Democrats are skilled in (to put it the other way, they are incompetent at everything else), is demonization.  Democrats know how to demonize, demagogue, fearmonger and backstab better than anyone on the planet, bar none.

But business experts PREDICTED we would be in this situation; and they well understood and continue to understand who is causing this crisis: Barack Hussein Obama.

I also wrote an article earlier this year titled Instability, Food Riots And A Heaping Dose Of ‘I Told You So’ which referenced my November 24, 2008 article titled Renowned Economic Forecaster Says US Headed For Total Collapse.  The 2008 article contained a prediction by Gerald Celente that under Obama, we would have revolution, food riots and tax rebellions by 2012.  And we’re right on schedule.

This is why I have been so angry.  When I heard those Jeremiah Wright tapes (the racist, Marxist, anti-American “reverend” whom Obama called his “spiritual mentor” for over 20 years), I knew that Barack Obama was a truly evil man. You don’t sit in a toxic, poisonous, hateful environement like that for that long if you aren’t genuinely evil yourself.  And I knew that we were headed for “God damn America.”  It was as though I had had a vivid vision of the future – culminating in the implosion and collapse of the country that I have loved and served.

We’ve got a top very-recently former SEIU official caught on tape talking about deliberately imploding America by deliberately destabilizing the already destabilized housing mortgage crisis.  And I point to Obama’s words regarding SEIU: “Your agenda is my agenda (3:15 in the video below).”  He promised SEIU “to make your agenda a reality” (1:22 into the video below).

And prior to the SEIU (whose agenda is Obama’s agenda) official describing the agenda to financially implode America, I was writing about the liberal goal of the destruction of America by means of the “Cloward and Piven” approach to implode America through the sheer massive weight of its welfare system.

Things are bad.  And they’re certainly going to get worse.  Not that the man we foolishly and despicably elected to be our president gives a damn.

Fearmongering Obama Holding Gun To Seniors’ Heads With Social Securty Threat. The FACT Is He Is A Lying Demagogue

July 18, 2011

The words of Barack Hussein Obama, our fearmonger-in-chief:

Obama in an interview with CBS said he couldn’t guarantee Social Security checks would be sent out on Aug. 3 if Congress did not raise the debt ceiling by Aug. 2, when the Treasury Department has said it will no longer have the money to pay all of the U.S. bills

Republican Allan West is entirely right in saying, “That’s fear mongering that’s not leadership, that’s sad and pathetic.”

Allow me to point out first of all that this fearmongering from Obama is nothing new.  Allow me to quote a Wall Street Journal article from almost immediately after Obama was sworn in as president:

“President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression. First, he did so to win votes in the November election. He has done so again recently to sway congressional votes for his stimulus package.”

Obama’s fearmongering then resulted in our undertaking a suicidal $3.27 TRILLION pork-laden “stimulus” that has massively failed to do what Obama promised it would do at a giantic cost to our children.  But he is an evil, cynical loathsome man who has experience in the fact that the lowest common denominator often wins.

Let’s move on to a demonstration of a man who is A) a liar; B) a fearmonger; and C) the worst kind of demagogue.  Let me begin by citing the Bipartisan Policy Center:

Bipartisan Policy Center: U.S. Won’t Default on Debt If Congress Fails to Raise Debt Ceiling
Posted in Weekly Standard – 8 July 2011 – No comments

With under a month left until the U.S. hits its statutory limit to borrow more money, Republicans and Democrats continue to disagree about what exactly would happen if Congress and the president fail to reach an agreement that raises the debt ceiling.

“Failure to raise the limit would precipitate a default by the United States,” wrote Treasury Secretary Timothy Geithner earlier this year. No, that’s not true, say Republicans. There’s enough federal revenue to pay the interest on the debt as well as fund the troops and entitlement programs.

According to a study by the Bipartisan Policy Center (BPC), Treasury could indeed avoid a debt default by prioritizing payments, but failure to raise the debt ceiling would mean deep and immediate cuts.

Which is to say that Democrats are lying and fearmongering, and Republicans are telling the truth.  But seriously what else is new???

And, with that, a piece of an article from Market Watch that provides the numbers to support what the Republicans are saying and to factually disprove what lying Obama is saying:

Q: What is a default?

A: In this case, a default would be the failure by the U.S. Treasury to make payments of principal or interest on its debt in a timely manner.

Q: In a given month how much does the Treasury owe as interest on its debt?

A: Roughly about $15–20 billion (more on this in a moment).

Q: How much revenue does the Treasury take in on average in a month?

A: Roughly about $200 billion.

Q: Are you saying the Treasury could pay interest on its debt 10 times over (or more) from monthly income?

A: Yes.  Therefore the likelihood of not paying interest on its debt is zero.

Q: But, what about redeeming bonds that come due?

A: As bonds come due, the Treasury would again use monthly income to pay them off. This would lower the debt owed beneath the so-called debt ceiling.  Then, the Treasury could turn around and issue debt in that amount up to the debt ceiling.

Q: Why then do Treasury Secretary Geithner and others in government make such apocalyptic statement about the horrors of default.

A: I’m afraid Secretary Geithner and others in government are doing the moral equivalent of yelling “Fire!” in a crowded theater and they are doing so for political reasons rather than financial reasons.  They simply do not want any interruptions in the bloated spending underway in Washington and they want to scare Americans into thinking the end of the world is nigh unless the gravy train keeps chugging along.

Math is hard for politicians

Now, let’s do the math to flesh out some of these points.  I know that for many politicians and pundits math is hard, but I’ll try to make it as simple as possible. If we do not raise the debt ceiling by August 2nd, we will not default on Treasury obligations.  Nor, will we have trouble making Social Security payments.  However, there would be a big drop — roughly 44% — in government spending because that percentage represents the difference between government revenues which would be about $200 billion for the full month of August and $172 billion for August if we start counting after the first week when the deadline hits.  Spending is slated to be over $300 billion that month.

Here are the numbers from an excellent and highly detailed study by the Bipartisan Policy Center (BPC) quoted in this piece [emphasis added]:

…The BPC study found that the United States is likely to hit the debt limit sometime between August 2 and August 9. “It’s a 44 percent overnight cut in federal spending” if Congress hits the debt limit, [BPC’s Jay] Powell said. The BPC study projects there will be $172 billion in federal revenues in August and $307 billion in authorized expenditures. That means there’s enough money to pay for, say, interest on the debt ($29 billion), Social Security ($49.2 billion), Medicare and Medicaid ($50 billion), active duty troop pay ($2.9 billion), veterans affairs programs ($2.9 billion).

