News & Analysis
The Man With No Plan: The Fuse on America's Debt Bomb Just Keeps Getting Shorter
With the health of the fragile economy hanging in the balance and financial markets watching closely, the leaders said they would present the compromise to their caucuses on Monday in hopes of enacting it before a Tuesday deadline to avert default. ... The tentative agreement calls for at least $2.4 trillion in spending cuts over 10 years, a new Congressional committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling. ... They said the debt limit would be increased by $900 billion in the first installment, subject to a Congressional vote of disapproval that Mr. Obama would be able to veto. To prevent a default, $400 billion would be added immediately. – NY Times
Dominant Social Theme: Everything will be OK. Nothing to see here folks ... the storm has passed and your wise leaders have saved the day.
Free-Market Analysis: All along we have been saying that the semantics and hype surrounding the debt ceiling debate would be for not and that "business as usual" would prevail. This celebratory piece, published by the NY Times on Sunday (excerpted above), is just the kind of propaganda that confuses the public into actually believing that something meaningful has been accomplished and that the US economy will now improve and their living standards along with it.
Mainstream media have long been aiding and abetting Money Power and their deceitful game of monetary manipulation – one that has been hollowing out the American economy and blowing cannon-size holes through the US Constitution. So it comes as now surprise, that here on the virtual eve of the debt ceiling vote in the House of Representatives, that the NY Times brings the "people" a message of false hope.
Well, sorry to burst the party balloons, but we just don't see this as anything other than a continuation of the same. There is no "cure" here. The "plan" is not going to solve anything because it DOESN'T ADDRESS THE REAL PROBLEM.
The real problem has to do with a faulty currency that is unrestrained because it is inflatable at the will of politicians and central bankers. And people have been conditioned to believe that there are others out there who can do a better job of looking out for their needs than themselves.
So it is that people continue to sacrifice more and more of their freedoms to the dream peddlers. They grant them free license to inflate an unrestrained fiat currency that has been hijacked over time. And mainstream media publications, like the NY Times, are ever ready to do their part to make sure a glossy coat of wordsmithing provides cover to the process.
The "wise leaders" would like everyone to believe that money is evil and that in order to protect society against the ravages of the free-market, a central bank must oversee the process of money creation and monetary policy, albeit with government supervision. And it is the belief by many in this misguided premise that has enabled the greatest heist the world has ever seen to be carried out, courtesy of the "wise leaders" and their structural edifices.
Here is what Anthony Wile wrote in an editorial we published on Saturday:
"Anyone who thinks that money is evil should think again. It is evil that has taken control of the issuance of money. But money itself, as determined by the free market over thousands of years, is far from evil – it is necessary for the advancement of a specialized society where an increasing division of labour allows for the creation of ever more useful products and services to allow humans to maximize their time and improve living standards. The reverse is what we have now. You are being forced to work half your life for the "system." Is that not an encroachment? ...
"The system is rotten and thoroughly unfair. The Fed hands out trillions in bailouts – none of which loosens the pressure of your noose. Barack Obama and his puppet administration threaten more fear to cutoff the social security checks to seniors, amongst other threats, if the debt ceiling isn't raised yet again. Can't you just see all of those unfortunate seniors squirming as they realize their lives have been stolen and the footboards are starting to creak?
It is very very sad that Amercia has come to this point – it is broke. It to be more blunt, it was broken on purpose so that a global new world order can be hoisted – an international gallows, if you will."
You can read the full editorial here: As America Continues to Tank, What Will You Do?
Without addressing the base of the problem itself, which is the unrestrained ability for the fiat-dollar to be devalued by central bankers, thus taxing the purchasing power of all existing currency in circulation, there will be no fix. You cannot cure a system that is built on a faulty base. And the US dollar is – a faulty currency.
But Western mainstream media and the "wise leaders" are going to try to promote this last-minute "solution" as "the fix." It is nothing of the sort and the alternative media will surely not help the mainstream "sales process." But they'll try anyway.
Let's take a closer look at "the plan." Here's what the NY Times article reported:
The tentative agreement calls for at least $2.4 trillion in spending cuts over 10 years, a new Congressional committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling.
... They said the debt limit would be increased by $900 billion in the first installment, subject to a Congressional vote of disapproval that Mr. Obama would be able to veto. To prevent a default, $400 billion would be added immediately.
A second increase of $1.2 trillion to $1.5 trillion would be available subject to a second vote of disapproval by Congress. At the same time, a new joint Congressional committee would be created to find cuts roughly matching the increase in the debt limit.
