still nothing yet... I almost kind of want nothing to happen just to see the chaos (or lack thereof) that will ensue starting on Tuesday

Haha well I would personally love to see a default. I'd explained this in the Spanish Revolution thread, but it's silly to be paying such a huge % of your tax revenue on interest payments to banks.

 

So like most things in economics it's very counterintuitive - a default would mean a higher quality of life for people in the US, coupled with the inability of Washington to borrow (which would increase the power of the individual states and reduce the power of the Federal government).

 

They'll increase the debt ceiling, though, I'm confident. It will happen continually until hyperinflation hits.

Eventually what'll happen is people will just choose to stop buying US bonds in such large amounts at such low interest rates. The government will be forced to raise interest rates in order to increase demand for the bonds.

 

When the rates increase, the interest payments will also increase a corresponding amount. In order to pay the increased interest, they'll need to issue even more debt - and it will be at this point when the market will crash, because people will see the Catch 22 very clearly.

 

Money will fly out of the bond markets (where most US dollars in the world are parked) and into circulation (buying up real commodities). That'll be the start of hyperinflation.

I have wheelbarrows for sale or rent, perfect for carrying around large amounts of worthless paper. ;)

Ron Paul slams it right out of the ballpark.

 

When a Cut is Not a Cut

 

One might think that the recent drama over the debt ceiling involves one side wanting to increase or maintain spending with the other side wanting to drastically cut spending, but that is far from the truth. In spite of the rhetoric being thrown around, the real debate is over how much government spending will increase.

 

No plan under serious consideration cuts spending in the way you and I think about it. Instead, the "cuts" being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family "saving" $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.

 

The truth is that frightening rhetoric about default and full faith and credit of the United States is being carelessly thrown around to ram through a bigger budget than ever, in spite of stagnant revenues. If your family's income did not change year over year, would it be wise financial management to accelerate spending so you would feel richer? That is what our government is doing, with one side merely suggesting a different list of purchases than the other.

In reality, bringing our fiscal house into order is not that complicated or excruciatingly painful at all. If we simply kept spending at current levels, by their definition of "cuts" that would save nearly $400 billion in the next few years, versus the $25 billion the Budget Control Act claims to "cut". It would only take us 5 years to "cut" $1 trillion, in Washington math, just by holding the line on spending. That is hardly austere or catastrophic.

 

A balanced budget is similarly simple and within reach if Washington had just a tiny amount of fiscal common sense. Our revenues currently stand at approximately $2.2 trillion a year and are likely to remain stagnant as the recession continues. Our outlays are $3.7 trillion and projected to grow every year. Yet we only have to go back to 2004 for federal outlays of $2.2 trillion, and the government was far from small that year. If we simply returned to that year's spending levels, which would hardly be austere, we would have a balanced budget right now. If we held the line on spending, and the economy actually did grow as estimated, the budget would balance on its own by 2015 with no cuts whatsoever.

 

We pay 35 percent more for our military today than we did 10 years ago, for the exact same capabilities. The same could be said for the rest of the government. Why has our budget doubled in 10 years? This country doesn't have double the population, or double the land area, or double anything that would require the federal government to grow by such an obscene amount.

 

In Washington terms, a simple freeze in spending would be a much bigger "cut" than any plan being discussed. If politicians simply cannot bear to implement actual cuts to actual spending, just freezing the budget would give the economy the best chance to catch its breath, recover and grow.

 

Here's Ron Paul's take on the debt deal that's being touted today as the solution to our problems.

They should've included a balanced budget amendment in this bill.

 

 

I as a citizen can't believe the direction the country has taken and how we can just continue to spend and spend and spend money we don't have. If the country was a person trying to get loans or new credit cards there is no way that any bank or credit card company would approve. I think it's time that the country starts worrying about the long term solutions because temporary ones clearly have not worked. Also when it comes to defense, why is it necessary to continue to spend so much money?

 

It's like personally if I really wanted to I could spend my credit card and money and get really nice things even though I already have student loans, but from just a common sense stand point I'd rather not be spending money that I don't have, can't afford, or know that I can't afford in the end.

They should've included a balanced budget amendment in this bill.

 

 

I as a citizen can't believe the direction the country has taken and how we can just continue to spend and spend and spend money we don't have. If the country was a person trying to get loans or new credit cards there is no way that any bank or credit card company would approve. I think it's time that the country starts worrying about the long term solutions because temporary ones clearly have not worked. Also when it comes to defense, why is it necessary to continue to spend so much money?

 

It's like personally if I really wanted to I could spend my credit card and money and get really nice things even though I already have student loans, but from just a common sense stand point I'd rather not be spending money that I don't have, can't afford, or know that I can't afford in the end.

:nod: precisely

 

 

 

 

 

I want to travel the world with money I don't have. But alas I cannot, because I am not the U.S. gubmint.

Eric Cantor just announced he'll vote for the biggest debt ceiling increase in American history.

 

Remember that next time you hear Democrats complaining about him, or you hear about how Eric Cantor is such a staunch supporter of fiscal conservatism.

DJIA fell over 500 points today, bloodbath in the markets. European markets open in 12 hours.

 

Margin debt is near record high levels, and mutual funds have record low cash.