That leaves you with about $39 billion to fund (or not fund) the following:

Defense vendors ($31.7 billion)

IRS refunds ($3.9 billion)

Food stamps and welfare ($9.3 billion)

Unemployment insurance benefits ($12.8 billion)

Department of Education ($20.2 billion)

Housing and Urban Development ($6.7 billion)

Other spending, such as Departments of Justice, Labor, Commerce, EPA, HHS ($73.6 billion)

The decision to prioritize payments would fall on the Treasury department, and Powell points out it would be chaotic picking and choosing who gets paid (in full or partially) and who doesn’t…

No doubt picking and choosing who gets paid and who doesn’t would be chaotic.  And, lots of programs would not get their funding and that would lead to plenty of screaming.  Nonetheless, it should be clear from this exactly how much we are spending in excess of government revenues.  And, that could and should lead to a sober assessment of what government can and cannot do.

We can easily make all of our debt payments (both interest and principal), our Social Security payments, our contributions to Medicare and Medicaid, our payments to our active duty soldiers and provide funding to the VA system.  With room to spare.  Barack Obama and Timothy Geithner (a lying weasel who didn’t pay his own taxes) are lying weasels.

They are treacherous and un-American.  They are the very worst kind of cockroaches.  They represent everything that is wrong with this country’s political system.  What Obama is doing is low and loathsome beneath contemptible.  The only way that we wouldn’t send out Social Security checks is if Obama decides to fund demonic ACORN instead of sending out those checks (see here and then see here and here).  And the scumbag might actually do that because he’s simply that wicked and depraved and uncaring about the American people or their suffering.

Obama – the liar, the demagogue, the fearmonger – falsely demonized Republicans by claiming that they were using the debt ceiling as a gun to the American people’s headsHE’S THE ONE USING THIS ISSUE LIKE A GUN.

This is what happens in God damn America.

The beast is coming.  And with Obama’s help imploding America, he is coming soon.

Obama Sets Record With Biggest Deficit In History

March 11, 2010

The left told us that Obama’s was a historic presidency.  And they were right: he just smashed his own record for massive and totally unsustainable deficits.

Budget deficit sets record in February
By MARTIN CRUTSINGER (AP)

WASHINGTON — The government ran up the largest monthly deficit in history in February, keeping the flood of red ink on track to top last year’s record for the full year.

The Treasury Department said Wednesday that the February deficit totaled $220.9 billion, 14 percent higher than the previous record set in February of last year.

The deficit through the first five months of this budget year totals $651.6 billion, 10.5 percent higher than a year ago.

The Obama administration is projecting that the deficit for the 2010 budget year will hit an all-time high of $1.56 trillion, surpassing last year’s $1.4 trillion total. The administration is forecasting that the deficit will remain above $1 trillion in 2011, giving the country three straight years of $1 trillion-plus deficits.

The administration says the huge deficits are necessary to get the country out of the deepest recession since the 1930s. But Republicans have attacked the stimulus spending as wasteful and a failure at the primary objective of lowering unemployment[Editorial note: The Republicans are right, and the American people know it.  The stimulus is a gigantic porker which was recently upgraded as costing a massive $862 billion from the previous estimate of $787 billion.  But the real cost is actually $3.27 TRILLION!!! And contrary to Obama’s utterly false claims, only SIX PERCENT of Americans believe that the stimulus has created any jobs at all].

The administration defends the economic stimulus bill that Congress passed in February 2009 with a pricetag at the time of $787 billion as the right medicine to get the economy back on its feet. President Barack Obama has said even more is needed to battle an unemployment rate that remained stuck in February at 9.7 percent.  [Editorial note: When Obama was elected, unemployment was at 6.6%.  He promised that his stimulus would prevent unemployment from reaching 8%.  The stimulus failed by Obama’s own standard.  To try to explain away the failure of his policy, Obama created the nonexistent category of “saved jobs.”  But economists point out the following: “One can search economic textbooks forever without finding a concept called `jobs saved.’ It doesn’t exist…”]

The White House says that job creation will remain a top priority, hoping to convince voters that Obama did not spend too much time during his first year in office trying to get Congress to pass health care reform[Allow me to editorially interrupt this spin to point out that ObamaCare is the top priority, with Obama hoping to convince liberals that they need to pass this incredibly unpopular bill no matter how many Democrats lose their seats in order to “maintain a strong presidency.”  And in point of fact, they have done little else this entire year].

The government’s monthly budget report showed the record $220.9 billion deficit for February reflected outlays of $328.4 billion and revenues of $107.5 billion. The February receipts marked the first time that revenues are up compared with the same month a year ago since April 2008. Revenues had fallen for 21 straight months as the recession cut into both individual and corporate income tax payments.  [Editorials note: And yet Obama is selling his healthcare takeover as “deficit neutral” on the incredibly risky assumption that tax revenues will miraculously massively increase.  So Obama is explaining away his deficits by pointing to the frighteningly low revenues even as he bases his health care on the assumption that those same revenues will massively increaseAnd if Obama is wrong, the trillions of dollars of new spending will implode our economy].

Deficits normally shoot up in February because it is a month when the government makes large refund payments to individuals and corporations as part of the tax filing process. Those payments were boosted this year by various tax credits that were expanded or added as part of the government’s stimulus efforts including the “Making Work Pay” tax credit and the first-time home buyers tax credit. [Editorial note: Which doesn’t in any way change the fact that this February’s frighteningly low revenues continues a 21-consecutive month trend.  That in addition to the fact that the stimulus is contributing to our deficit crisis].

Through the first five months of the budget year, government revenues totaled $800.5 billion, down 7 percent from a year ago, while outlays totaled $1.45 trillion, up a slight 0.1 percent from a year ago.

The deficit of $651.6 billion through February is up by 10.5 percent from the $589.8 billion deficit run up during the first five months of the 2009 budget year. The government’s budget year begins on Oct. 1.

