Tuesday, December 30, 2008

Debt, Debt everywhere, nor any credit to drink

California and New York states are now in debt up to their eyeballs.  They used some really bad assumptions about future tax revenues and now they will simply be unable to pay their bills and interest payments without a massive Federal bailout.  Ahhh, but what the heck?  These are "Blue" states, and we have a Blue Administration coming to Washington.  Is it a coincidence that the very seats of power for the Left in the U.S. control policy (and taxes and spending) in these 2 states (Ca. is the most populous state, New York is the 3rd most populous) are now insolvent.  Not A F&^%%!!ing Chance.

In my previous posts I laid out the risks to the U.S. Dollar from the Federal Budget Deficit and the Trade Deficit. - “Twin Deficits”. We might have to change the name to “The Triplets”. You see, there is another government debt lurking out there – and it is growing every day. As of today, it is estimated at $2 trillion dollars, and by some estimates, it is growing at about 7% per year. That means it will be up to $4 trillion in the middle of the next decade.

I was wrong.  It is much worse than I had thought then.  And in keeping with my recent "Ponzi"/Madoff theme...Also from the same post:

The Great American Ponzi Scheme

In order to avoid China’s 4-2-1 problem – 4 grandparents and 2 parents supported by 1 worker – the U.S. immigration policy, the “Great American Ponzi Scheme”, has imported enough young people to continue to fund the Social Security and Medicare trust funds. For a number of reasons, that is coming to a close in the near future.

Had we not had the benefit of these immigrants over the past 20 years (legal or otherwise) the Social Security and Medicare trust funds would now be in default. Still, we grow our entitlement programs at an exponential rate – but future immigration will not be there to hold up its end of the Ponzi Scheme.

A “pay as you go” system means that today’s young workers pay for today’s retirees. What happens when you have too many retirees and not enough young workers? Nothing good
Nothing good, indeed.

Obama's Trillion $ stimulus plan appears to be chock full of swimming pools, tennis courts, dog parks, African art appreciation, and other bridges to no where...  You know all that useful stuff our economy needs to get going again (hehehehehehehehehe!).  And you wonder why I am not constructive on Obama's impact on the markets?  Geesh!

Stay tuned.

Mentatt (at) yahoo (d0t) com


Anonymous said...

Gee Greg,

Is there any hope at all?


bureaucrat said...

There's plenty of hope. Things are just going to get a lot more expensive.

Greg T. Jeffers said...

Of course there is hope.

Don't live in California or New York. States like that are going to try to tax their earners into penury. Hold savings in various currencies, Gold, and Silver (Gold has had a hell of a rally. I do not offer any timing advice you are on your own).

Make love and have dessert everyday - I endeavor never to miss... but I gotta figure out what I am doing wrong, we keep having babies...

In between I surf, kibbitz at the gym (with a little exercise between BS sessions), and bike ride. Maybe your thing is tennis.

The thing is we all need to have as much fun as possible and not define our selves by what we do for a living, because that part of our lives is going to be less and less rewarding. Still, you have to make a living and provide for your family - so you gotta sort that out.

Also, read Dmitri Orlovs older stuff. Fascinating (I think so, anyway). His fore thoughts ( I hesitate to call them forecasts) were quite prescient.

Shadowfax said...

I like your blog,but whats with the light blue print for quotes?..I find it hard to read

Anonymous said...

That's the spirit!!!

Hey,everyone have a great New Year!

Oh,to whom it may concern, you should know a lot of babies are made on nights like tonight...I figured that one out recently. Caution.


Anonymous said...

If Orlov is correct, in 2009, we will be witnessing scenes in the US that remind of Haiti.

Guess I shouldn't panic. Got a paid off rural property with lots of wood for heating- over 2 years worth are split and stacked right now. We are growing a lot of our own food. We have NO debt of any kind. Lots of practical skills w autos & welding & repairs etc.

And I've got fairly good financial survival skills- my investment portfolio is actually in positive territory over the last year.

But it still looks extremely dark for the USA at this point. Too many massive imbalances plus a population & leadership that does not have any understanding of the situation.

bureaucrat said...

Your life is alll set for the American apocylapse but 300 million other U.S. people haven't done anything to protect themselves? Don't bet on it. You might want to try to have a life and stop worrying/hoping for a massive downfall which isn't going to happen. Overwhelming numbers of people will be partying tonight with optimism while you will be in your cold shack peeling your potatoes. Get a grip, people!

Anonymous said...

>a population & leadership that does not have any understanding of the situation.<

This means you, bureaucrat.

You are the guys who are supposed to be organized when events like Katrina happened. And you completely blow it. And you are blowing again now with the massive money printing and misguided bailouts.

And talking about "massive downfall which isn't going to happen". What do you call 5,000 points down on the DOW. Or 30% down on housing? Or the USD in freefall? Or $100 Trillion in unfunded US liabilities. How about a projected 200,000 retail stores closing is 2009? You are in denial to the extreme.

And you assumption that because someone may live in the country that they are living in cold shacks peeling potatoes is just plain dumb.

You don't inspire confidence, sir.

Anonymous said...


I 'm peeling something but it ain't tatters.


Greg T. Jeffers said...

Now, now... be nice everybody.

I think it is easy for folks with a secure job to fail to see what others are going through. It is also easy for us to blame EVERYONE in government for all over governments failings. Neither position is very fair or correct.

As a matter of fact, it might be a great strategy to become employed by the government and gain some seniority.

I think the point that government agencies are supposed to think through situations and contingencies is well made. Good luck making that a reality, though. The "stick and the carrot" simply are not there as they exist in the private sector.

Remember, according to Freud, everything we do we do to get more sex! (at least I'd like to think so...☺)

bureaucrat said...

Last time I was in Jewel (today) there is lots of food in the aisles. I withdrew $500 cash from an ATM today with no problem. The U.S. dollar alternates between going down cause of government obligations and then going up cause everyone wants to buy Treasuries (in U.S. dollars), or because everyone thinks the Euro is history. I saw several of my friends this past week, and they are all employed. And so far the sun still rises. You're gonna give yourself an ulcer waiting for the world to explode! We screwed up Katrina because the Republican political appointee bosses wanted to do everything on the cheap as usual, and they fiddled while Rome burned. I had my Federal Mastercard ready to start spending. :) But if the bosses don't think there is a problem, we can't do much about it. The people wanted Bush ...

Anonymous said...

Things are always available until they aren't. The people of New Orleans know that all to well.

The perfect storm is forming off the coast and heading towards shore. You can be prepared for the day that things aren't available or you can be unprepared.

Personally, I would rather be prepared unnecessarily then unprepared when those store isles do go bare. Because in the former I wasted some time and a little money. In the later I and quite possibly those who depend on me all STARVE to DEATH. Same could be said of heating.

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