OK, there you have it. Americans are going to get yet another new Congressional committee that will take a supposed bipartisan approach to determining how to implement "yet-to-be-determined" spending cuts totaling $2.4 trillion over TEN YEARS – while the current debt ceiling is raised to a cool $17 trillion. More debt today against promised cuts tomorrow. And, to show how prudent the "wise leaders" are, they are going to raise the debt ceiling in two tranches – rather than spend it all in one shot. But if the House doesn't approve the plan; Obama's moving forward anyway. Sound good to you dear reader?
How in good conscience could anyone actually support such a plan? What ever happened to the US Constitution and its ability to protect the people from big government and its expansion into an authoritarian State?
The truth of the matter, as we see it, is that the debt ceiling will be raised – or as Peter Schiff refers to it, the "debt target" – and the Federal Reserve will go about monetizing another couple of trillion and devaluing the purchasing power of the US dollar. Jobs will not be created, the real economy will not grow and another chance to actually address America's monetary problems will pass by. Inevitably, the system, as any PONZI scheme, will collapse and the fiancial hurricane approaching America's shores will be even more devastating.
The US government has expanded the national debt by a whopping ELEVEN (11) TRILLION DOLLARS over the past TEN YEARS. And that doesn't include the entitlement obligations on top of that figure, which IS MUCH MORE.
According to Congressman Ron Paul, "The debt is unsustainable. This year alone it is said we have a debt increase of $1.6 trillion, but that's not true. If you count what we borrow from the pension funds, the social security and highway funds, it's $2 trilion dollars. But if you include the increase in the entitlement obligations, it's $5 trillion dollars."
You can watch Dr. Paul's full speech to the House here: Ron Paul: If Debt Is the Problem, Why Do You Want More of It?
The bottom line folks, is that this "plan" is no plan at all. It doesn't call for serious spending cuts. It doesn't call for a balanced budget and a serious attempt at making structural changes so that America can live within its means. It does nothing of the sort. All it does is put lipstick on dying pig.
You cannot sober up a drunk by pouring more liquor down his throat. You cannot solve the debt crisis in America, and the West in general, by continuing to go down a path of certain destruction by creating more of what is causing the problem in the first place - fiat-money debt. The amount of spending cuts "promised" over a 10-year period amount to a drop in the bucket when compared with the amount of new debt that's been created just this year alone! Not to mention the $11 trillion that's been created over the past 10 years.
Earlier today, we posted a video clip from Judge Andrew Napolitano's FreedomWatch program where he delivered an on-air plea to Speaker of the House, John Boehner. In his address, Napolitano said the following:
"After President George W. Bush grew the US debt by seven trillion dollars in eight years in office and President Obama added four trillion in just two years in office, the people cried out against Big-Government policies that are sabatoging the economy and taking over our lives. And because they cried out, you are no longer just John Boehner from Ohio, you are now the second in line to succeed to the presidency. You are the Speaker for the House of Representatives. Mr. Speaker ... Americans do not want to see the debt ceiling raised. They are sick and tired of paying interest on borrowed money, money borrowed in their name."
So what has been the reaction of Mr. Boehner? According to the Times article:
"Our framework is now on the table that will end this crisis in a manner that meets our principles of smaller government," said Mr. Boehner, who said he hoped to get the legislation onto the House floor as quickly as possible.
You've got to be kidding, right? No. Mr. Boehner isn't kidding. He believes this "plan" is going to "end the crisis," or at least that's what he says. His statement is simply ridiculous. Boehner should have listened to the Judge. (You watch Judge Napolitano's FreedomWatch clip here: Judge Napolitano: An Open Letter To John Boehner – Stand Up for The People!)
As stated above, the plan is no plan at all. People are awakening to the deceitful nature of the US monetary system and how it has been systematicaly devaluing their purchasing power ever since the Federal Reserve was established in 1913. People are making changes – and fast. The US dollar has been devalued some 50% in the last three years alone against gold and will likely continue to devalue at an even faster rate.
Conclusion: The US dollar is in serious danger of a total collapse. Hyperinflation is a pending reality as the Internet Reformation continues to awaken millions of people from their dreamtime slumber. It is clear that the entire monetary system needs a complete overhaul and central banks and their destructive game of wealth redistribution needs to be stopped. There are many good people like Ron Paul, Lew Rockwell, Judge Napolitano, Jim Rogers and Peter Schiff, just to name a few, who have been trying for years to get the message across that something needs to change or America will find itself in embroiled in civil chaos. But it is obvious that today's elected officals are going to do nothing to change it. Just more jaw-jaw. It truly is time for people to take matters into their own hands by seeking solutions that can protect them and their families.