The budget that Obama sent to Congress in February projects that the deficits over the next decade will total $8.53 trillion. But the Congressional Budget Office last week put the 10-year total even higher at $9.8 trillion. Part of the reason for the $1.2 trillion difference is that the CBO is projecting slower economic growth and thus less tax revenues than the administration over the next decade[Editorial note: Number one, this proves we can’t trust the Obama administration or the government’s cost estimates to do anything other than be lowball figures.  Number two, passing trillions in new spending via ObamaCare is hardly the thing to do given the fact that we will have LOWER revenues rather than higher ones].

The administration has maintained that the country must run large budget deficits until the economy has begun to grow at a sustainable pace that is bringing the unemployment rate down. Only then, the administration says, should the government focus on getting control of the deficits.  [Editorial note: So I’m flat broke and deeply in debt.  Clearly the thing I need to do is go on a massive spending spree on my credit card in order to get out of debt!!!].

Obama has created by executive order an 18-member fiscal reform commission that has been charged with coming up with a plan to shrink the deficit to 3 percent of the economy within five years. The plan is scheduled to be unveiled in December, after the midterm congressional elections.  [Editorial note: What Obama has in fact created is a tool to weasel out of his repeated campaign promise not to raise taxes on “95% of Americans” by so much “as one dime”].

With the economy so weak, the interest rates that the government has to finance the flood of red ink have remained low. However, economists are worried that the favorable outlook on interest rates could change quickly if investors, including foreign investors, start to worry about the government’s commitment to restraining future deficits. China is the largest foreign holder of U.S. Treasury securities [Editorial note: First of all, the Associated Press is factually wrong: Japan is now our largest holder, as China is jumping off the proverbial sinking ship.  And to make things even worse, China is preparing to abandon the dollar altogether.  Second, just to clarify, what this paragraph means is that the moment our interest rates go up – which they have to do in order to deal with our debt/deficits – we will have a double-dip recession.  And the second dip may well be worst than the first].

Through the first five months of this budget year, net interest payments totaled $86.5 billion, up 15.3 percent from a year ago[Editorial note: this is exactly what happened to Greece; and we are not far away from the same sort of implosion occurring here.  Obama’s “solution” is to borrow more money in more unsustainable spending which will ultimately push our interest payments rates up and up].

In its report last week, the CBO predicted that the government debt held by investors would climb from $7.5 trillion at the end of last year to $20.3 trillion in 2020. CBO forecast that interest payments would more than quadruple from a projected $209 billion this year to $916 billion annually by the end of the decade [Editorial note: So let’s just keep spending and spending and spending until we fly off a cliff to our deaths].

Congratulations on your historic presidency, Mr. Obama.  Congratulations on your new record as the biggest spender in the history of the human race.

Obama promised hope and change.  And he’s delivering.

A second Great Depression will be “change.”  And there are plenty on the left – who embrace the Cloward-Piven strategy – who are “hoping” for it.

Obama’s Plunging Polls Correspond To America’s Plunging Economy

July 31, 2009

President Obama’s biggest calender item yesterday was his scheduled “having a beer” with his good friend Henry Louis Gates and the man that both Gates (directly) and Obama (indirectly) called a racist, Sgt. James Crowley.  By sitting down for a beer, Obama was attempting to turn the giant turd he laid at his fourth prime time news conference in six months (which is how many George Bush gave in 8 entire YEARS btw) into a gold-plated turd.

I hope the three men clink their glasses to Obama’s plummeting poll numbers and America’s plummeting economy while they pondered why ‘Skip’ Gates is such a bigot and why Barry Obama acted so stupidly by claiming the Cambridge police “acted stupidly.”

Rasmussen has Obama at a -12 approval rating measuring the difference between those who strongly approve and those who strongly disapprove of his presidency; and he is now at only 48% approval – a far cry from his halcyon days of being in the high 60s.  Only 34% of likely voters think the country is headed in the right direction.  And 49% believe America’s best days have come and gone, versus only 38% who think the country will improve.

The hope that once swelled the hearts of Obama voters is fading fast – especially in the swing states he needs to win to have any chance at either future re-election or even current relevance.  “Hope and change” now means, “I hope I still have some change left in my pocket at the end of the month.”

As U.S. recession bites, Ohio hopes fade for Obama
Thu Jul 30, 2009 11:12am EDT
By Nick Carey

TOLEDO, Ohio (Reuters) – Hope and jobs are in short supply in Ohio eight months after President Barack Obama won the recession-battered state in the 2008 election with promises of a better future.

“People were looking for a savior to get us out of this mess and that’s why they voted for Obama,” said Jeff Fravor, 55, a retired train conductor on his way to breakfast on the outskirts of Toledo.

“I’ve nothing against Obama personally, but he’s new to the job and ‘hope’ won’t fix this mess.”

Candidate Obama delivered his message over and over again in Ohio, a politically diverse battleground state that often decides presidential elections. Obama went back to the state last week with an approval rating below 50 percent.

A Quinnipiac University opinion poll released on July 7 showed the Democratic president’s popularity in America’s seventh most populous state had fallen to 49 percent from 62 per cent in May. Even worse for Obama, 48 percent said they disapproved of his handling of the U.S. economy, with 46 percent approving.

The reason for the poll drop? Rising unemployment.

The downturn has pummeled Ohio’s manufacturing base.

“As jobs have gone away, that has created a true focus here on job creation,” said Andrew Doehrel, head of the Ohio Chamber of Commerce. “People look at what’s been done on a federal level in terms of bailouts and stimulus and they see that this has not equated to anything more than lost jobs in Ohio.”

Ohio has not been the state hardest hit by the U.S. recession that began in December 2007, but it is not far off.

Unemployment in the state of 11.5 million people reached 11.1 percent in June, compared with the national rate of 9.5 percent, making it the seventh highest rate in the country. Michigan was first with a rate of 15.2 percent.

TWICE THE UNEMPLOYMENT

Ohio’s unemployment has nearly doubled from 5.7 percent in January 2008. That is not a good start for Obama in a state with 20 electoral votes that could be vital for his re-election effort in 2012.

“It’s not a surprise Obama’s numbers have fallen here and they’ll continue to go down as long as jobs keep being lost here,” said Jim Rokakis, treasurer for Cuyahoga County, which includes Cleveland where unemployment hit 10.1 percent in June. “Americans always want a quick fix to problems, but they are going to relearn patience this time round.”

Toledo in northwest Ohio has been especially hard hit by the recession, in particular because of the auto industry-related plants that dot the area.

