Archive for the ‘Debt’ Category

February was not kind to Obama and his administration. His spending continues to set records.

Debt

The CBO has projected that the government deficit for February 2012 will be $229 billion, making the FY2012 deficit already more than half a trillion dollars.  This is the highest monthly budget deficit in history.

  • Gas prices highest in history for this time of year.
  • Debt highest in history.
  • Lowest growth rate.
  • Regulations that are choking financial institutions, and small business.
  • Freedoms eroding.

What’s your Debt Burden?

The following tables are provided by the Tax Foundation with these assumptions.

Let’s start with the top 1% of taxpayers.

  • The top 1% makes $345,000 or more of adjusted gross income in a year.
  • The top 1% pay 37% of federal income taxes, so let’s assume they’ll pay 37% of the debt.
  • That means that each top filer in the top 1% is responsible for four million dollars of the debt.
  • And if we’re going to pay it off in 15 years, with no interest, then we would require $22,000 per month from those taxpayers after they have paid their current tax burden.
  • Does anyone think we can raise taxes by $22,000 a month on this group of taxpayers and have them survive that level of confiscation? Of course not. They would be wiped out.
  • The top 1%, if you combined all their assets it would be equivalent to $1.5 Trillion dollars. With a deficit now in excess of $15 Trillion, do you see how ludicrous this administration states they need to pay their fair share. You could wipe them out, not to mention their spending, their companies that employ individuals jobs. All for not even 10% of the total debt in this country?

Paying the debt is going to cost real money, and it’s going to have to come out of real pockets. Already the bottom 50% in this country only pay 1% of the tax burden.

Tax Burden

Tax Burden

Tax Burden

Where do we go from here? Is the United States the next Greece?

To Solve the Crisis You Must Solve Three Problems

2012 Foreign Debt Maturing

2012 Foreign Debt Maturing

There are three main problems in Europe.

  1. Most of the banks are massively insolvent, because they have 30 times their capital invested.
  2. The sovereign debt of countries that are going to have trouble paying that debt. If the banks have to mark down the debt to what its real value is – or to what it will soon be – they will be bankrupt on a scale that makes 2008 look like a waltz in the park. If banks can’t make loans, then businesses must cut back, which means fewer jobs, products, and services, which quickly becomes an ugly spiral. If countries must step in and save their banks, then they have to assume some of the losses.
  3. The largest problem, and that is massive trade imbalances. Germany exports products to the peripheral European countries, which run trade deficits. A country cannot reduce private-sector leverage, reduce public-sector leverage and deficits (balance its budget), and run a trade deficit all at the same time. That is simple, unavoidable math, based on 400 years of accounting understanding. Ultimately, there must be a trade surplus if leverage and debt are to be reduced.

For most of the past two years, European leaders have tried to deal with the problems as though they were short-term liquidity problems: “If we just find the money to buy some more Greek bonds, then Greece can figure out how to solve its problems and then pay us back. Given enough time, the problem can get solved.”

They have now arrived at the understanding that it this not a short-term problem. Rather, it’s a solvency problem of the various governments, which of course creates a solvency problem for their banks. They are now addressing the problem of solvency and providing capital until such time as certain countries can get their budgets under control and the bond market sees fit to provide the capital they need.

Greece runs a trade deficit of about 10% of GDP. Until they can stop that bleeding, they cannot get their government and private budgets under control. It is not simply a matter of cutting budgets or raising taxes. Indeed, their economy will continue to shrink, making it more difficult buy foreign goods without increasing their own production of goods and services. It is a vicious spiral. And that same spiral will spin up to take in all of Europe. Again, more on that later, as we consider what their choices are.

But for now, let’s start with my contention that if you do not solve all three problems you do not solve the real problem. Greece cannot “stand on its own” without a change in its cost of production relative to Northern Europe. Neither can Portugal, et al., unless Germany either changes how it exports and consumes more, or Germany is willing to fund Greek (and Portuguese and Italian and…) debt, so those countries can continue to run large deficits.