The Quote of the Decade? (Submitted by a Daily Bell feedbacker earlier today.)
'The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government can not pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America's debt weakens us domestically and internationally. Leadership means that, "the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.' – Senator Barack H. Obama, March 2006
Debt Ceiling Update: This evening, at 6 PM CET, Russia Today's Kevin Owen conducted a live television interview with Anthony Wile, founder and chief editor of thedailybell.com, about Washington's latest deal to raise the US debt ceiling and avert a potentially devastating default. Click here to watch now.
Posted by Snooves on 09/01/11 06:08 PM
I think we need to get used to the fact that we don't have a government of "wise leaders" (unfortunately for Ron, the electing public would not know what a "wise leader" was if such a candidate were to land in their lap... ). What we have is a group of Congressmen all of whom, have to also get re-elected every 2 years - BY AMERICAN CITIZENS! If they try to cut one nickel out entitlements (50% or our federal spending), 50 million senior citizens will run them over a cliff!
When it comes to cost cutting, our political system guarantees failure because our "decision makers" in congress - like "John Boehner of Ohio" have to literally walk around on egg-shells otherwise the good people of Ohio will end his career in 10 seconds. Imagine if your boss handed you a pay cut, then allowed you to "vote" on whether or not he should be able to keep his job?
The framers of the constitution did not have this problem because they were never elected!
Because this is a STRUCTURAL flaw, there is no reason to think that Congress will become an effective group of cost cutters and reformers (the summer debt ceiling debate and the ridiculous outcome, $2.4T in 10 year solution - proved that point). Because of this reality, Congress (who is elected by us) is effectively forcing the Central Bank to deal with problem alone, through quantitative easing measures to devaluate the currency. Remember it may not be all that bad - if there is any hope to get manufacturing going again, its a weak dollar... .
The dollar goes down by another 50% in 3yrs - Get used to it.
Posted by dotti on 08/02/11 08:41 AM
I just went back and reread the Paul Krugman article:
Click to view link
I had not finished it last night and now I'm glad that I didn't.
I vascilated between delight that the deal made Obama look bad to Krugman--and hopefully other libs as well--and sheer horror at some of the other things he said.
I am vastly troubled at the viciousness of the attacks on the "resistance" forces, i.e., Tea Party Patriots. Not just in the Krugman article, but among some "conservatives" as well.
I just realized that I don't even know if they eventually agreed to vote for the current bill--did they? It doesn't call for a balanced budget and I thought that was their own "tipping point".
Well. Thanks injun1 and Zen$$$. I'm hoping that I undersand the remark better now.
injun1, it is shaping up to be a very interesting week.
Thanks all for your posts. I guess we'll all be moving on to the topic of the day for today. See ya' there!
Posted by dotti on 08/02/11 08:26 AM
Good morning and thanks!
Now I see. I thought he meant future interest costs on the national debt--in a cumulative sense, i.e., how much interest we pay annually on the debt.
Actually, he was speaking in the traditional terms of the government absorbing all the excess capital and thereby increasing interest rates for those other than the GOV.
Maybe now I should go back and reread the article.
Thanks, my fiend!
Posted by David_Robertson on 08/02/11 05:38 AM
I thought a lot about this last night and I believe, rightly or wrongly, that this is the final nail in the coffin of the American Republic. Unless the Congress unite to defeat this bill by voting YES and making clear to the President that they will not countenance such chicanery I am afraid they will have emasculated themselves completely and transferred all power to the Executive Branch. From now on you will be living in a totalitarian dictatorship with even the last vestiges of a Republican government removed.
I have always thought that Obama was in some symbolic way going to parallel the presidency of FDR and I have mentioned this before relating to his second swearing in ceremony that was done in FDR's map room under the gaze of the Architect of the US Capitol Benjamin Latrobe:
"Let us recall that the second oath was performed in secret: "...the two men convened in the White House Map Room at 7:35 p.m. for a brief proceeding that was not announced until it was completed..."
In Freemasonry the god of the secret societies is covertly substituted for the One True God. This false god is identified in the masonic lodges as "the Great Architect."
