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Tuesday, November 9, 2010

Hardcore Wonking On The Collapse

Hat-tip to Insty, who linked this post today.

Read it, and its two embedded links:

Fiscal Crisis, Part 1: The Slow Descent to Second-Class Status

Fiscal Crisis, Part 2: Catastrophe

Wanna bet Part 3 features militarily-supported repo men and emergency housing facilities?


Blogger pdxr13 said...

AFAICT, as a non-economist, non financial professional, it doesn't matter if the "Bush Tax Cuts" are continued/cut/trimmed/expanded, because it is just nibbling at the margins of a huge problem of overall solvency.

Debt that can not be paid, will not be paid.

What is happening is that we are borrowing from everywhere to make the interest payments (cash-advancing the cards that come in the mail to make minimum monthly payments on the older debt). It is unfortunate for our trusting lenders that fraud and concealment of the true situation has allowed/encouraged over-lending beyond reasonable payback capacity.

We will default.

Will it be honestly and directly by announcement, or by the way of the snake with "Quantitative Easing" and devaluation/inflation? Helicopter Ben is making the path clear this week.

I expect payments to the people to continue. SSI checks, VA checks, food stamps, Federal permanent unemployment compensation, etc. checks and Direct Deposit will continue because the machine doesn't have an OFF button. What can be done is to stop COLA's (via fraud statistics) and devalue the "dollars" being issued.

Soon enough, the amount of the monthly issue will no longer pay for enough food calories to keep weight on a person. This is the very-long road version of control that the occupying Nazi's used on ghetto-ized undesirable populations in Eastern European cities. Long-term hungry peoples are not very active/effective in resisting central gov't power, and the few individuals who might be can mostly be bought-off cheaply. Except for the heroic stories of a few dozen fighters holding back infantry against commanders who didn't want to take casualties (see: "Force Protection" in modern US Army lingo) the Nazi plan worked.

If I had a choice about how to collapse the economy and default on the debt it would include one factor above all: speed.

The faster it is done, the fewer Americans will die of hunger before networks (jobs, money, food, water, business, newly elected Government, etc.) can be re-established.


November 9, 2010 at 3:27 PM  
Blogger Graybeard said...

They are such starry eyed optimists! Plotting debt vs. GDP out to year 2035, as if we're going to make it that far. Silly boys.

As far as _I_ can tell, pdxr13 is exactly right. We have two options, hyperinflation and default. Since the first one hurts the bankers and the ruling class, an engineered default is more likely - assuming they can control things.

The problem is simple. Our deficit for this year is right around 1.4 Trillion. That means we need to "borrow" that by selling bonds. That's more than the GDP of every country below number 10 in the world GDP list. How can a country with a GDP lower than that buy a significant number of bonds? We have to sell to only the two or three biggest economies in the world. And that amount we need to sell gets bigger every year. It's looking like they don't want to play this game much longer.

Don't believe that crap about "taxing the richest 1% will pay for it" - if you confiscated every single penny they make you couldn't pay for that much debt. The small tax increase they're talking about will be like whizzing on a forest fire.

And if I hear the DNC talking point about "the rich" paying $700 billion dollars in tax one more time, I'm going to hurl. Geithner said it's $30 billion for this year and 700 for 10 years. Since 30 times 10 isn't 700, he's counting on a bunch of growth out there. Seen any real growth? Yeah. Me neither.

November 10, 2010 at 12:08 AM  
Blogger Dedicated_Dad said...

I'm not so sure the banksters and their fed/.gov enablers consider hyperinflation to be a bad thing.

Today, almost every bank in our Republic is insolvent. So many "upside-down" mortgages were issued that they're all bankrupt. The ONLY reason they haven't collapsed already is they're not being forced to properly value their "assets" in light of the popping of the mortgage-bubble.

Put simply, the problem is millions of $200k mortgages on properties worth only $100k. Owners can't sell. Banks can't foreclose without losing their shirts as well.

Then there's the point of all our "public" debt, which at this point probably cannot ever be paid off.

So, how do we get ourselves out of this mess?

IF the Fed can kick off a "controlled inflation" situation, and devalue the dollar by ~50% or more without collapsing it entirely, this would free our economy and restore the banks to solvency.

Now that $100k house is worth $200k "new dollars" - coincidentally the amount for which it's mortgaged. Now the owner can sell, or the bank can foreclose without losing its shirt.

Further, once salaries rise to reflect the "new" reality, the .gov gets a big bailout as well.

Assuming tax-brackets are not adjusted, pretty much everyone will see themselves jumping into significantly higher tax-brackets.

Since our debt isn't indexed for inflation, China and others will - in essence - be screwed out of half of what we owe them, but... That's likely to be considered a bonus by TPTB as well.

I honestly believe TPTB see this as the only way out of the mess we're in. Sure - there'll be some serious pain in the short-run as prices out-strip salaries, but they probably figure on passing some "emergency assistance" bill or another to bridge the gap.

One more bit of supporting info...

We all heard how banks were literally THREATENED over TARP, ordered to take the $ whether they wanted/needed it or not. The REASON for this was to hide the banks which were in trouble.

If only troubled banks had taken TARP funds, it might have kicked off a "run" on said banks -- causing their collapse. By forcing healthier banks to also take TARP funds, TPTB were able to hide and protect the weak ones from us sheep.

This hyperinflation "solution" may literally be the "best option" from the perspective of the banksters -- after all, they're rich enough that it won't REALLY hurt them, and the values of RE, PMs, Commodities and etc will quickly rise to reflect the new realities.

It's us - the "little guy" - who will suffer the most in the interim...


November 13, 2010 at 4:24 PM  

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