The eurozone debt crisis returned with a vengeance on Friday as Standard & Poor’s, the credit rating agency, downgraded France and Austria – two of the currency zone’s six triple A rated countries – as well as seven nations not in that top tier, among them Italy and Spain.

S&P, under political fire since it announced a review or eurozone debt in December, gave 14 of 16 countries – including France, Italy and Spain – a negative outlook, which it said meant a one-in-three chance for each country of a further downgrade this year or next.

The agency downgraded France and Austria by one notch to double A plus, while it cut Italy Spain and Portugal by two notches. Portugal has now been relegated to “junk” status by the three main rating agencies following similar actions by Moody’s in July and Fitch in November. Ireland held its rating.

The agency’s move prompted an immediate political backlash.

Earlier, financial markets slid as news of the downgrade leaked and investors sold the euro, eurozone equities and sovereign bonds, especially from Italy and Spain – the latter move pushing down yields for German Bunds and US Treasuries, held to be havens.

The downgrades came in lockstep with new problems for the eurozone on other fronts – debt-restructuring talks between Greece and holders of its debt broke down over how large bondholders’ losses should be, raising the spectre of a Greek default in March.

The downgrades – announced after US markets closed on Friday – come after the S&P in December warned the six triple A nations and nine others in the eurozone that it had put their creditworthiness on review as a result of the debt crisis and the worsening economic outlook.

Cyprus, also downgraded on Friday night, was already on review, and Greece not under consideration.

Ahead of the statement confirming the downgrades, the euro fell more than 1 per cent to a 17-month low against the dollar and early gains on European stock markets were erased.

Sovereign bond markets were also rattled, with Italy and Spain’s borrowing costs creeping up again after several days of sharp drops. France’s 10-year bond yields edged up, to 3.05 per cent, while Germany’s 10-year bond saw its yield drop to 1.75 per cent as investors returned to safer assets.

There are 40 elections in 2012. Everybody is going to do their best to get us through the elections. Governments will continue to print money, propping up economies all over the world. Will it work this time? Will it postpone the crisis in 2012 and push it into 2012?

Your thoughts?

The total of the U.S. debt load is now $15.2 trillion, more than the annual value in goods and services of the country’s economy. Now exceeding 100% of the US Economy.

US Debt % to GDP

US Debt % to GDP

Although the specific figure is difficult to pinpoint, the benchmark was likely reached at some point in the last few days, USA Today first reported Monday.

  • In layman’s terms, it means the world’s largest economy now collectively owes more than its entire annual output is worth.

The total value of all the goods and services that the U.S. produces sits at $15.17 trillion. That figure is growing at a 4.4 per cent annual pace at the moment, not enough to keep up with the increase in America’s debt load which is growing at a 10% clip.

“It’s a bit like saying your debt is as high as your family’s annual salary,” said Ian Nakamoto, research director with MacDougall MacDougall & MacTier in Toronto. “It’s a pretty symbolic moment.”

  • America’s national debt has reached a worrying milestone – it is now as big as the whole of its economy.

Steve Bell of the Bipartisan Policy Center, which has proposed cutting nearly $6 trillion over ten years, said: ‘The 100 per cent mark means that your entire debt is as big as everything you’re producing in your country. Clearly, that can’t continue.’

President Obama’s 2012 budget shows the debt

passing $26 trillion ten years from now.

Among advanced economies, only Iceland, Greece, Ireland, Italy, Japan and Portugal have debts larger than their economies.

For the first time in American History we will surpass $15 Trillion in our National Debt today! That basically equals 100% of our Gross Domestic Product. In the book “This Time is Different” by Reinhart and Rogoff, once a country reaches 90% of GDP, buckle your seat belt, well we blew by that number.

Forget all the pundits who keep saying it will affect our children and grandchildren. No one is talking about how the debt is affecting all of us today. The debt was $10.626 trillion on the day Mr. Obama took office. We are in another depression like the 30′s, and he doesn’t have any solutions.

Here’s a video of what a Trillion Dollars looks like.

While this President states that America is a lazy country, and then goes off to play a round of golf in Hawaii. Where’s the sense of urgency in creating Jobs.