“Obama set expectations too high here and six months later, things haven’t got better, so some people are losing hope,” said John Johnson, branch manager of the Southeastern Container Inc plant in nearby Bowling Green, which makes plastic bottles for Coca-Cola Co..

Johnson said he had to turn away qualified workers from auto-related plastic companies seeking work. “When people are out of work for a long time, they become very impatient.”

Unemployment hit 14.2 percent in June in Toledo, a city of about 315,000 people. Many of the roads in and out of the city are in a poor state of repair and many downtown stores have closed down. Manufacturing brought the city wealth, so plant closures have taken a heavy toll.

‘DEPRESSION’

“We’re not just in a recession here, it’s a depression,” said Toledo Mayor Carty Finkbeiner. “This downturn has left Ohioans wondering if we’ve lost our place in the sun.”

According to a midyear survey from real estate service company CB Richard Ellis Reichle Klein, Toledo’s retail vacancy rate hit a record level of 14.6 percent.

“Everybody is having a hard time just existing right now,” said Bob Shelley, 72, who runs Shelley Rubber Stamp & Sign Inc for his father in downtown Toledo. “All businesses have been hit, so everybody’s giving everybody a break right now.”

Shelley said he felt Obama had an overcrowded agenda.

“He’s trying to satisfy everyone at once and he’s trying to rush everything through Congress,” he said. “But if you rush like that, you’re bound to make mistakes.”

Angie Carter, 32, a market research analyst in downtown Toledo, said she voted for Obama and he just needed time.

“This is a recession and we live in a manufacturing state,” she said on a cigarette break. “It’s going to take time to turn it around.”

When touting his $787 billion stimulus package earlier this year, Obama cautioned that a recovery would take time.

The president also has time to recover in Ohio if jobs come back. Aware of its importance, he was there last week to tout his healthcare plans. The last candidate who won Ohio but lost the election was Republican Richard Nixon in 1960.

Rokakis said Obama’s speech in Cleveland on July 23 was no accident.

“Obama is a smart man and he knows how important Ohio is,”

The article portrays Obama as having said that recovery would take time under his stimulus.  It fails to mention that the Obama administration – in pushing the failed stimulus package through Congress – predicted that unemployment would rise no higher than 8% if his stimulus passed.

As bad as things are now, there is no realistic reason to believe they will get better.  Meredith Whitney, the Wall Street analyst who gained much credibility in predicting the mortgage meltdown, is predicting unemployment will rise to 13% or higher.

The date for a housing market recovery stretches to 2015.

Obama’s deficits are soaring to stunning levels.  Back in March the Congressional Budget Office estimated that Obama’s “huge annual budget deficits that would force the nation to borrow nearly $9.3 trillion over the next decade — $2.3 trillion more than the president predicted when he unveiled his budget request just one month ago.” And that mindbogglingly ginormous figure doesn’t include the trillion plus hole we would dig passing Obama’s health care plan.

As the Wall Street Journal’s Michael Boskin puts it:

Mr. Obama’s $3.6 trillion budget blueprint, by his own admission, redefines the role of government in our economy and society. The budget more than doubles the national debt held by the public, adding more to the debt than all previous presidents — from George Washington to George W. Bush — combined.”

Obama has blamed President Bush for the deficits, but not only has he racked up far more debt than did Bush, but as a Senator Obama actually voted for the very Bush-budget that Obama is now blaming on Bush – including the $700 billion TARP bailout.

It is also worth knowing that the federal government has exposed itself to $23.7 trillion in risks with its bailouts since TARP (which is turning out to be a thinly disguised anagram for “TRAP”).

Those massive deficits guarantee future economic pain, but recent developments are beginning to show that our future pain may already be here right now:

Weak Treasury Auctions Raise Worries About US Debt Burden
By: Reuters     Wednesday, 29 Jul 2009

The U.S. Treasury sold $39 billion in five-year debt Wednesday in an auction that drew poor demand, raising worries over the cost of financing the government’s burgeoning budget deficit.

It was the second lackluster showing in as many days,  convincing analysts that the stellar results of debt auctions just a few weeks ago were a fluke and that Thursday’s $28 billion seven-year offering could suffer a similar fate.

Under the weight of the ballooning deficit, the government has raised auction volumes and analysts now wonder whether the strain on the market is showing.

“Obviously everyone is inferring that tomorrow’s won’t be good either,” said James Combias, head of government bond trading at Mizuho Securities USA in New York. “Maybe you will see more interest tomorrow but I think the increase in the auctions and the size of them may be starting to have an effect. These are very large auctions.”

We are witnessing a terrifying unfolding scenario in which “Interest due on the debt could easily be $1 trillion toward the end of the next decade.”

Like the Texas Hold’em player who pushes every last dime into the center of a poker table, the federal government is now “all in” with its commitment to push the national debt to 50% of GDP. The Congressional Budget Office believes that the Treasury will have to borrow nearly $2 trillion this year. None of that is new news, but what is beginning to emerge is a picture of a government which has narrowed its options for improving the economy down to one. Either GDP turns sharply up next year or the deficit will become an unmanageable burden. The Treasury will have to default on interest payments if sharply raising taxes in 2010 and 2011 does not bring IRS receipts to historic highs. That would not appear to be likely with unemployment moving toward 10% and American corporate earnings badly crippled.

You may not know it, but your government under Obama has gambled this country’s future – and gambled poorly.  Obama believed his $787 billion stimulus – which was actually scored by the CBO to be $3.27 trillion – would stimulate big, but it has been a total dud.  And as we continue to pile on debt on top of debt on top of debt, and combine that with continuing high unemployment and low economic output, the result is insolvency and doom.  And it is already beginning to rush toward us like an enraged Kodiak bear.

Some are pointing at the seemingly recovering Dow Index to argue that the worst is behind us and that we are on the road to recovery.  As reported by Reuters:

No Economic Recovery in Sight, Only Inflation
Mon May 11, 2009 9:01am EDT

FORT LEE, N.J., May 11 /PRNewswire-USNewswire/ — The National Inflation Association yesterday released the following statement to its http://inflation.us members:

“Wall Street would like you to believe that the Dow Jones’ recent 33% rally from March’s low is due to improving economic fundamentals, but it is our belief this rally is due to nothing but inflation.

“Jobs data released on Friday shows that U.S. employers cut 539,000 jobs in April, the fewest since October. However, these numbers were artificially strong due to the U.S. government increasing their payrolls by 72,000, which included the hiring of about 60,000 temporary workers in preparation for the 2010 census.

