Fed Encourages Runaway Debt as “Minsky Moment” Approaches

By Clint Siegner – Re-Blogged From Gold Eagle

Federal Reserve officials like to pretend they can use interest rates like a motorcycle throttle on the U.S. economy. They can either rev things up by dropping interest rates or slow things down by moving rates higher.

The public has been led to believe the central planners can do whatever is needed with rates to keep things purring along.

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The Dollar – King Rat Of Failing Currencies

BY Alasdair Macleod – Re-Blogged From Gold Eagle

The explanation for the sudden halt in global economic growth is found in the coincidence of peak credit combining with trade protectionism. The history of economic downturns points to a rerun of the 1929-32 period, but with fiat currencies substituted for a gold standard. Government finances are in far worse shape today, and markets have yet to appreciate the consequences of just a moderate contraction in global trade. Between new issues and liquidation by foreigners, domestic buyers will need to absorb $2 trillion of US Treasuries in the coming year, so QE is bound to return with a vengeance, the last hurrah for fiat currencies. However, China and Russia have the means to escape this fate, assuming they have the gumption to do so.

Introduction

It may be too early to say the world is entering a significant economic downturn, but even ardent bulls must admit to it as an increasing possibility. Financial analysts, both bovine and ursine, face a complex matrix of factors when judging the future effect of any downturn on currencies, and of the prospects for the dollar in particular.

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US Government Debt Bomb Much Higher Than Americans Realize

By SRSrocco – Re-Blogged From Silver Phoenix

The U.S. Federal debt bomb continues to increase, even with the government shut down.  In just one day, the U.S. public debt increased $50 billion on Jan 15th.  While the total outstanding Federal debt has now reached nearly $22 trillion, it doesn’t include all U.S. government debt.

That’s correct… there’s a lot more debt than Americans realize sitting on the balance sheet of the U.S. Government.  For example, there are other obligations such as U.S Government Agency Debt that isn’t well-known.  According to the USGovernmentSpending.com website, U.S. Agency debt is the amount of outstanding debt issued by federal agencies (such as FHLB and GNMA) and government-sponsored enterprises (such as Fannie Mae and Freddie Mac).  The amount of U.S. Agency debt

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US Government To Fork Out A Half Trillion To Service Its Debt In 2018

By SRSrocco – Re-Blogged From Gold Eagle

The US Government is going to surpass another significant milestone this year.  According to the recently released data from the TreasuryDirect.gov, the government will fork out a stunning half trillion dollars just to service its debt in 2018.  Unfortunately, as U.S. interest rates rise, along with ever-expanding public debt, the cost to service the debt will continue to increase.

In just the first nine months of the year, the US interest expense has increased by an additional $40 billion.  Last year, the U.S. Government paid only $375 billion to service its debt from October to June, but this year it has jumped to $415 billion:

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Speculation On Hyperinflation

By Gary Christenso – Re-Blogged From http://www.Gold-Eagle.com

Hyperinflation Myths:

  1. Hyperinflation occurs in banana-republics and not modern western countries.
  2. Hyperinflation cannot occur in the United States because the U.S. issues dollars – the reserve currency.

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Which Has The Bigger Economy: Texas Or Russia?

By Frank Holmes – Re-Blogged From http://www.Silver-Phoenix500.com

You’ve no doubt heard that everything’s bigger in Texas. That’s more than just a trite expression, and I’m not just saying that because Texas is home to U.S. Global Investors.

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US Public Debt Surges By $175 Billion In One Day

By SRSrocco – Re-Blogged From http://www.Silver-Phoenix500.com

After the U.S. Government passed the new budget and debt increase, with the President’s signature and blessing, happy days are here again.  Or are they?  As long as the U.S. Government can add debt, then the Global Financial and Economic Ponzi Scheme can continue a bit longer.  However, the days of adding one Dollar of debt to increase the GDP by two-three Dollars are gone forever.  Now, we are adding three-four Dollars of debt to create an additional Dollar in GDP.  This monetary hocus-pocus isn’t sustainable.

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Soaring Deficits Force Treasury Into Foolish Gamble

By Michael Pento – Re-Blogged From http://www.Silver-Phoenix500.com

The Treasury opened the fiscal year 2018 with an October budget deficit of $63.2 billion. That is 37.9% larger than the $45.8 billion deficit in October of last year. The primary reason behind this surge in year-over-year deficits was a 21.6% increase in net interest expenses. The annual red-ink problem looks even greater when recognizing that the national debt is already over 105% of Gross Domestic Product (GDP), at nearly $21 trillion, and with an additional $10 trillion projected to be added in the next ten years.

According to the Congressional Budget Office (CBO), the budget deficit grew to 3.5% of GDP for fiscal 2017. But due to the growth in spending for Social Security, Medicare, and net interest payments, the deficit explodes to 5% of GDP ($1.4 trillion) by 2027.

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New Thinking And Different Actions

By Gary Christenson – Re-Blogged From http://www.Silver-Phoenix500.com

Hypothetical 65 year old American Male:

Height: 5’10”

Weight: 285 pounds – 120 # overweight

Health: Marginal, with chronic pain and increasingly difficult daily existence

Ask our hypothetical male if he wants to lose 100 # of unnecessary fat, improve his physical health, live 10 years longer, increase stamina, reduce chronic pain, and drive a golf ball 50 yards longer off the tee.

