Patterico's Pontifications

2/14/2010

America’s Looming Financial Disaster

Filed under: Economics,Obama,Politics — DRJ @ 3:42 pm



[Guest post by DRJ]

Sobering thoughts from Ed Morrissey at Hot Air:

“Obama demanded fiscal austerity this week … at the same time he lifted the cap on US debt from $12.4 trillion to $14.3 trillion. The difference between the two is about what the federal government spent for all of FY1999. It’s half of what Obama proposes to spend in FY2011. Democrats have raised spending by over a trillion dollars a year since taking control of Congress in 2007.

Which party needs to be told to get serious about fiscal responsibility?

We may rebuild the economy with cheap credit based on a borrowing spree by the federal government, but we’re about to reach our limit on how much we can keep borrowing. China, which holds a significant amount of our debt, has already begun making noises about dumping it in retaliation for our foreign policy towards Taiwan. We’re buying our own debt these days just to keep interest low. It won’t take much more than a single hard push to collapse the financial house of cards we’ve built — and if that happens, the resulting disaster will make 2008-9 look like a picnic.”

The worst part is that this isn’t deterring the Democrats at all.

— DRJ

29 Responses to “America’s Looming Financial Disaster”

  1. There was frequent criticism by Democrats of the deficits in the Bush administration, even as they controlled Congress.

    Now we find out that those criticisms were not just meaningless, but in fact nothing but jokes since the Democrats are making the Bush administration look like Dave Ramsey fans.

    SPQR (26be8b)

  2. this sort of post is unpatriotic, and unhelpful, as Obama struggles to repair the deliberate damage done to this country by the Bush regime.

    if you racists don’t have anything constructive to add to the conversation, why don’t you just shut up and let the adults work?

    i'mwd-40 (fb8750)

  3. “The worst part is that this isn’t deterring the Democrats at all.”

    Nor will it. The Democrat Party’s motto, by which all Democratic politicians must swear to abide by is “What’s mine is mine, and what’s yours is mine to redistribute as and to whom I wish. So help me Obama.”

    GM Roper (6afe02)

  4. I think the only thing to do at this point, and I am doing it, is to hunker down, deleverage as much as you can, reduce your spending and increase saving although I don’t know that dollars are safe for more than a couple of years, and prepare to ride it out until adults are back in charge.

    Of course, the idiots are planning on a continuation of the consumer economy but that is over for a while. I didn’t live through the Depression but my parents did and I have heard their stories. My father never had a credit card. He made a pretty good living in the 1940s, better than I ever have, but he paid cash for their house and cash for everything else he bought, even when things were not going as well for him.

    We have an administration that gets its economic policy from faculty lounge Marxists. They know nothing about economics and less about small business. Roosevelt set the price of gold by what he considered lucky numbers. These people are about as well informed.

    Mike K (2cf494)

  5. Tens of trillions of dollars in unfunded liabilities… unsustainable debt… the party’s over.

    There are some that say the USA could become like Argentina. Perhaps that transition is already underway.

    GeneralMalaise (4d34a1)

  6. “China, which holds a significant amount of our debt, has already begun making noises about dumping it in retaliation for our foreign policy towards Taiwan.”

    What does it means for china to “dump” our debt? Does that mean its value goes down?

    imdw (8f8ead)

  7. “We have an administration that gets its economic policy from faculty lounge Marxists”

    Austan Goolsbee?

    imdw (f0517e)

  8. On the week of the opening ceremony of the Beijing 2008 Olympics, Russia was pissed at the US’s role in the Georgia mess. Russia asked China to join it in dumping all Freddie Mac and Fannie Mae debt, which would have caused instant collapse and forcing the US to swoop in and cover the billions in obligations. This happened anyway a year later. China refused and tipped off Treasury Secy Paulson instead.

    This is the type of retaliation we can expect from Georgia and Taiwan types of disputes. The USA is vulnerable.

    Wesson (9fddaa)

  9. “Russia asked China to join it in dumping all Freddie Mac and Fannie Mae debt, which would have caused instant collapse and forcing the US to swoop in and cover the billions in obligations.”

    What does it mean to “dump” debt? You mean sell it at low prices?

    imdw (de7003)

  10. What does it means for china to “dump” our debt? Does that mean its value goes down?

    Since we’re all rich conservatives who know the financial and investment markets inside and out, it would be a snap for us to explain the mechanics of that to you.

    Official Internet Data Office (99772e)

  11. The problem is that it isn’t just Democrats, it’s politicians of all stripes and at all levels. The Tea Party movement is the most positive sign I’ve seen that the citizens of our nation could still stop the train wreck from happening… but it’s still a long shot that we pull it off.

    Regret (0116ce)

  12. Austan Goolsbee?

    Comment by imdw

    Who was thoroughly spanked for telling the Canadians that Obama’s trade policies were just campaign rhetoric. Have those trade policies changed, idiot ?

    Have they signed the free trade agreements with Columbia and South Korea ?

    Another illiterate.

    Mike K (2cf494)

  13. “Who was thoroughly spanked for telling the Canadians that Obama’s trade policies were just campaign rhetoric. Have those trade policies changed, idiot ?”

    Is that “marxist”?

    imdw (842182)

  14. No, it’s a comment on your intelligence. I notice you don’t respond to the substance of my comment.

    Mike K (2cf494)

  15. “No, it’s a comment on your intelligence. I notice you don’t respond to the substance of my comment.”

    well. I did ask first: Austan Goolsbee?