“Government jobs are non-productive jobs that normally get paid for by taxpayers. However, because the U.S. already has a huge budget deficit with tax revenues likely to decline substantially, these jobs will be paid for through inflation. An increase in government jobs is not a sign that the economy is improving, but only a sign that we are digging our economy into a deeper hole that will ultimately lead to the U.S. dollar collapsing.

“Even Warren Buffett, who is a huge supporter of Obama and has defended his economic policies, said last week that with political leaders showing little inclination to raise taxes, the only way to pay for excess spending will be by inflating the currency and shrinking the value of the dollar.

The worst of the recession is not behind us. Nominally, anything can happen to the Dow Jones. If the Federal Reserve prints enough money, the Dow Jones could go back to 14,000, but it won’t mean anything if it costs $2,000 to fill your refrigerator with groceries.

Obama’s spending has put us into a genuine crisis: we are now in a situation where any recovery will be immediately followed by sharp increases in inflation, unless government either sharply raise taxes across the board (which will undermine the economy) or unless they sharply raise interest rates (which will also undermine the economy).  Both options are politically unacceptable.

You’d better be thinking about getting a wheelbarrow, because you’re eventually going to need to one to bring enough cash to the grocery store to buy your daily bread.

That was my long-winded way of saying that Obama’s polls are likely to drop to the point where angry villagers armed with pitchforks and torches start storming Castle Obamastein as the economy drops right along with his popularity by the end of his one-term presidency.

Taxpayers Now On Hook For $23.7 TRILLION In Bailout Money

July 22, 2009

I don’t know if I should be more scared than angry or more angry than scared.  Suffice it to say, I’m both angry and scared as hell.

The Obama presidency is just one giant nightmare.  And just like most nightmares, it’s going to keep getting scarier and scarier and crazier and crazier the longer it goes on.

While Obama has promised us unparalleled transparency, we have had the truth concealed from us, and we have been lied to.  And the TARP Inspector General’s report should wake up every American and

U.S. Rescue May Reach $23.7 Trillion, Barofsky Says (Update3)

By Dawn Kopecki and Catherine Dodge

July 20 (Bloomberg) — U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.

The Treasury’s $700 billion bank-investment program represents a fraction of all federal support to resuscitate the U.S. financial system, including $6.8 trillion in aid offered by the Federal Reserve, Barofsky said in a report released today.

“TARP has evolved into a program of unprecedented scope, scale and complexity,” Barofsky said in testimony prepared for a hearing tomorrow before the House Committee on Oversight and Government Reform.

Treasury spokesman Andrew Williams said the U.S. has spent less than $2 trillion so far and that Barofsky’s estimates are flawed because they don’t take into account assets that back those programs or fees charged to recoup some costs shouldered by taxpayers.

“These estimates of potential exposures do not provide a useful framework for evaluating the potential cost of these programs,” Williams said. “This estimate includes programs at their hypothetical maximum size, and it was never likely that the programs would be maxed out at the same time.”

Barofsky’s estimates include $2.3 trillion in programs offered by the Federal Deposit Insurance Corp., $7.4 trillion in TARP and other aid from the Treasury and $7.2 trillion in federal money for Fannie Mae, Freddie Mac, credit unions, Veterans Affairs and other federal programs.

Treasury’s Comment

Williams said the programs include escalating fee structures designed to make them “increasingly unattractive as financial markets normalize.” Dependence on these federal programs has begun to decline, as shown by $70 billion in TARP capital investments that has already been repaid, Williams said.

Barofsky offered criticism in a separate quarterly report of Treasury’s implementation of TARP, saying the department has “repeatedly failed to adopt recommendations” needed to provide transparency and fulfill the administration’s goal to implement TARP “with the highest degree of accountability.”

As a result, taxpayers don’t know how TARP recipients are using the money or the value of the investments, he said in the report.

‘Falling Short’

“This administration promised an ‘unprecedented level’ of accountability and oversight, but as this report reveals, they are falling far short of that promise,” Representative Darrell Issa of California, the top Republican on the oversight committee, said in a statement. “The American people deserve to know how their tax dollars are being spent.”

The Treasury has spent $441 billion of TARP funds so far and has allocated $202.1 billion more for other spending, according to Barofsky. In the nine months since Congress authorized TARP, Treasury has created 12 programs involving funds that may reach almost $3 trillion, he said.

Treasury Secretary Timothy Geithner should press banks for more information on how they use the more than $200 billion the government has pumped into U.S. financial institutions, Barofsky said in a separate report.

The inspector general surveyed 360 banks that have received TARP capital, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. The responses, which the inspector general said it didn’t verify independently, showed that 83 percent of banks used TARP money for lending, while 43 percent used funds to add to their capital cushion and 31 percent made new investments.

Barofsky said the TARP inspector general’s office has 35 ongoing criminal and civil investigations that include suspected accounting, securities and mortgage fraud; insider trading; and tax investigations related to the abuse of TARP programs.

We were sold the stimulus (more commonly known to people who actually knew what was going on as ‘porkulus,’ and more accurately known as the Generational Theft Act) as a $787 billion package.  But it was actually no such thing.  The media kept talking about billions; but the actual figure was $3.27 TRILLION.  That’s right.  $3.27 trillion.  We were lied to.  Costs that were clearly part of the legislation weren’t disclosed to us, and now on top of getting far less than what was advertised, we are paying far more for the privilege than was advertised.

Now we find out that Obama and his gang of thieves has done much the same with TARP.  Somehow, while we weren’t looking, “TARP evolved into a program of unprecedented scope, scale and complexity.”  And by the same people who promised us an “‘unprecedented level’ of accountability and oversight.”  And lo and behold, TARP has exploded under all the darkness into a mushroom cloud of government obligations that dwarf anything imaginable.

And all that’s coming out of the Obama administration is some stumbling excuse from the Treasury Department’s spin doctor that it really isn’t as bad as the inspector general scrutinizing TARP says it is.

What we are getting from the Obama administration is an unceasing projection of rosey-colored scenarios that have no connection whatsoever to reality.  When they are forced to offer some sort of excuse, they claim they didn’t realize the economy was so weak (even when they were fearmongering it into comparisons of the Great Depression to sell their stimulus package) – and then they immediately offer up yet another mindlessly and freakishly rosy scenario in their very next breaths!!!  And then, of course, based on these projections, they are racking up insane spending atop insane spending.