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Higher Interest Rates May Force Higher Inflation Rates

By Daniel Amerman – Re-Blogged From http://www.Gold-Eagle.com

1) Financial analysis of the three way relationship between interest rates, inflation and the U.S. national debt.

2) Higher interest rates causing higher interest payments on the $20 trillion national debt would ordinarily cause soaring deficits over time.

3) Detailed analysis of the “loophole”, which is that if inflation even moderately increases – then interest rates can rise without exploding the real debt.

4) This simultaneous increase in interest rates and inflation would have a major impact on all markets, as well as long term retirement planning.

5) The logical response to rising interest rates may be to sharpen one’s focus on how to better deal with higher rates of inflation over the long term.

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Raising The Debt Ceiling Means Jacking Up Future Inflation

By Stefan Gleason – Re-Blogged From http://www.Gold-Eagle.com

The dramatic failure of the US Senate’s last-ditch Obamacare repeal effort leaves Republicans so far without a major legislative win since Donald Trump took office. No healthcare reform. No tax reform. No monetary reform. No budgetary reform.

The more things change in Washington…the more they stay the same.

Despite an unconventional outsider in the White House, it’s business as usual for entrenched incumbents of both parties. The next major order of business for the bipartisan establishment is to raise the debt ceiling above $20 trillion.

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Welcome To The Third World, Part 24: Illinois About To Default?

By John Rubino – Re-Blogged From Dollar Collapse

The train wreck that is the state of Illinois has generated a lot of questions lately, including “Will its government ever pass a budget?”, “Will it ever pay its overdue bills?”, and “Is it possible for a state to go bankrupt?”

Looks like we’re about to get some answers to these questions, along with one more: “What happens to the financial markets when people finally realize that Illinois is far from the only impending bankruptcy?”

Today’s Wall Street Journal has an anecdote-filled article illustrating what certainly looks like a case of terminal financial mismanagement (How Bad Is the Crisis in Illinois? It Has $14.6 Billion in Unpaid Bills):

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Federal Employees & Budget Deficits

   By Bob Shapiro

The US Federal Government employs a lot of people – a LOT of people.

In total, Uncle Sam has over 4 million people on the payroll, plus a whole lot more working as contractors. The military has about 40% of those employees, while federal civilian bureaucracies employ an army and a half (60%).

Now, I’m not a military guy, but I expect – especially if peace broke out – that we could make do with fewer soldiers and fewer generals. I know that there are a lot of people around the world who would like to see us dead, so I’ll defer to the military brain trust (for now) on just how many people they need.

The civilian federal workforce is a whole different matter. Over 1% of Americans – men, women, and children – work directly for the federal government. When you consider that only half of Americans currently are working (and looking only at civilians), around 1 person in 100 is a federal bureaucrat of varying level.

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Dow Euphoria

By GE Christenson – Re-Blogged From The Deviant Investor

Following President Trump’s speech the Dow Jones Industrial Average (Dow) easily broke 21,000, and closed at another all-time high – 21,115.

The Dow closed up for the 12th consecutive day on Monday February 27, another three decade record.

Excel calculated the Dow’s daily Relative Strength Index (RSI – 14 period), a technical timing oscillator. It reached 97.75 (maximum = 100.00) on March 1, an exceptionally “over-bought” reading that has occurred nine times since 1950.

The weekly RSI also reached a very high “over-bought” reading as of March 3, the end of last week.

Margin debt recently registered an all-time high on the NY exchange. Price to earnings ratios have risen into “nosebleed” territory, and the last 1% correction in the S&P was in November – a long time ago. Many other market extremes and highs in confidence indexes are evident.

YES, THE EUPHORIA IS PALPABLE!

The Dow reached new highs the normal way – levitated through the creation of massive unpayable debt and the expectation of huge profits (for traders). Daily sentiment has reached a peak and indicates we are at or near a top.

Official national debt is nearly $20 trillion. Regardless, President Trump promised something for everyone:

  • More military spending, which will create larger deficits and more debt;
  • Middle-class tax relief; (Larger deficits and more debt…)
  • $1 trillion infrastructure spending; (More debt…)
  • Education bill for more school choice etc.; (More debt…)
  • The Wall; (More debt…)
  • And more promises that require massively more debt.

The Dow likes more debt, until reality strikes.

Previous Peaks in the Dow: (National debt in $ billions.)

Date                      Dow          Official National Debt          Ratio Dow to Debt

Jan. 1973              1,067                   450                                      2.37

Aug. 1987             2,746                 2,330                                     1.18

Jan. 2000            11,750                 5,776                                     2.03

Oct. 2007            14,198                 9,055                                     1.57

Mar. 2017            21,115               19,960                                     1.06

To keep the Dow rising, create debt and don’t worry, be happy…

But it takes more debt to buy each Dow point than it did several decades ago. How much debt will be needed to levitate the Dow to 30,000? Will it require $40 trillion in debt? And what are the consequences of massively more debt? Stagflation is on the horizon.

Consequences of the spending problem according to Ron Paul:

“That leaves only one solution: printing money out of thin air.” [But] “printing money out of thin air destroys the currency, hastening a US economic collapse and placing a very cruel tax on the working and middle classes as well.”

His solution for US government policy:

“… end the US military empire overseas, cut taxes and regulations at home, end the welfare magnet for illegal immigration, and end the drug war. And then get out of the way.”