    But I don’t follow trade policy so I dont know how much it has changed.

    imdw (8f8ead)

  16. imdw…

    Please answer your own damn questions…

    P.S….spelled your name right this time….

    reff (176333)

  17. > The worst part is that this isn’t deterring the Democrats at all.

    Surprised much? Not me:

    Barack Obama and the Strategy of Manufactured Crisis

    IgotBupkis (79d71d)

  18. “P.S….spelled your name right this time….”

    you’re being lied to.

    imdw (603c39)

  19. > But I don’t follow trade policy so I dont know how much it has changed.

    Then why don’t you STFU and listen to the “adults” talk about it rather than blathering on like an idiot.

    “Dumping” debt onto the market means that they are willing to sell it to others rather than keep it themselves. Yes, it does bring the price down (it’s somewhat the equivalent of a collection agency agreeing to settle a debt at 80 cents on the dollar), but it creates a significant problem in that it becomes competition for any new debt instruments we attempt to sell, meaning that THOSE must be offered at a higher rate to compete.

    Example:

    Suppose I sell “bazingas”. I’ve sold thousands and thousands of “bazingas” to China.

    China decides it doesn’t want to buy any more bazingas, and, in fact, has too many of them. So they turn around and re-sell the ones they have, which means I can no longer sell my NEW bazingas at the same price I’ve been selling them at, but instead have to lower the price (in the case of debt, this means “offer a higher rate of return”) in order to keep selling bazingas.

    You can see how this has two longer-term implications —
    a) I’ve lost a significant market for bazingas, which means I have to find other markets to take its place
    b) I will make less money across the board on ALL my bazinga sales because I’m now competing with China to sell them.

    This is the sort of thing that can ruin a bazinga manufacturing company, if it works out wrong.

    Now substitute “US Debt Instuments” (i.e., “Bonds”) for “bazingas” in the above.

    In real fact, the US Government has become a “bazinga manufacturing organization”.

    And Obama, our CEO, has brilliantly responded to this problem by announcing plans to make more bazingas.

    Apparently he thinks that “economy of scale” rules apply to making bazingas.

    Starting to see the problem? No? Not particularly suprised, actually. Neither do most libtards, for whom fiscal policy is anything but clear.

    IgotBupkis (79d71d)

  20. P.S. I said:
    > Yes, it does bring the price down (it’s somewhat the equivalent of a collection agency agreeing to settle a debt at 80 cents on the dollar)

    This would be A Good Thing — indeed, a Very Good Thing — if we were in the market to reduce our deficit, and buy back and settle some of it.

    We aren’t doing that, though.

    As discussed above, we’re adding still more of it. So this, again for reasons mentioned above, is NOT the good thing it might otherwise sound like.

    IgotBupkis (79d71d)

  21. But I don’t follow trade policy so I dont know how much it has changed.

    Yet you still felt compelled to open that blowhole and expound on matters you’re completely ignorant about. You really are a douchebag.

    Dmac (799abd)

  22. “China decides it doesn’t want to buy any more bazingas, and, in fact, has too many of them. So they turn around and re-sell the ones they have, which means I can no longer sell my NEW bazingas at the same price I’ve been selling them at, but instead have to lower the price (in the case of debt, this means “offer a higher rate of return”) in order to keep selling bazingas.”

    Who would buy that debt that china is selling if we’re about to offer it at better terms?

    “Yet you still felt compelled to open that blowhole and expound on matters you’re completely ignorant about. You really are a douchebag.”

    I’m not expounding on trade policy. I’m just wondering if Austan Goolsbee is a “faculty lounge marxist”

    How about Romer? Volker? Geithner?

    imdw (1ad994)

  23. “Who would buy that debt that china is selling if we’re about to offer it at better terms?”

    Who could explain economics to someone not interested in reading?

    Corwin (ea9428)

  24. “Better terms” on our debt means higher interest rates. Given what an immense amount of our Federal budget will be going to interest payments in 10 years, if interest goes up more than the already farcical estimates in the budget, our Federal finances will collapse.

    SPQR (26be8b)

  25. Who would buy that debt that china is selling if we’re about to offer it at better terms?

    You know, kid, you really should do some reading unless you are trying to prove to us how stupid the left is on economics. If China becomes convinced that we are thinking of renouncing our sovereign debt, and that looks to me like Obama’s policies end result, they might sell it at auction. The price would settle at what the rest of the world thinks is our risk of default. The effect would be interest rates like those in the Carter years, before you were born.

    In the late 70s, I bought long term (10 years) Treasuries that had a coupon rate of 16% and I bought them at a discount that made the true return 18%. New home mortgages were 23%. Would you like to see those days come again ? Good because they are.

    Mike K (2cf494)

  26. “. . .long term (10 years) Treasuries that had a coupon rate of 16%. . .”

    imdw, that’s 16% per year (paid semi-annually) not 16% for the whole 10 years added together, cumulatively.

    Official Internet Data Office (99772e)

  27. “The effect would be interest rates like those in the Carter years, before you were born.”

    Real or nominal? Real rates dipped into the negative in the 70’s.

    “You know, kid, you really should do some reading unless you are trying to prove to us how stupid the left is on economics.”

    That’s why I’m asking just who in this economic team are the faculty lounge marxists. Romer? Geithner? Volker? Summers? Goolsbee? Why aren’t you answering this?

    imdw (017d51)


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