Wall Street analyst Meredith Whitney, who gained a reputation of credibility after boldly predicting doom when everyone around her was seeing roses last year, is now predicting 13% unemployment and a very tough future for banks due to the continuing mortgage meltdown.

The White House is refusing to release its own annual midsummer US budget update because it doesn’t want the American people to see how bad things are until after they’ve passed their massive health care boondoggle.  Many now believe that budget release accounts for Obama’s frenzied push to pass health care before the August recessHow’s THAT for “unparalleled transparency”?

As said, Meredith Whitney is predicting 13% or higher unemployment.  What you may not know is that we are already at Great Depression levels of unemployment right now, and that our current 9.5% unemployment rate would be nearing 20% if it were calculated the way it was in 1980.

Unemployment

Note: The SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated “discouraged workers” defined away during the Clinton Administration added to the existing BLS estimates of level U-6 unemployment.

We face a future damned-if-you-do, damned-if-you-don’t dilemma: the only reason interest rates aren’t shooting skyward is because the market is in such a doldrum.  But the moment recovery begins to rear its head in Barack Obama’s game of economic Whack-a-Mole (where he whacks down small businesses and private-sector employment), hyperinflation due to our massive indebtedness will likely attack us.  The prospect of a jobless recovery, followed by Zimbabwe-levels of inflation looms very large in our future.

We’ve set ourselves up for hyperinflation.  We have massively increased our money supply even as our GDP has plummeted.  We have an increasing lack of confidence on the part of investors that we will be able to maintain the value of our currency (and see here), forcing demand for higher and higher interest rate payments on future bonds.  Those were the conditions of the Wiemar Republic; those were the conditions of Zimbabwe; and those are the conditions in the Late Great USA.

Pretty soon, we will be facing the Sophie’s Choice prospect of whether we want massively high interest rates, or massively high inflation – or best of both worlds – both massive interest AND hyperinflation.  We’ve got experts such as Johns Hopkins Professor of applied economics Steve Hanke and National Bureau of Economic Research economist Anna Schwartz seeing the inflation bogeyman rearing its genuinely ugly head.  And we’ve got investors beginning to start betting big on a coming hyperinflationary economy.

The thing is, we have a giant mega-trillion ton anvil cued over our collective heads.  And it is just waiting to drop.

So you see massive debt exposure to US economic structures.  You see higher unemployment.  You see historically low levels of tax revenue.  You see terrible recent mortgage default rates now turning “markedly worse.” You see all kinds of indicators that our debts are getting larger and larger even as our ability to repay them becomes smaller and smaller.

And it is with that backdrop that we should contemplate the massive, mind-numbingly enormous numbers hanging over everything this administration has done, is doing, or is trying to do.  With the debt he’s accumulating going up by the trillions, Obama issued the petty promise to cut his spending by a measly $100 million.  And he couldn’t even fulfill that insignificant budget cut.  All he knows how to do is spend and spend and spend.

So get scared.  Get angry.  And get ready for the beast.

We voted for “No, no, no.  Not God bless America.  God damn America!”  And now we’re going to get to see what “God damn America” looks like.

Obama Imposes Suicide-Pact Bankruptcy On Chrysler

April 24, 2009

The government is preparing the way for a “Dr. Kevorkian”-style bankruptcy for Chrysler.  A couple of paragraphs from the New York Times story should suffice:

U.S. Is Said to Push Chrysler to Prepare for Chapter 11

DETROIT — The Treasury Department is directing Chrysler to prepare a Chapter 11 bankruptcy filing that could come as soon as next week, people with direct knowledge of the action said Thursday.

The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.

You know, I’m old enough to remember a time way, way back when businesses were actually allowed to attend to their own financial affairs.

And they’ve got a guy who was either too dishonest or too stupid to pay his own tax bill organizing the thing: “Turbo Tax Tim” Geithner.

That’s bad enough, but then the snowball starts rolling straight to hell.

The government isn’t making its arrangements with Chrysler; it is rather making them with the United Auto Workers, and then imposing the conditions onto Chrysler.

This is tantamount to saying that Chrysler will never come out of bankruptcy, given the fact that the company needs to be able to escape its legacy costs if it is to ever have any chance of ever being viable.

Would Italian Fiat want this gold-plated turd?  Not very likely.  The Obama administration’s kissy-kiss with the UAW on a bankruptcy deal (and who ever would have seen THAT coming) is frankly akin to a bridal consultant pushing a bride-to-be to gain 500 pounds and have her face chewed off by a deranged chimpanzee in order to prepare her for her nuptials.  The bridal consultant, the chimp, and the bride; the Obama administration, the UAW, and the company: neither situation is going to end well.

Realize this: Obams imposing a suicide pack onto Chrysler.  There is no way the company will be able to attract private investment as long as the unions get to dictate terms.  And realize this: the green cars that the Obama administration wants to impose on the American auto industry aren’t profitable.  Which is why no American money wants anything to do with Barack Hussein’s GM or Chrysler (and very soon Ford).  That leaves us hoping that some foreign country’s investors are more stupid than ours are.

This is nothing less than a suicide pact.  There’s a spaceship hidden behind big labor’s version of the Hale-Bopp comet, and the Obama administration wants Chrysler and GM to prepare to board.

The NY Times article continues:

The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt. The government’s most recent offer, presented Wednesday, would give the company’s lenders about 22 cents on the dollar, or $1.5 billion, and a 5 percent equity stake in a reorganized Chrysler. Earlier this week, a steering committee of the lenders proposed that they receive 65 cents on the dollar, or $4.5 billion, and a 40 percent equity stake.

If no agreement is reached between the government and Chrysler’s lenders, a nasty legal fight could emerge in bankruptcy. The creditors’ claims are backed by most of the company’s collateral, including plants, brands and equipment, and the senior lenders will argue that they have first claim on those assets — even over and above the government’s debt….

Some analysts questioned whether the Treasury’s steps to prepare a bankruptcy case were an effort to put more pressure on lenders, with which it has exchanged proposals meant to reduce Chrysler’s debt. Chrysler faces an April 30 deadline from the Treasury, while G.M. faces a June 1 deadline in its own efforts to draft a new restructuring plan.