These ideas will encounter fierce resistance, so much that his plan is clearly “dead on arrival.”

CREATE MORE DEBT!

More debt is guaranteed by a century of fiat currency devaluations, a borrow-and-spend congress, the executive branch, central banks that love debt, and an economy that runs on debt and credit. Expect continued dollar devaluation and more Dow highs after a nasty correction/crash.

While the Dow corrects and the U. S. economy struggles in a fiat currency induced coma, gold and silver prices will rise.

CONCLUSIONS

  • The Dow has reached another all-time high powered by borrow and spend euphoria. A bubble in search of a pin… Read Speculative Blow-offs.
  • By many measures including daily sentiment, P/E ratios, technical indicators, and consecutive daily highs, the Dow is peaking and due to correct. Perhaps the correction/crash will occur soon, or near the next Fed meeting, or after the March 15 budget ceiling deadline, or whenever the HFT machines decide to crash the market.
  • Expect massively more “money printing” and debt creation.
  • Ever-increasing spending and more debt and currency in circulation will push the price of gold to new highs. Fear and panic will eventually force withdrawal of “funny money” from the stock markets and bond markets. Some of that fearful money will purchase gold and silver for safety, preservation of capital, and protection against further devaluation of fiat currencies.
  • The stock and bond markets will correct but the debts will remain.
  • Gold and silver will surge higher, probably through the balance of this decade.

CONTINUE READING –>

How We Got Here In One Sentence

By John Rubino – Re-Blogged From Dollar Collapse

In every annual budget debate since the 1980s, one side figures out that the way to get what it wants – which is higher spending – is to frame the request in a particular, ingenious way: We have to borrow and spend way more now if we want to borrow and spend way less later. History has of course proven this argument to be idiotic, but because it moves the pain of living within our means into the indefinite future, it always manages to attract enough votes to win the day.

The following article, published today by a major news outlet, spells it out in one sentence, in the title no less:

Why federal debt may have to explode before it shrinks

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Carnage of the Middle Class

By Michael Pento – Re-Blogged From http://www.PentoPort.com

In President Donald J. Trump’s inaugural address he promised, “This American carnage stops right here and stops right now.” And immediately liberals and the MSM took umbrage to his use of the word carnage, which means the slaughter of a large number of people, claiming it was just too dark a description for America. Maybe so. However, in a recent Bloomberg commentary, Justin Fox cites some sobering statistics that support Trump’s statement.

While the overall murder rate for the nation should end up increasing about 8% year-over-year, the surge within U.S. cities is absolutely staggering. Chicago suffered a 59% increase in homicides during 2016. Murders were up 56% in Memphis, 61% in San Antonio, 44% in Louisville, 36% in Phoenix and 31% in Las Vegas.

There were also 44,193 suicides in the US in 2015, with the percent increase in suicides rising the most for females aged 10–14, and for males aged 45–64. The suicide rate has risen 24% over the past 15 years and is the highest recorded rate in 28 years.

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Trump Deficits Will Be Huge

By Peter Schiff – Re-Blogged From Euro Pacific Capital

There is much we don’t know about how the Trump presidency will play out. Will the Wall get built? Who will pay for it? Will it have at least some fencing? Will repeal and replace happen at exactly the same time? Will Trump throw a ceremonial switch? Will there be a Trump National Golf Course in Sochi? It’s anyone’s guess. But of one thing we can be fairly certain. President Trump is very likely to preside over the largest expansion of Federal budget deficits in our history. Trump has built his companies with debt and I’m sure he thinks he can do the same with the country. His annual budget deficits are likely going to be huge. This development will make a greater impact on the investment landscape than most on Wall Street can imagine.

In the past half-century, Republican presidents have been the going away winners at the deficit derby, a fact that should make any true conservative blush. The sad truth is that annual deficits exploded under Ronald Reagan and George W. Bush, and generally contracted under Bill Clinton and Barack Obama. Some of the explanation is just luck of the draw, some walked into office in the midst of recessions they didn’t create. But the better part of the explanation is baked into the political dynamics.

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Silver, Debt, and Deficits – From an Election Year Perspective

By Gary Christenson – Re-Blogged From The Deviant Investor

It is an election year. We should anticipate 8 years of upcoming trauma, following nearly 8 years of “hope and change,” after 8 years of “no nation building,” after 8 years of “I did not have sexual relations with that woman.”

Examine the official US national debt in 8 fiscal year increments (10/1/84 – 9/30/92 etc.) using linear and log scales.

You can see that official national debt has been rising exponentially. At the current rate of increase it should approach $40 trillion in 8 years. Given the likelihood of more wars, recessions, more social spending, and accelerating Medicare and Social Security expenses the total debt might be considerably higher than $40 trillion in 8 years, regardless of who is elected.

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Massive Twin Deficits To Impact UK Assets

By Mark O’Byrne – Re-Blogged From http://www.Gold-Eagle.com

Sterling is now the worst performing major currency in 2016 and gold the best.

The pound has completed its worst four day performance since Brexit and the pound remains considerably weaker versus the dollar, euro and gold since the Conservative Party conference, when Theresa May promised to trigger article 50 within six months.

