Tag: government debt

Is the Administration waking up to the predicament of the U.S. debt load?

Bloomberg relays the epiphany:

“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”

You don’t say.

Sorry folks, but China is already tired of buying Treasuries. The world economy is slowing drastically, which means the king of exports is feeling the pain too. And they’ve got plenty of their own to take care of.

I’m not sure which is scarier: the thought that China may run out excess capital at some point in the future, and be altogether unable to buy US government debt despite whatever politicking the US throws their way; or that while these bold statements about the ‘unsustainable’ government debt load are being made officials are endorsing the largest budget deficits in history.

Just another case of ‘do as I say, not as I do’? Or prima facie insanity?

US Government launches bold plan for pensioner genocide

“Screw you, AARP” – Ben Bernanke and Tim Geithner, March 18, 2009

The AP wind up:

With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy. To do so, the Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

Fed Chairman Ben Bernanke and his colleagues wrapped a two-day meeting by leaving a key short-term bank lending rate at a record low of between zero and 0.25 percent. Economists predict the Fed will hold the rate in that zone for the rest of this year and for most — if not all — of next year.

The decision to hold rates near zero was widely expected. But the Fed’s plan to buy government bonds and the sheer amount — $1.2 trillion — of the extra money to be pumped into the U.S. economy was a surprise.

Surprise, surrprise, surrrprise.

You heard that right, boys and girls – the government is now exchanging its debt for money that it prints, and buying bonds from wholly-owned subsidiaries in exchange for yet more cash. Never has anything struck a resemblance closer to taking money out of the right pocket and sticking it in the left. I guess the Chinese weren’t particularly impressed with the government’s assurances.

A premonition from Guy Kawasaki that may just be humor, but might not be too far from becoming reality:

Going down to the casino to eat. May cost me $500.

The bullishness at the printing press may put a temporary halt to the wealth destruction we’ve become accustomed to, but creating $1.2 trillion out of thin air has a high probability of turning inflation worries into nightmare.

If you thought you were now retirement-poor as a result of the decimation your IRA/401k endured in the last few quarters, imagine what already retired folks who live on fixed incomes are going to think when a loaf of bread costs $15. What home value they have left, now being extracted in bulk through the magic of reverse-mortgages, is being used to pay jacked-up supplemental insurance premiums and co-pays.

If universal coverage doesn’t wind up killing them, now starvation will.