The mysterious man in the portrait who silently presides over the authentic inauguration of Barack Obama as Commander and Chief, is Benjamin Latrobe, the great architect of the U.S. Capitol." (Michael A. Hoffmann)
President Obama has used the debate over the debt ceiling as a cover and has run it down to the very last minute to increase the tension and to hide his true objective, the creation of a new voting procedure that will give the Executive Branch total power over legislation. He will now be able to create legislation to authorise unlimited Executive orders that will be impossible for Congress to challenge. This is exactly like FDR who issued more Executive Orders than any President either before or after his four terms of office and did many other such things to undermine the Republic. Click to view link
In His commentary on the Law the Lord Jesus said "Simply let your 'Yes' be 'Yes', and your 'No', 'No'; anything beyond this comes from the evil one." President Obama said "Let your Yes be No and your No be Yes." So, where does that come from?
Posted by Berthe on 08/02/11 02:46 AM
Thank you for the kind words and the information about other shocking US government programs. I am not surprised. I was surprised by the details of that crop loss insurance but once I knew about it I suspected it was not the only federal giveaway program that would shock me.
A majority of the politicians of both parties would just love to get rid of Social Security and Medicare and get their hands on that money to give it out to their cronies and benefactors.
Posted by Zenbillionaire on 08/02/11 12:02 AM
"Am I just too tired to "get" this?"
No, it just means what Krugman says: Interest rates are currently very low so future spending won't do much to reduce future interest costs.
His point is that the US is already so far in debt that if interest costs were to return to normal levels they'd swamp any future spending. This is to say "the cat is out of the bag", or "the horse has left the barn". There's no help coming. In very real terms, it no longer matters how much the US government spends, if interest rates can't be controlled the game is over.
Posted by injun1 on 08/01/11 11:49 PM
The world is at zero interest rates, there is nothing that can reduce the rates even more.
Posted by injun1 on 08/01/11 11:46 PM
Cheer up my friend, the other crowd runs nothing but there mouths/ha! There is only so much we can do, and the first is to inspire others to join our conversation. An exchange of information is the beginning. Each of us who participates knows something the other does not. We all learn from each other.
As for your question, it is my sense that you can't have HSBC sell off U.S. assets and layoff 25,000 worldwide without it have not U.S.impact. especially in the currency markets. My experience with them tells me they are batting down the hatches and preparing for storage.
Employment will probably stagger big time again and when the markets take time to digest the debt ceiling bill they are going to find it is nothing but B.S.
As an investor I am right in the middle of it. But as a lackluster contributor at DB I have to sit back and smile at every post and think there is plenty of hope within us all.
As zenbillionarire says, be very, very quiet, we are hunting for wabits!
Posted by dotti on 08/01/11 11:38 PM
I just read Paul Krugman at JSMineset. I found one very confusing statement. Maybe someone can enlighten me--make it simple, if you will. It's too late in the evening for much critical thinking!
"On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs."
Am I just too tired to "get" this?
Posted by injun1 on 08/01/11 11:28 PM
The dollar just jumped 35 pts since we posted and came down 20 all in about 5 seconds. They are trying to build support, maybe for fear of the employment numbers.I got in earlier and in good shape but I pity the poor guy who didn't take a position earlier and is just entering a position, he is on a roller coaster ride that will give him a heart attack or be busted, which ever comes first.
Posted by dotti on 08/01/11 11:25 PM
Re: How are you?
I'm tired by this time of the evening.
I'm frustrated that it seems that the same old gang is running things. The MSM seems to still be able to manipulate the mainstream momandpop.
I keep feeling like the sky is falling...but "normal folks" think that now that we have avoided default, everything is fine. No problemo.
I surely do enjoy your posts--particularly on this topic. Seems like lots of us are doing therapeutic chats here. Seems good for all of us.
Were you surprised at the short duration--30 seconds--of the dollar's jump?
What bad economic news are you referring to for this week? Worse than the ISM?
Posted by Zenbillionaire on 08/01/11 11:09 PM
"Upon the news the dollar jumped over 50 points in perhaps 3 seconds. Then came back to reality within the following 30 seconds"
There were a few articles today and yesterday that predicted exactly that, but they suggested it might last longer than thirty seconds. It had to do with leveraged positions unwinding rapidly, and the analysts who dared go there pretty much agreed it would happen with or without an "agreement", though those with a longer view surmised the dollar bounce would be very short IF the debt ceiling was raised, longer if it was not. So maybe they win the prize.