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2016 Budget Deficit Almost Final Around $600 Billion

cropped-bob-shapiro.jpg   By Bob Shapiro

The US Budget Deficit for Fiscal 2016 is about to close, and various estimates bracket a $600 Billion Deficit. I’ve seen numerous analyses which forecast this to rise to over $1 Trillion over the next few years, largely due to the growth of Social Security, Medicare, & other Health outlays, which currently make up about 2/3 of total federal government outlays.

Here is a wealth of numbers from the Office of the President. (I copied below only a tiny amount because the many graphs didn’t copy well.)

2016 United States Budget Estimate

GDP: $16.5T

Total Receipts: $3.34T

Total Outlays: $3.95T

Total Surplus or Deficit as Percentage of GDP: -3.3%

* Note: To the extent feasible, the data have been adjusted using chained 2009 GDP to provide consistency with the 2015 Budget and to provide comparability over time.

CONTINUE READING –>

Three Big Stories NOT Being Covered Part 3

By Andy Sutton & Graham Mehl – Re-Blogged From http://www.Gold-Eagle.com

The third and final (for now) portion of this series might be a tad anticlimactic. If so, we apologize. Most people know America is in debt beyond comprehension. A small subset of people understand that the numbers published by the government are missing a whole bunch of important items and use accounting methods that would land most business people in prison. An even smaller subset understands the idea of generational accounting.

What we are going to discuss this time around is not the long-term situation, but rather the medium to short-term situation because some really bad things are going to take place within the next 5-7 years absent major, MAJOR policy changes. At that point, the policy changes will have to be drastic since our government fiddled while Rome burned for the last 3 decades.

If you take nothing else away from this article, understand that our ‘leaders’ – of all political affiliations and stripes – KNEW this was going to be the result if they did nothing, yet that’s precisely what they did. The blame game this time around ought to be one for the ages, however a well-informed populace can short-circuit the traditional mudslinging by inserting the following statement: “You all knew. You knew and you did nothing. You are guilty of dereliction of duty. You failed your constituents and your country. ALL of you.”

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Why Trillion Dollar Deficits Are Coming Back Soon

By David Stockman – Re-Blogged From Stockman’s Contra Corner

Yesterday I noted that the frogs of Wall Street linger in the boiling pot because they are under the delusion that stocks are cheap based on the sell-side hockey sticks that always show $135 per share of S&P earnings and a 15X multiple in the next year ahead. Besides that, should anything go awry with the economy, Washington purportedly stands ready to bail-out the stock market with a new round of fiscal stimulus after the election.

The latter delusion brings to mind what might be called the “CBO hockey stick”, which is a fiscal fantasy so unhinged from reality as to make the Wall Street stock analysts look like models of sobriety by comparison. To wit, CBO’s latest 10-year budget projection assumes that the US economy will hit full employment next year, and remain there with nary a bump or recession in sight through September 2026, at least.

Well, now. Don’t bother to say Rosy Scenario move over because the arithmetic of CBO’s fantasy speaks for itself. That is, it is advising Washington to relax——we are heading for 207 straight months without a recession. And not in the next world, but this.

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Fed Decision From A Retirement Investor’s Perspective

By Daniel R Amerman – Re-Blogged From http://www.Gold-Eagle.com

We are going to take a look using a number of visual images at what has been happening recently with the Federal Reserve, how this integrates with the federal government and the national debt, and the just extraordinary implications when it comes to retirement and other long-term investment decisions.

Our starting point is this graph from the Federal Reserve Bank of St. Louis, which shows the effective federal funds rate from July 1954 to February 2016.

As you can see it starts off very low in the 1950s and early 1960s, and then it goes in kind of a medium range, we could call them shoulders, between 1965 and the mid-1970s. There’s a sharp peak from 1978 to 1982, and then we’re back in that shoulder range from the mid-1980s through the late 2000s.

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Government Ramps Up Borrowing As Private Sector Slows

By John Rubino – Re-blogged From http://www.Silver-Phoenix500.com

This morning, US existing home sales plunged and the Chicago Fed’s national activity index turned negative. Both are obvious signs of a slowing economy.

Anticipating this kind of news, Credit Bubble Bulletin’s Doug Noland in his most recent column analyzed the Federal Reserve’s quarterly Z.1 Report for signs of changing financial trends, and found something potentially serious. The following three charts tell the tale:

First, corporate borrowing slowed dramatically in 2015’s fourth quarter…

…while households scaled back their mortgage borrowing:

And guess who stepped in to save the credit bubble? That’s right. Federal government borrowing soared:

Writes Noland: “This more than offset the private-sector slowdown, ensuring that overall Non-Financial Debt growth accelerated to an 8.6% pace in Q4.”

In other words, monetary policy (QE and low/negative interest rates) has stopped working and now we’re reverting to deficit spending to juice the economy. If this is the beginning of a trend, expect to see a torrent of announcements in coming months touting new government programs on infrastructure, health care and/or the military.

It’s as if the people making these decisions have forgotten that 1) the world borrowed $57 trillion post-2008 and got next to nothing for it and 2) the new debt will have to be rolled over at higher rates if interest rates are ever to be normalized, thus decimating government finances.

CONTINUE READING –>

Social Security And The National Debt Are Misleading The American Public

B Daniel Amerman – Re-Blogged From http://www.Silver-Phoenix500.com

We are told that many economics experts don’t worry about the total national debt because $5 trillion of that debt doesn’t really exist; it is rather just a theoretical bookkeeping transaction for money that the federal government owes to itself. Netting out this bookkeeping entry then allows some authorities assert that while the debt is a bit on the high side relative to the size of the economy, it is far from historically unprecedented, and certainly no cause for despair or rash talk about insolvency.