 

This is looking a lot like 2008 all over again.

US has just lost its triple A credit rating.

 

Let the chaos on the stock market ensue on Monday.

I like how this conveniently happened after the ending bell today.

I was thinking earlier when the debt ceiling raise was being discussed why the US doesn't default now instead of later, as you'd think it would cause a little less mess. But no, all those lovely politicians care more about making everything seem all nice and sunshiney and staying in office than taking care of things.

 

Also, laughing hard at the loss of the AAA rating. What is it now? Just AA?

Also, laughing hard at the loss of the AAA rating. What is it now? Just AA?

 

"S&P lowered the U.S. one level to AA+ while keeping the outlook at "negative" as it becomes less confident"

 

heh

Excellent... *twiddle fingers*

Yeah, Crests you'll be happy to know that your country is the only one in North America now with a AAA credit rating! :D

 

Let the chaos on the stock market ensue on Monday.

I like how this conveniently happened after the ending bell today.

 

Hard to say, I think this information might have already been leaked. Hence the big market collapse a couple days ago. But we'll see. There's evidence George Soros (one-world-government promoting hedge fund manager) knew about the downgrade because he liquidated his stock holdings days before the market tanked.

 

The REALLY important news now is what's going on in Europe. Germany just balked at buying more Italian debt:

 

German Govt: Italy Too Big For EFSF To Save - Spiegel

German Govt: Doubts Whether Tripling EFSF Would Help It Save Italy

German Govt: Italy Must Make Savings, Reforms To Exit Crisis - Spiegel

Italy Debt Guarantee Could Raise Doubts Over Germany's Finances - Spiegel

German Govt: EFSF Should Only Help Small, Mid-Size Countries - Spiegel

 

Germany, as the sole EU country that isn't mired in its own debt, has been responsible for filling in the gaps for all the idiocy in Greece lately (which isn't a big deal because it's a small country with relatively small debts). But Italy is a big country with big debts. So Monday will be very interesting. The fun starts Sunday afternoon for us East Coast Americans, though, that's when the Asian markets open.

 

The time between the announcement of government bailouts and the markets falling again (due to realization of the inefficacy of bailouts) is getting shorter and shorter. Eventually bailouts won't make a lick of difference.

Conference calls time! From Zero Hedge:

 

For a world that has supposedly largely priced in the US downgrade, the amount of emergency conference calls this weekend is a little disturbing. First, tonight at 22:30 GMT the G20 deputy finmins will hold a conference call It to "exchange of information and opinions." Next tomorrow sometime the ECB will hold a separate call in "response to the latest developments in the euro zone's debt crisis, an ECB source said on Saturday." Somehow we think the tangential topic of the historic US downgrade may also be breached. And, as always, the market is sure to be delighted with the outcome of this latest political hodge podge of responses to what is increasingly shaping up like a market perfect storm of epic proportions.

Yeah, Crests you'll be happy to know that your country is the only one in North America now with a AAA credit rating!

 

I don't know what a credit rating is. :disappointed:

When old people have a lot of money to invest (that they've saved up their whole lives), they go to an advisor who tells them where to put it.

 

Sometimes they'll use the money to buy stocks. But right now, the stock market is haywire so they're more likely to loan their money out for interest.

 

You can loan your money to companies or governments. But governments are usually safer to give money to because they can tax and print in order to pay off their debts.

 

In the case of the US, the rating agency decided our debt isn't as safe as Canada's debt (it's less likely to be paid off, in other words).

 

When a ratings agency decides your debt isn't safe, that makes people less likely to loan you money. And so in order to attract lenders, you need to raise the rate of interest you're willing to pay on your debt!

 

Understand?

So it's like, how good/trusted you are at paying off debt?

Yep, exactly. Basically investors don't take US politicians seriously when they talk about cutting spending. And tax revenues are too low to pay it off... and if they tried to raise taxes, it would make the recession worse.

What political implications do you think this will have on the USA?

A lot of it depends on how the markets react. If the stock market and bond market freak out like a drama queen then it could cause some major political trouble, maybe some more calls for serious spending cuts.

 

Otherwise we might see the same old day-by-day "kick the can down the road".

 

Obama's reelection chances are looking worse and worse, that's for sure. But there's also deep anger against Republicans who aren't as fiscally-conservative as they advertise themselves to be. So the "Tea Party" continues to get more influential.

 

Some of this might also be my wishful thinking, I'm not as good at predicting political outcomes as I am at predicting economic outcomes.

Geez Jay, your knowledge about all this stuff is like, at an autistic level. :freak:

Geez Jay, your knowledge about all this stuff is like, at an autistic level. :freak:

 

It's how I get all the ladies. :husky:

Gold just passed $1700 an ounce.

 

Chinese, Israeli markets down dramatically, US market futures down dramatically.

 

Tomorrow's gonna be exciting! *gets popcorn*

 

While the notional level of the market is still modestly higher than late August 2010, when indexed for that other component which everyone always forgets, yet which is an integral part of any net purchasing power calculation, the devaluation of the dollar, the S&P is now precisely at the levels at which Bernanke let QE2 loose with his Jackson Hole speech.

 

QE3, here we come. Let the moneyprinting begin!