Let me put the first sentence of the last paragraph another way: “Some analysts questioned whether the father-in-law’s steps to prepare a shotgun wedding was an effort to put more pressure on the boyfriend…

This is an administration that is clearly hungry for power, and which clearly intends to use that power for political purposes.  Why won’t they allow banks to repay bailout money?  They want to be able to control the banks, and thereby control the banks lending policies.

As the Wall Street Journal’s Stuart Varney puts it:

Think about it: If Rick Wagoner can be fired and compact cars can be mandated, why can’t a bank with a vault full of TARP money be told where to lend? And since politics drives this administration, why can’t special loans and terms be offered to favored constituents, favored industries, or even favored regions? Our prosperity has never been based on the political allocation of credit — until now.

Obama is paying unions back for supporting his presidency by putting the UAW at the head of the line in bankruptcy negotiations.  It is nothing short of political patronage.  Do you seriously think there’s even a chance that he won’t similarly use his power over the banking industry to impose liberal policies and reward liberal constituents?

Obama shares a number of the underlying characteristics that would tend to define one as a fascist, as Jonah Goldberg saw at least as far back as February of 2008.  But we’re not talking about mere “underlying characteristics” or tendencies anymore.  We’re talking about overt fascism.  Sheldon Richman defined fascism as follows:

Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”–that is, as the autocratic authority conceived it. (Nevertheless, a few industries were operated by the state.) Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities. Where socialism abolished money and prices, fascism controlled the monetary system and set all prices and wages politically. In doing all this, fascism denatured the marketplace. Entrepreneurship was abolished. State ministries, rather than consumers, determined what was produced and under what conditions.

What the hell else are you going to call what Obama is doing but fascism?

Fascism came out of the political left; and liberals are leading us right back into a fascist hell all over again.

Which leads to the last observation: the suicide-pact that the Obama adminstration is forcing onto Chrysler is a microcosm for the suicide-pact that our society and our country are going to experience.  This government takeover of the American way of life won’t just result in a fascistic redefinition of America.  The federal government and federal reserve have committed over $12.8 TRILLION so far in bailouts and stimulus.  And we’re nowhere near done with this madness, because our leaders believe they can sepnd their way out of debt.  Massive inflation – and a death spiral – will necessarily follow.

Why We Should Be Seriously Contemplating The Great Depression

December 3, 2008

Revelation 6:6 – “And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine.”

There are plenty of financial experts out there assuring us that any comparison between our current economic situation and the Great Depression are utterly baseless.  The problem is that most of these experts are either demonstrated hypocrites who have themselves compared our economy to the Great Depression, or they are employing extremely flawed logic in their dismissals that may well even cross the line into outright deception.

Nathan Burchfiel takes CNBC‘s Jim Cramer to task for the sort of blatant hypocrisy that we’ve seen from all to many other media analysts:

CNBC “Mad Money” host Jim Cramer said on NBC’s “Today” show Dec. 2 that comparisons between the current economy and the Great Depression are “scare tactics.” Maybe he forgot about his own reliance on the juxtaposition….

But Cramer has been among the most vocal scaremongers when it comes to throwing around Great Depression warnings.


Criticizing economists who opposed the $700 billion taxpayer bailout of the financial industry on the “Today” show Oct. 1, Cramer warned the country was “on the precipice of Great Depression II.”

He made a similar claim about the financial bailout in September, arguing that if Treasury Secretary Henry Paulson didn’t find a way to get a rescue package passed, “we are going to have The Great Depression II on our hands.”


On Nov. 11, Cramer supported another proposed bailout – this time for the U.S. auto industry by saying it would prevent another depression. “It’s like look – we got to bail them out,” Cramer told CNBC “Street Signs” host Erin Burnett. “We have to. We have to keep the Great Depression off the table.”

In other words, the “Great Depression” basically becomes a shell game, where you see the shell when the shysters want you to look at it, and then you don’t see the shell when they want to keep it out of sight.  It’s a bogeyman that some journalist, or some academic, or some government official can trot out to frighten us into doing what s/he wants to advance an agenda, and then put it away until they want to frighten us again.

Now, there was a time when a story like this one would have completely discredited a media personality such as Jim Cramer.  But in these Bizarro World days, being discredited seems to be to a journalist’s career what having a tawdry sexual affair does to a movie star’s career.

Then we’ve got the philosophical dismissal of any comparison to the Great Depression, as exemplified by government academics such as Ben Bernanke:

WASHINGTON (AFP) — Federal Reserve chairman Ben Bernanke said Monday the current economic situation bears “no comparison” to the much deeper crisis of the 1930s Great Depression.

“Well, you hear a lot of loose talk, but let me just … say, as a scholar of the Great Depression — and I’ve written books about the Depression and been very interested in this since I was in graduate school, there’s no comparison,” Bernanke said in a question period after an address in Austin, Texas.

Bernanke cited “an order-of-magnitude difference” in the current situation compared to the 1930s.

“During the 1930s, there was a worldwide depression that lasted for about 12 years and was only ended by a world war,” he said.

“During that time, the unemployment rate went to 25 percent, at least, based on the data that we have. The real GDP (gross domestic product) fell by one-third. About a third of all of the banks failed. The stock market fell 90 percent.”

Bernanke said the situation at that time represented “very difficult circumstances,” because “we didn’t have the social safety net that we have today. So let’s put that out of our minds; there’s no — there’s comparison in terms of severity.”

Well, first of all the fact is that Bernanke – just like Cramer – has himself made the comparison between our economy and the Great Depression, as the bottom of the same article clearly demonstrates:

In a related matter, President George W. Bush said in an interview released Monday that Bernanke and Treasury Secretary Henry Paulson warned him weeks ago that bold action was needed to avert a new Great Depression.

“I can remember sitting in the Roosevelt Room with Hank Paulson and Ben Bernanke and others, and they said to me that if we don’t act boldly, Mr. President, we could be in a depression greater than the Great Depression,” Bush told ABC News.

Which clearly means that comparisons to the Great Depression clearly aren’t so silly after all – as evidenced by the very people who are most loudly telling us that such a comparison is silly.

Bernanke and others also imply that our social support structures and our financial expertise would prevent the worst effects of any so-called “Great Depression.”  But is that really so?