We are also told that many financial experts don’t worry about the solvency of Social Security and other federal government retirement programs, because they are funded with $5 trillion of the safest assets on earth, those being United States government Treasury obligations (i.e., the national debt), which are being held for our benefit by the federal government.

Unfortunately, both statements cannot be true simultaneously.

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Advice to the Prime Minister/President

By Alasdair Macleod – Re-Blogged From http://www.GoldMoney.com

Your country faces a stagnating economy. Let us assume your Prime Minister (or President if that is who holds the executive power) seeks advice from two imaginary economists.

PM: You two economists have different views on what our economic policy should be. What is your advice?

FIRST ECONOMIST (Austrian school): Prime Minister, the reason we face a stagnant economy is your central bank perpetuated the credit cycle by suppressing interest rates when the economy turned down after the banking crisis and lending risk escalated. That has left us with a legacy of under-performing businesses, which should have been left to go bankrupt. Instead they are struggling under a burden of unrepayable debt. Capital is not being reallocated to the new enterprises of the future. The dynamism of free markets has been throttled.

The extra money and credit created by the banking system has not been applied to the real economy. Instead they are fuelling a financial boom in asset prices, which have become dangerously separated from production values.

Eventually, current monetary policy will lead to a fall in the purchasing power of the currency, and the central bank will be forced to raise interest rates to a level that will precipitate the next financial crisis, if the crisis has not already occurred by then. Overvalued assets become exposed to debt liquidation. It happens every time, and if you think the last crisis, which led to the Lehman collapse was bad, on current monetary policies the next one will be much worse, just as Lehman was much worse than the aftermath of the dot-com boom.

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Let’s Control Our Government

cropped-bob-shapiro.jpg   By Bob Shapiro

In recent days, Congress has raised the National Debt Ceiling once again. The new ceiling of $20+ Trillion probably will not be hit until 2017, after the next election. No surprise there, as Members of Congress have proven to be cowards yet again.

A rising National Debt implies a continuing Budget Deficit. The size of the Ceiling rise implies an acceleration in the Deficit, as pork barrel spending will be used to help current Members get reelected. When I was a kid, this was called corruption. I’m not sure why it is not called corruption today.

So, what’s so bad about running a Deficit?

Plenty!

  • The US Economy is made up of two sides: the Government side and the Private, Productive Sector side. The Government side, almost by definition, involves spending which the Private, Productive Sector would not do. The Government side takes money from those individuals and businesses which have earned it, to give to those individuals and businesses which haven’t earned it.

      By its very nature, Government spending is less productive – less valuable – to the whole Economy than spending by the Private, Productive Sector, even though official GDP numbers give them the same weight.

     Since Government spending is less valuable, and directly reduces the Private, Productive Sector, every Dollar spent by our Government reduces the US Economy – increased Government spending makes every American, rich, poor, and in between, less well off. Government spending makes us all poorer.

Debt Burden

  • Government spending, since it takes money away from the Private, Productive Sector, this side of the Economy is less able to grow. Real GDP growth during the Obama regime has been dead flat according to the official fairy tale numbers. GDP growth has averaged only about 2% during the last generation or two, compared to growth of around 3.5% before 50 years ago. An Economy growing at 2% a year will double in size in 36 years. In 36 years, an Economy growing at 3.5% will grow to be almost 3½ times as big. Out-of-control Government spending (and Over-Regulation) has robbed all Americans of that extra 1½ times of GDP growth. All Americans would have been 75% more well off (3.5 times vs only a double) with previous relatively low spending levels than we are with the “drunken sailors” in Congress, in just the last 36 years.
  • Continuing Deficits and a growing National Debt need to be financed, which takes even more resources away from the Private, Productive Sector. They encourage the Government to print more Paper Dollars, which reduces the value of all the Dollars which you and I have saved. Deficits and a rising Debt level are embarrassing, so there is a government urgency to screw with the official numbers, making them look not quite so bad. The Private, Productive Sector works best when the data it uses is accurate. It works best when the money supply is not being inflated. It works best when the Government leaves it alone to do its thing. Bigger, more expensive Government make all Americans poorer.

GDP Shadow Stats 0115

  • If GDP is dead flat, as it has been during the Obama years, and the US Population grows, then each American alive today has a claim to a smaller portion of that GDP. The per-capita GDP has gone down. Even by the Government’s manipulated figures, All Americans are poorer because of our Government’s activities.

In past essays, I have proposed several “Action Items” to help reduce Government Spending. I’d like to recount some those here.