Posted by injun1 on 08/01/11 10:57 PM
Ha! I would be very, very quiet! The Natives would be eye balling Yosemite also!
Posted by Zenbillionaire on 08/01/11 10:51 PM
" the Indians interpreted that the treaty of 1868 entitled them to take possession of surplus federal land"
Well, I'd keep a weather eye on Yellowstone then...
Posted by injun1 on 08/01/11 10:41 PM
Dottie, the knee jerk reaction happened in the currency market. Upon the news the dollar jumped over 50 points in perhaps 3 seconds. Then came back to reality within the following 30 seconds. There is tremendous downside pressure on the dollar. Hence metals during the reading simply held their own. And there's more bad economic news that's coming out this week.
How are you?
Posted by injun1 on 08/01/11 10:24 PM
I find great humor in the position of liquidating real estate holdings of the federal government. For example:
In 1969 the occupation of Alcatraz was on the front page news. The infamous prison island was targeted by the Native American and not without some thought. The United States government had in essence vacated the island. It was considered surplus.
Unknown to the general public and most of the federal government, the Indians interpreted that the treaty of 1868 entitled them to take possession of surplus federal land. It never reach the courts because of the deals that were cut by the Nixon administration. Nobody dared wanted that to be heard before the United States Supreme Court.
There have been other examples of reverted lands back to the tribes, even in the recent past. Some returned because it was right, but I suspect some was returned because nobody wants to hear the answer to all the potential lawsuits that would hit the federal court system.
Whether one wants to determine whether it is a right or wrong issue is neither here no there. The fact remains congress would be very careful about the wording on the disposition of federal surplus lands.
just thinking out loud....
Posted by dotti on 08/01/11 10:07 PM
BTW, all. I was pretty surprised that gold didn't take a bigger hit on the news of a deal.
All here realize that it was all "Shock and Awe", but I expected a knee jerk reaction to be a gold selloff to below $1600. I didn't expect it to last, but think it's a good sign that it didn't happen at all.
I want to add my comments to the others who say this is one of the best of your articles. it is a timely topic well covered in the article.
Posted by dotti on 08/01/11 10:03 PM
Thanks for your comment. People seem to have forgotten who the true owners of the gold are.
I was surprised (disappointed) about a month ago when Ron Paul was reported to have said that we should use the gold to pay off part of the national debt. I wondered if he did it because he thought it might expose the truth: that all the gold in Ft. Knox is kaput.
Was it the IMF who sold gold a few years ago "to help the underdeveloped nations of the world."
Don, you've had some particularly insightful posts on this topic. Thanks.
I do want to add to the debate about the ignorance of the American people. Let's be honest here. People who watch the MSM are DISinformed. They could be called gullible, but the people running this game are very slick. One "well-informed" CNN-educated liberal told me that he would be happy to pay more taxes--implying that I should be as well. It's a good intention--he has more money than he knows what to do with, but he is willing to be generous. Unfortunately, there will never be enough money. That's the whole point.
Well. I started that para to defend the disinformed. Somehow I didn't get thre. Just too tired tonight to pull the thoughts together. Should have tackled it earlier in the day! LOL
Anyway, Don, thanks for your posts.
Posted by Don on 08/01/11 09:45 PM
Any gold in Ft Knox rightfully belongs to the American people. Let's divvy up the people's gold and give an equal quantity of it to each and every American citizen. Besides stimulating people with a golden new new deal we can tax gross interest income from federal debt at 100%.
Reply from The Daily Bell
We seriously doubt there is any gold left at Fort Knox.
Posted by dotti on 08/01/11 08:54 PM
Tazio, thanks. Read the full press release. All seems to make sense to me.
However, I would not necessarily say that they support the idea of selling some of the US gold reserves and govt owned property.
"Assuming that all of our gold is still there [Ft. Knox], this gold is worth $426.5 billion at the present time, enough to cover our U.S. government's deficit spending for almost four whole months. The U.S. government also owns valuable land, buildings, monuments, and other types of Real Estate, that could also be worth hundreds of billions of dollars. Although we don't support selling all of our gold and Real Estate, if the U.S. government isn't going to implement real spending cuts that will lead to a balanced budget, we rather sell our assets than see the dollar-denominated savings and incomes of all Americans lose its purchasing power."
My reading says that EVEN THIS would be better than the continued spending (printing) that is debasing our currency and wiping out the people's savings.
Thanks for the link. It is a really good read and full of good, factual information. I recommend it!