When the $852 billion Troubled Asset Relief Program (TARP) suddenly morphed into what one writer mocked as Capital Redistributed As Pork (CRAP), shouldn’t it bother you that an abandonment of such an enormous program’s expressed goal midstream amounts to a de facto declaration that our experts clearly don’t know for sure what they’re doing?

The notion that a Great Depression could never happen because we know so much more doesn’t hold much water for me in the light of our “Keystone Cops-approach” to all of our various bailouts and attempts at political legislation.  The fact is, after seeing our “experts” at work the last couple months, I have less confidence in them than I’ve ever had before.

But there’s another giant problem with Bernanke’s analysis, and it is difficult to imagine that he doesn’t himself recognize it.  The problem is that he’s comparing apples to oranges; he’s comparing an economy that may well be on the throes of a future Great Depression to a 1930s economy that was already well into the worst stages of a depression.  And he’s pointing out the obvious – but in fact completely irrelevant and actually completely absurd – fact that they don’t look alike.  Of course they don’t look alike – yet.

But what would have happened had Bernanke compared the economy as it was in 1929 with our economy today, rather than the worst period of the 1930s?  What would have happened had he looked at the economy just before the Black Tuesday crash of October 29, 1929, or even shortly after that crash?  The numbers would have hardly appeared anywhere near so dire, which means Bernanks’ comparison would have failed.

Let me quote Wikipedia to show you what I mean:

The Great Depression was not triggered by a sudden, total collapse in the stock market. The stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30 percent below the peak of September 1929.[7] Together, government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the previous year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the summer of 1930.

In early 1930, credit was ample and available at low rates, but people were reluctant to add new debt by borrowing. By May 1930, auto sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930, then began to drop in 1931. Conditions were worst in farming areas, where commodity prices plunged, and in mining and logging areas, where unemployment was high and there were few other jobs. The decline in the American economy was the factor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. Frantic attempts to shore up the economies of individual nations through protectionist policies, such as the 1930 U.S. Smoot-Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the collapse in global trade. By late in 1930, a steady decline set in which reached bottom by March 1933.

Keep in mind that OUR stock market began to tank only a little over two months ago.  And if the exact same thing were to happen now that it did to the United States in the 1930s, we actually would expect our market to pick up significantly in the coming months – and our economy to even appear to be rebounding – shortly before a downward slope into collapse that would occur one to three years later.  It wasn’t until March 1933 – 3 years and 4 months after the Black Tuesday stock market crash – that the bottom really fell out of our economy.

And while “Great Depression” comparisons may be silly in terms of the actual economic numbers RIGHT NOW (the number of banks going under, the jobless rate, etc.), we actually face potential economic nuclear bombs that would very likely have made 1930s American financial experts faint with dread.

We are looking at $700 TRILLION in derivatives.  Compare this stupefying fact to the associated fact that global GDP is only about a lousy $50 trillion! Assets have been leveraged as much as a hundred and even two-hundredfold.  The Institute for Economic Democracy have an article titled, “Hedging and Derivative Risks Become Infinite Risks.”  The result is MASSIVE exposure such as the world has never seen lurking like some incredibly deadly plague in the form of financial vehicles that few even begin to understand and only advanced computers can calculate.  As these highly leveraged financial obligations result in losses – as has already begun to happen – the result is cataclysmic failure in financial markets beyond the power of any government to prevent.  And anyone but a fool should be able to recognize by now that such disasters can send the entire global economy crashing down very quickly, seemingly from out of nowhere.

None of the bailouts have done ANYTHING to fix the systemic structural problems with our financial system (the worst probably being the massive flow of capital out of production and into speculative markets due to the shift from being a manufacturing-based economy to a service-based economy).  And the fact that the $852 billion bailout package went from being used to buy bad mortgages to a completely different solution should kind of serve to tell you that no one really knows WHAT to do.

So our financial experts are throwing out our money the way out-of-control craps players throw dice.

ABC News had this:

The government’s financial bailout will be the most expensive single expenditure in American history, potentially costing around $7.5 trillion — or half the value of all the goods and services produced in the United States last year.

In comparison, the total U.S. cost of World War II adjusted for inflation was $3.6 trillion. The bailout will cost more than the total combined costs in today’s dollars of the Marshall Plan, the Louisiana Purchase, the Korean War, the Vietnam War and the entire historical budget of NASA, including the moon landing, according to data compiled by Bianco Research.

It remains to be seen whether the government’s multipronged approach to bail out banks, stimulate spending and buy up mortgages will revive the economy, but as the tab continues to grow so does concern over where the government will find the money.

One critical thing to understand is that the aforementioned historic massive expenditures – which combined still only amount to half of the expenditure we are talking about today – took place over many decades, such that the various costs to the economy were absorbed over many years.  What happens when we spend trillions of dollars in only a few months?  Who knows?  No one has ever tried it before! And unlike the what had been the greatest – now the second greatest – expenditure in history, the costs associated with World War II were spent producing, building, and developing, whereas frankly most of the costs associated with our current bailouts essentially amount to paying off Wall Street’s gambling debts.

Meanwhile – as we contemplate forking over still more billions to bail out our automakers – we need to realize that we’re entering a potentially insane realm where there’s simply no end to the companies and now even the states who are “too big to fail” and need bailouts of their own.  And what of the moral hazard incurred by giving money to people, corporations, and states simply because they were the biggest fools and failures?  What impact will this have not only on the economy, but on the hearts and minds of honest people who played by the rules and ended up with nothing to show for it while the failures and the gamblers walk away with money in their pockets?  How many previously stable people will begin to angrily demand, “Where’s my bailout?”

What’s going to happen as our financial system attempts to absorb absolutely mind boggling government debts that dwarf anything ever before seen in human history?

A lot of financial experts aren’t so much anxious about what happens in the next few months.  We might well be able to throw so much money at the economy that we can stimulate it again; rather, they are worried about 3-5 years down the road as our dollar devalues dramatically due to interest payments that can only be repaid by printing more and more money.  You don’t just double an already insanely-out-of-control national debt without severe consequences.

And given the very real probability that massive spending is going to be the cause of our undoing, the social safety net that Bernanke refers to as being a preventative would actually merely be one more causative factor in a pending economic collapse.  We won’t be able to hand out food stamps and welfare checks if our government itself goes bankrupt.

So while it’s obviously not accurate to describe our present situation as a “Great Depression,” the simple reality is that we might well – and in the very near future – experience an economic meltdown that would likely make the Great Depression look tame in comparison.