  • No Bill shall be introduced, voted on, or passed which is over 50 pages in length. If the Sponsor can’t say what he wants within 50 pages, then he doesn’t know what he wants. This also means no more last minute “Ear Marks” to buy a Congressman’s YES vote.
  • No Member of Congress may vote YES on a Bill unless he can attest that he has read the Bill. He may vote NO or may ABSTAIN. ObamaCare was just one example of a Bill passed without giving Members of Congress time to understand what they were voting on.
  • Both Houses of Congress must send every Bill (and every amendment to that Bill) to a Constitution Committee, whose job is to show – specifically – where in the US Constitution every provision of the Bill is authorized. Both Houses shall hear/read public comments and must respond to each one of them in their report to their respective Houses.
  • A Constitutional Amendment shall be passed to Balance the Budget. It could include salary sanctions for the top brass of all three branches of our Government if the Budget is not Balanced during any year. The Limit shall apply to both Annual Spending and to Un-Funded Liabilities.
  • A Constitutional Amendment shall be passed to Pay Off the National Debt over a set number of years (perhaps 20), with a specific timetable.
  • A Constitutional Amendment shall be passed to place a Dollar Limit on Government spending, perhaps 10% above Government spending during the year it’s ratified. This will be an effective way to prevent further debasement of the Dollar. (A constant Dollar allows for more Government spending than a depreciated Dollar.)
  • A Constitutional Amendment shall be passed to require the Federal Budget to meet GAAP accounting rules, including Un-Funded Liabilities.

Our Government is supposed to work to increase the well-being of all Americans, not to make all Americans poorer.

World’s Largest Debtor Ever Raises US ‘Debt Ceiling’…Again

By Mark O’Byrne – Re=Blogged From http://www.Gold-Eagle.com

The US government has once again agreed to increase its so-called debt “ceiling” – this time from $18.5 trillion to $20 trillion.  The so-called debt ceiling is recognized industry-wide as a complete misnomer.


Source: Sharelynx.com

“The phrase “debt ceiling” sounds austere and restrictive, as if intended to keep a lid on government spending. Actually, the U.S. national debt limit was conceived almost a century ago to do the opposite: to make it easier for Washington to borrow money” (see: Bloomberg Quicktake)

Investment advisers Casey Research yesterday called the debt ceiling ‘a farce’. “Last week, Forbes reported the U.S. government has raised the debt ceiling 74 times since March 1962. The latest increase – number 75 – should help fund the government until March 2017 or so.”

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December FED Rate Hike?

cropped-bob-shapiro.jpg   By Bob Shapiro

It looked as if the FED had decided to go all in with money printing. And, it looked like the FED officials were lying through their teeth with all the jawboning since Janet Yellen became FED Chief. Not only was the FED continuing with ZIRP and QE money expansion, but also Negative Interest Rates. But something may have changed the last couple of weeks.

Since a month ago, interest rates have gone up. It’s not enough to call it a spike, but up nonetheless.

US Treasury Yields 110815

Short rates – on 3 month T-Bills – went from a low of -0.04% to a recent high of 0.06%, although they have settled back a little to 0.04%. However, over the rest of the yield curve, from 6 mo and 2 year up to the 10 and 30 year maturities, yields are up by a quarter percent or more.

The odds of the FED actually raising rates “officially” at their December meeting, are starting to look good.

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US Regulators Mandate Next Stage Of Textbook Financial Repression

By Daniel Amerman – Re-Blogged From http://danielamerman.com

With comparatively little fanfare, Fidelity Investments has announced that 100% of their $115 billion Cash Reserves fund, the world’s largest money fund, will be invested in US government debt by December 1st of 2015. It is expected that many other money fund companies will also change their policies and invest only in US government and agency securities, because of a change in regulations that will occur in 2016.

Since 2010 the US government has been implementing a textbook example of Financial Repression, when it comes to using private savings to control and even effectively pay down the size of the national debt. Far from slowing down or ending this process, these new policies will expand by many millions the number of people who will effectively be forced to fund the purchase of government debt at artificially low interest rates.

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A Government Ponzi Scheme Starts To Crack

By Nick Giambruno – Re-Blogged From http://www.Silver-Phoenix500.com

Government employees get to do a lot of things that would land an ordinary citizen in prison.

For example, it’s legal for them to threaten and commit offensive, rather than defensive, violence. They can take property from others without their consent. They spy on anyone’s email and bank accounts whenever they please. They go into trillions of dollars in debt and then stick the unborn with the bill. They counterfeit the currency. They lie with misleading statistics and use accounting wizardry no business could get away. And this just scratches the surface…

The U.S. government also gets to run a special type of Ponzi scheme.

According to the Merriam-Webster dictionary a Ponzi scheme is:

[A]n investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.

In the private sector, people who run Ponzi schemes are rightly punished for their fraud. But when the government runs a Ponzi scheme, something very different happens.

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Debt Ceiling Debate: Don’t Mention Warfare/Welfare State!

By Ron Paul – Re-Blogged From The Ron Paul Institute

The US Treasury’s recent announcement that the government will reach the debt ceiling on November 3 means Congress will soon be debating raising the government’s borrowing limit again. Any delay in, or opposition to, raising the debt ceiling will inevitably be met with hand-wringing over Congress’ alleged irresponsibility. But the real irresponsible act would be for Congress to raise the debt ceiling.

Cutting up its credit card is the only way to make Congress reduce spending. Anyone who doubts this should listen to the bipartisan whining over how sequestration has so drastically reduced spending that there is literally nothing left to cut. But, according to the Heritage Foundation, sequestration has only reduced spending from $3.6 trillion to $3.5 trillion. Only in DC would a less than one percent spending reduction be considered a draconian cut.

Defense hawks have found a way around sequestration by shoving billions of dollars into the Overseas Contingency Operations (OCO) account. OCO spending is classified as “emergency” spending so it does not count against the spending limits, even when OCO is used for items that do not fit any reasonable definition of emergency.