The Super Committee is a joke…another crisis deadline looms on November 23rd to come up with cuts the day before Thanksgiving. Wonder what the Pilgrims would think. If the Super Committee cannot agree, cuts will go into effect January 2013 after the elections. Exactly how do they define cuts again??? Oh…a 5% increase is baked into the budget every year, so if we only allow a 3% increase that’s considered a cut. That’s lunacy.

Tennessee Ernie Ford would be proud to hear his song being played.

Sixteen Tons of Debt…

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store

Could the US be on the verge of another credit downgrade from another rating agency?

Government Stimulus

Government Spending

November 23rd is the next drop dead date to reduce the runaway Federal Deficit by $1.2 Trillion. Failure by the Super Committee to reduce the deficit would automatically take effect in 2013. Why do politicians kick the can down the road?

“The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan” to cut the deficit. This administration continues to pile on debt at a record pace. It would seem to some that this is almost intentional. Get more people dependent on government. If you look through the course of history, that has never worked, and will never work. Capitalism has it’s faults, but it is the only solution to get out of this crisis. Small Business creates the majority of jobs in this country. Get rid of the strangling regulations, and increase incentives for small business to create jobs.

A second downgrade — either from Moody’s or Fitch — would follow Standard & Poor’s downgrade in August on concerns about the government’s budget deficit and rising debt burden. A second loss of the country’s top credit rating would be an additional blow to the sluggish U.S. economy.

Buckle your seat belts…You could be in for a bumpy ride in the markets.

Where Are the Jobs

Posted: September 7, 2011 in Debt, Jobs
Tags: , , , ,
Jobs

Jobs

Unless you were completely out of touch this weekend, you know the jobs report came in flat, as in zero, nada, “0”. The economy was in neutral, at least as far as employment was concerned. But flat is actually down, as we need 125,000 jobs a month (at least) just to stay up with population growth. As John Mauldin writes about. Government is not the answer, they are destroying our economy.

The simple fact is that net new jobs for the last 15 years came from business start-ups or rather small businesses.

  • Goldman Sachs notes that historically 90% of new jobs come from small businesses, with 75% coming from firms with less than 20 employees. Some of those become Google, but a lot of them are simply small, local services. But every job, if it is yours, is important.

What we need to do is to make it easier for businesses to start and find capital. Reduce the regulatory burden that small businesses face. When small local banks need 1.2 employees to deal with regulations and compliance for every 1 worker they have making loans (as reported in the WSJ this week), something is seriously wrong.

The US has roughly the same number of jobs today as it had in 2000, but the population is well over 30,000,000 larger. To get to a civilian employment-to-population ratio equal to that in 2000, we would have to gain some 18 MILLION jobs.

  • 1.2 million people over 75 are in the US work force, which is getting ever closer to 1% of the total working population.

Tomorrow night we are going to hear about JOBS, JOBS, JOBS…really. What has been happening for the past 2 1/2 years to create jobs. This administration doesn’t want to create jobs, they want people dependent on government like socialist country’s.

  • Spending out of control. Highest deficit in history. Obama has added more deficit than all the other presidents combined in history.
  • We have now reached 100% of GDP in our debt. History tells us that we’ve entered crisis territory. No wonder the S&P downgraded out debt for the first time in our nations history.
  • QE3 funding, which they will relabel.
  • More regulations on the back of small business?
  • Let’s tax the rich…Really. Let’s just take all their money, which if totaled all up is $1.5 Trillion. That’s smaller than the deficit that Obama will run in this year alone. That’s how absurd this is. Our debt is now around $15 Trillion.
  • More Green Jobs Funding. Like the one in California this administration gave them a $535 million dollar loan and they filed for bankruptcy. Another 3 green job company’s went under.
  • More special deals for the select few.
  • Hey another round of Obamacare.
  • More stimulus where this administration spent $700+ Billion. Remember when Obama said we had to pass this to keep unemployment under 8%. That’s really worked, as unemployment shot up to almost 10% and some economists say it is closer to 17% because of the way we are calculating unemployment. Paying $278,000 per job that was created.
  • Tell us where the TARP money is?
  • Announce going on another vacation?
  • Buying another million dollar bus to tour?
  • How’s GM – Government Motors doing?