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Tea Party Drinking Too Much Decaf

By Michael Pento – Re-Blogged From http://www.Silver-Phoenix500.com

On December 16th, 1773 the Sons of Liberty in Boston, in protest of the Tea Act, destroyed an entire shipment of tea sent by the East India Company, in a political protest referred to as the Boston Tea Party.

Following the Wall Street bail-outs in 2009, a political movement also protesting their lack of representation in government sought a reduction of the U.S. national debt and deficits by reducing government spending and lowering taxes. They were referred to as The Tea Party, named from the aforementioned Boston variety.

Since then, supporters of the Tea Party have had a major impact on the internal politics of Republicans and have helped secure both houses of congress. But these representatives who were elected to bring fiscal discipline to Washington have failed to deliver on their promises.

A year before The Great Recession the Federal deficit was $162 billion, it peaked in 2009 at $1.45 trillion and this year came in at $439 billion, and is projected to increase significantly after 2018. All this overspend has driven our national debt to over $18 trillion dollars, which is already north of 100% of the Gross Domestic Product.

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What Two Risks From Rising Interest-Rates Could Each Trigger A New Global Crisis?

By Daniel R Amerman – Re-Blogged From http://www.Gold-Eagle.com

Why are interest rates at historic lows in the United States and around the world?

The widely-accepted answer is that very low interest rates exist for the purpose of stimulating economic growth and corporate profits, and are thereby helping the United States and other nations that are struggling with persistent and deep-rooted economic and unemployment problems.

However, if we accept this answer, then another question arises. If the US economy is booming while unemployment purportedly nears a mere 5% – then why do interest rates remain so low? Why the continuous drama about whether the Federal Reserve will slightly increase interest rates?

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Three Reasons Why The US Government Should Default On Its Debt Today

By Doug Casey – Re-Blogged From http://www.Gold-Eagle.com

The overleveraging of the U.S. federal, state, and local governments, some corporations, and consumers is well known.

This has long been the case, and most people are bored by the topic. If debt is a problem, it has been manageable for so long that it no longer seems like a problem. U.S. government debt has become an abstraction; it has no more meaning to the average investor than the prospect of a comet smacking into the earth in the next hundred millennia.

Many financial commentators believe that debt doesn’t matter. We still hear ridiculous sound bites, like “We owe it to ourselves,” that trivialize the topic. Actually, some people owe it to other people. There will be big transfers of wealth depending on what happens. More exactly, since Americans don’t save anymore, that dishonest phrase about how we owe it to ourselves isn’t even true in a manner of speaking; we owe most of it to the Chinese and Japanese.

Another chestnut is “We’ll grow out of it.” That’s impossible unless real growth is greater than the interest on the debt, which is questionable. And at this point, government deficits are likely to balloon, not contract. Even with artificially low interest rates.

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Really Measuring Real GDP

cropped-bob-shapiro.jpg   By Bob Shapiro

Consider two families. Both have a weekly income of $1000, and both spend it all.

Next year, one family gets a $30 raise (3%) and again spends it all ($1030). The second family does not get a raise, but it borrows $30 and spends all $1030.

Question: Are both families doing just as well, or is one doing better than the other?

My guess is that you can see that it is earnings which are important, rather than spending. I expect that you will agree that family one is 3% better off than family two, which borrowed 3% to match the spending of family one.

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Ending the US Economic Tailspin

cropped-bob-shapiro.jpg   By Bob Shapiro

After WWII, with the advent of the jet engine, a race was on to see who could break the Sound Barrier first.

To pick up the final burst of speed in order to get past Mach I, just over 760 mph, test pilots would go up to 45,000 feet, and then point the nose down and fall to earth. At the last moment, they would “pull up” on the stick, expecting for that to pull the plane up and out of the dive.

Several pilots killed themselves in crashes, until in October, 1947, one pilot, Chuck Yeager, realized that pulling up on the stick was making the plane go down even more.

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Bond Bubble Bust Won’t Cause Great Rotation Into Stocks

By Michael Pento – Re-Blogged From http://www.pentoport.com

For the first time in its country’s history, Portugal sold 6 month T-bills at a negative yield. The 300 million euros ($333 million) worth of bills due in November 2015 sold at an average yield of minus 0.002%. A negative yield means investors buying these securities will get back less money from the government than they paid when the debt matures.

To put this in perspective, the 10 year note in Portugal now yields just 2.38%, down from 18% a mere three years ago. Back in 2012, creditors grew wary of the countries referred to as PIIG’s (Portugal, Ireland, Italy and Greece) and their ability to pay back the massive amounts of outstanding debt. Consequently, creditors drove interest rates dramatically higher to reflect the added risk of potential defaults.

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Believing Impossible Things

cropped-bob-shapiro.jpg   By Bob Shapiro

The other night, I talked with my new friend Jack about the Economy, Taxes, and eventually Social Security. I explained that the unfunded liability for Social Security was far beyond what was possible to meet, and that somewhere down the road, Social Security would default.