The insanity must stop. It’s not politics, it’s about ideology. We’ve always been free, and a capitalist society.

The sad fact of the matter is that we are in for a long, slow slog uphill on employment for most the remainder of this decade, until we work through the debt crisis and deal with the deficits.

The debt was $10.626 trillion on the day Mr. Obama took office. The latest calculation from Treasury shows the debt has now hit $14.639 trillion.

It’s the most rapid increase in the debt under any U.S. president.

“Obama will have added more to the national debt by the end of his first term in office than all of the 43 prior presidents combined.” He blames it on politics, but he’s the one spending the money, including this $1.1 Million dollar bus to go on tour. At least he could have bought the bus in the United States, but didn’t even do that. This is Obama’s philosophy, has nothing to do with politics.

The question one must ask, which doesn’t depend on either party is this…

Are we better off as a nation under his policies? Are we on the right path?

Obama Bus

Obama Bus

According to the latest Gallup survey, his job approval has dropped to an all time low, with just 38 percent.

Expensive massages, top shelf vodka and five-star hotels: First Lady accused of spending $10m in public money on her vacations within the past year. Now one doesn’t begrudge the President and First Lady to be able to take vacations. The First Lady is believed to have taken 42 days of vacation in the past year. But how many is another subject, as well as the extravagant spending that is going on in light of the worst economic problems we’ve had since the great depression.

I can’t wait to hear how they relabel QE3, and Obama’s speech when he gets back from his 75+ golf outing. All of this new government spending was sold as “investment.” Yet after two years, the unemployment rate remains above 9%, and that’s what’s reported, the actual rate is almost double that for people who have gone off the unemployment rolls, or have just totally given up hope. Jobs are not being created unless you are the government, and that is by design.

This time is different, we have reached the tipping point. My hope and optimism lies in the fact we are a great nation, and will find the resolve to change course. However, we must act prudently, forget about politics and do what’s right for this country.

Piling on more debt is not the answer.

AAA to AA+

FIRST TIME IN AMERICAN HISTORY

Debt

The stunning decision by Standard & Poor’s on Friday to downgrade the long-term credit rating of the United States government to AA+ from AAA will likely raise questions about investor confidence in the economy and throw equity markets into more turmoil. What is so stunning is that it happened so quickly, financial market consensus was our debt would be downgraded within the next year if Obama didn’t address the debt issue.

So how’s that HOPE & CHANGE working?

Standard & Poor’s warned that the agency could downgrade U.S. debt a notch lower in the next six to 24 months if Congress doesn’t cut another $1.6 trillion over 10 years to reach the $4 trillion figure.

The probability of another downgrade is 3-1 odds, he said.

Asked whether the U.S. can regain its triple-A rating, Standard & Poor’s said the five governments that did achieved it in 9 to 18 years.

The great unknown is, how will U.S. stocks (which have already been hammered over the past two weeks) respond to this shocking development? And will there be a long-term lingering impact on stock price performance going forward?

  • Saudi market was off 5% on Saturday.
  • Israel off 7% Sunday.
  • Currently our futures market is off 230 points (Sunday).
  • Asia is off 2% Sunday.
  • China off 4% Sunday.
  • Hang Sing off 4% Sunday.

The federal government makes about $250 billion in interest payments a year, so even a small increase in the rates demanded by investors in United States debt could add tens of billions of dollars to those payments.

Barney Frank ranking member of the House Financial Services Committee is outraged. Really? Where was Barney when he was riding the coattails of Fannie Mae, and taking in all the money from them when they were cooking the books to the tune of billions of dollars. During the Bush Administration there were numerous attempts to reign in Fannie Mae, by conservatives showing how there would be a bailout if that didn’t happen. Barney, why are you surprised about the downgrade and your fellow cronies now?

  • We are bailing out Fannie Mae and Freddie Mac at the cost to US Taxpayers at a clip of tens of billions of dollars each year.
  • This administration parties like it’s 1999. SPEND, SPEND, SPEND.
  • The American people have had it with Washington Politics. I’m tired of being hosed!

Chinese economists said the U.S. credit rating downgrade by Standard & Poor’s poses great risk to financial markets and expect it to prompt China, the world’s biggest holder of U.S. Treasuries, to accelerate the diversification of its holdings.

So who’s going to finance the US runaway debt? Probably our Treasury Department who will do QE3 and keep printing money, and printing money, and printing money. What that means for you and me. Higher prices, Inflation is coming, get ready.

Tennessee Ernie Ford would be proud Sixteen Tons of Debt…

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store

Government Stimulus

Government Stimulus

It was just last May that the consensus was that second-quarter GDP would be 3.3%. That had been revised down to 2.7%, but the number came in at 1.3%.

  • Normally, at this time in a recovery we are growing at close to 3 times that number, or 3.6%. Double Dip?

Government stimulus is not creating jobs. Printing money, spending money is not going to do it. If anything, the government interference to the economy is destroying jobs. Remember Obama promised that we would not have unemployment above 8% if we passed this stimulus bill? We are 9%+, and that doesn’t count the ones who are not reporting.

The program  created or saved just under 2.4 million private or public jobs.  That amounts to a cost to taxpayers of $278,000 per job. Now with the average wage in this country around $40,000…you do the math. How about just giving us a check? Where did all the money go?

White House’s Council of Economic Advisors reports that, as of two quarters ago, the “stimulus” had added or saved just under 2.7 million jobs — or 288,000 more than it has now.  In other words, over the past six months, the economy would have added or saved more jobs without the “stimulus” than it has with it. In comparison to how things would otherwise have been, the “stimulus” has been working in reverse over the past six months, causing the economy to shed jobs.”

  • Too much money spent on something that did not work, there is a pattern here.  And we still have to pay back the money!

At the end of 2008, when President Obama was about to take office, the national debt was $9.986 trillion.  The national debt is now $14,467 trillion and climbing.  We are heading for the cliff, DOW OFF 513 points today. Projections are for almost $17 Trillion by end of next fiscal year.

  • Obama will have almost doubled the entire national debt of this country in 4 years versus the previous 232 years.

Let’s bring back Cash for Clunkers and give everybody $3500-$4500 again. Let’s continue to spend and print more money. Let’s continue to dig a deeper hole. That seems to be the current day philosophy. Maybe that’s explains why this administration only has 8% of it’s staff with any business knowledge. The lowest on record for a President’s administration in over 50 years.

“You cannot spend your way out of recession or borrow your way out of debt.”
-Daniel Hannan

We’ve already lost $16.4 Trillion in wealth over the past couple of years. Hey let’s continue the streak…why not?

Wealth Plunge

With financial markets in turmoil and economic growth slowing, policymakers around the world may once again be forced to cooperate to try to head off a crisis, as they did successfully in 2008-2009. But this time, they have fewer good options.

Central banks have less room to ease monetary policy than they did three years ago; cash-strapped governments cannot afford to boost spending as much; and political disarray in some countries may make concerted global policymaking harder. Where are we going to find the…

Answer...the Silver Bullet

Unfortunately our government has run out of ammo.

The current situation is more troublesome than it was in 2008: There is widespread concern about the risk of a downgrade of the U.S. sovereign credit rating, and a bond market attack on Italy, the euro zone’s third-biggest economy, has called into question the long-term viability of the zone. Valuations of U.S. and European bank shares are back around levels hit at the time of Lehman’s collapse.

On Thursday, growing fear about the weakening U.S. economy was joined by concern in Europe that the troubled economies of Italy and Spain might need help from the European Union.

Manufacturing is barely growing. The service sector, which covers about 90 percent of the American work force, is growing at the slowest rate in a year and a half. People spent less in June than in May, the first decline since September 2009.

“The difference (between 2008 and now) is that this is not only a currency and banking crisis, you have now a currency, banking and sovereign crisis.”