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Financial System Will Collapse Just a Matter of When-Laurence Kotlikoff

By Greg Hunter – Re-Blogged From http://www.usawatchdog.com

Renowned economist Laurence Kotlikoff recently testified at the U.S. Senate about the runaway U.S. budget.  How bad is it?  Kotlikoff says, “I told them the real (2014) deficit was $5 trillion, not the $500 billion or $300 billion or whatever it was announced to be this year.  Almost all the liabilities of the government are being kept off the books by bogus accounting. . . . The government is 58% underfinanced . . . . Social Security is 33% underfinanced . . . . So, the entire government enterprise is in worse fiscal shape than Social Security is, but they are both in terrible shape.”  So, how much is America on the hook for in the future?  Kotlikoff contends, “If you take all the expenditures that the government is expected to make, as projected by the Congressional Budget Office (CBO), all the spending on defense, repairing the roads, paying for the Supreme Court Justices’ salaries, Social Security, Medicare, Medicaid, welfare, everything and take all those expenditures into the future . . . and compare that to all the taxes that are projected to come in, and the difference is $210 trillion.  That’s the fiscal gap.  That’s our true debt.”

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Federal Budget in Pictures

Federal Spending and Debt are Out of Control – Re-Blogged From http://www.heritage.org

If America does not change course, the future will be dramatically worse. Now more than ever, it is crucial that Americans understand what our nation’s spending, taxes, and debt mean for them and their families. The Heritage Foundation’s Federal Budget in Pictures offers a unique tool to learn about the federal budget in a clear and compelling way.

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The CPI and The Dollar

cropped-bob-shapiro.jpg   By Bob Shapiro

The Year-Over-Year rise in the official CPI has turned negative, while the ShadowStats versions, using the BLS calculation methodologies used in 1990 and 1980, still show positive if lowered price increase rates. The 1990 methodology shows prices 3 1/2 % higher than a year earlier, down from a 5 1/2 % rise last year from the previous 12 months. The 1980 methodology shows a slowing of consumer price hikes to about 5% (YOY) compared to the previous year’s 10% (YOY) rate.

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Crowding Out

cropped-bob-shapiro.jpg   By Bob Shapiro

Back in 1971-72, the Wall Street Journal ran a pair of editorials on how the government was crowding out the private sector. Back then, it was the “massive” official National Debt plus Unfunded Liabilities – together about $4 Trillion then compared to today approaching $250 Trillion.

The Wall Street Journal noted that all of that spending beyond Uncle Sam’s means (deficit spending) had to be financed through borrowing.

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FED Policy & Government Spending

cropped-bob-shapiro.jpg   By Bob Shapiro

During the 1970s, inflation, as measured by the CPI, started to reemerge as a national problem. By the end of the decade, the US had “Double Digit Inflation.”

Paul Volker, the FED chief at the time, observed a steep rise in long dated Treasury Bonds, and slowly raised the short term Fed Funds interest rate, to keep the “spread” between the two rates reasonably close together. At the time, Volker was roundly criticized in the financial press for being “behind the curve” for being late consistently in raising the FED Funds rate.

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The CRomnibus Abomination Was Not ‘A Rare Bipartisan Success’

David Stockman   Guest Post by David Stockman

The rank economic cheerleading in the guise of “news” printed by the Wall Street Journal, Reuters and the rest of the financial press never ceases to amaze. But on the heels of Congress’ pathetic capitulation to Wall Street over the weekend you have to wonder if even the robo-writers who compose the headlines are on the take.

How could anyone in the right mind label this weekend’s CRomnibus abomination “A Rare Bipartisan Success for Congress”? Apparently,

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The Expanding World of US Treasury Debt

cropped-bob-shapiro.jpg   By Bob Shapiro

The US National Debt stands at around $18 Trillion. This is well above the annual GDP, and it looks impossible for the US ever to repay its accumulated official debt (let alone agency debt and unfunded liabilities). The US will be defaulting, either by refusing to repay or most likely by continuing to debase the currency through the printing press.

How long the rest of the world will allow this to go on is the big question. We can get a glimmer of an answer by looking at who holds all that Treasury debt. As of August, the FED itself held about $4¼

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Dollar Competitiveness – Part II

cropped-bob-shapiro.jpg   By Bob Shapiro

We saw yesterday that, although the Dollar has been strong versus the currencies of our trading partners, over the long haul – 60 years – Americans have been savaged by our government’s policies which have caused this fall in the Dollar’s international purchasing power. This fall is on top of the rise in prices domestically – the CPI increases.

Today we look at who wins and who loses by a cheapening Dollar and by the policies which cause it.

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Dollar Competitiveness – Part I

cropped-bob-shapiro.jpg   By Bob Shapiro

The US Dollar has been “strong” on foreign exchange markets for the past six months, with the USD Index having risen from 79 to 88, a gain of almost 11½%. That’s an increase in the value of the Dollars in your pocket (or bank account) compared to the currencies of our major trading partners around the world. If the value of your money could grow at a 23% annual rate year after year, you’d be rich in no time flat.

US Dollar 111614

Alas, this is not the way the world works. The Dollar got down to 79

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Eliminating Waste and Controlling Government Spending

Boccia_Romina  By

Abstract

Waste and inefficiency in the U.S. government are rampant. The federal government does too many things that would be done better by individuals or businesses in the private sector, or by state and local governments, or that should not be done at all. Moreover, unnecessary taxing, spending, and regulating distorts economic activity in numerous ways, leading to less growth and prosperity than if the government refrained from acting outside its proper constitutional domain. Ultimately, succeeding in eliminating waste and controlling government spending requires reducing the size and scope of the federal government.

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