So, how did that "debt-ceiling deal" work out for you?

What's that you say? You got jacked and the stock market plunged?

Dow Sinks 500, Worst Day Since Dec. 2008

Stocks plunged sharply Thursday, with the Dow down more than 500 points, in its worst one-day drop since December 2008.

All three major averages tumbled into negative territory for the year as investors were rattled over an intensifying global economic slowdown and ahead of the widely-followed monthly unemployment report.

Winning!

Don't worry though, government loves a crisis. Go ahead. Buy equities. Helicopter Ben will keep on printing.

U.S. Debt Reaches 100 Percent of Country's GDP

The U.S. debt surpassed 100 percent of gross domestic product after the government's debt ceiling was lifted, Treasury figures showed Wednesday, according to AFP.

The debt, which had been in somewhat of a holding pattern over the past several weeks, rose $238 billion after President Obama signed the debt-ceiling deal into law Tuesday to avoid the country's first-ever default.

The package is designed to carve $2.4 trillion from the deficit over the next decade. But in the near term, it granted Washington an increase in its borrowing authority worth the same amount.

With that authority, the public debt has climbed to $14.58 trillion, putting it just over the $14.53 trillion size of the country's economy in 2010.

We're on a bipartisan road to impoverishment and ruin.

There can't possibly be a more grossly corrupt, immoral, and immature group of people than the bipartisan Establishment that has occupied Washington, DC, over the past few decades. Just like everything else they do, the "deal" was nothing but lies, smoke, and mirrors.

Debt Reduction Delusions and the Menace of Big Government

In spite of the rhetoric in the media about a national debt crisis having been averted through a rise in the government's debt limit on Tuesday, August 2nd, the fact is the United States remains very much in the midst of a fiscal disaster.

The Congress has approved and the president has signed a bill raising the debt limit by an additional $2.4 trillion over the next year and a half. In other words, at the end of 2012, the government’s debt will have reached a total of over $ 16.5 trillion from its current $14.3 trillion.

When a Spending Reduction Still Equals More Government Debt

The debt ceiling deal requires a matching $2.4 trillion to be cut from projected government spending over the next ten years. In other words, this is not an absolute cut in government spending, as if government would be spending less in the next year compared to the current year. Instead, the deficit reductions represent a decrease from the amount of increasing government spending that would have occurred if no reduction had been agreed to.

Understanding this more clearly has been confused by the emphasis given to the fact that the $2.4 trillion debt ceiling increase has been "matched" by that $2.4 trillion decrease in projected government spending. The impression has been easily created in people’s mind that these two amounts are in some way cancelling each other out.

The U.S. Treasury is being given the authority to borrow and spend an additional $2.4 trillion dollars over the next 18 months. But the $2.4 trillion spending reduction over ten years represents, on average, a "savings" of $240 billion a year. Another way of thinking about this is that the government now has the authority to spend, on average, an additional $133 billion per month of borrowed money over the next year and a half. "Matching" this, the government is supposed to spend $20 billion less every month over the next ten years.

So, assuming what has been agreed to by the Congress and the president is actually adhered to, it will take ten years of that mere decrease in the rate of increase in government spending to just equal the increase in the government’s debt between now and the end of 2012.

Clearly this entire process has been one of smoke and mirrors by both political parties. New Congressional fiscal committees to deal with the government's debt; supposed "trigger mechanisms" to impose "automatic" across-the-board cuts in government spending if deficit reduction goals are not agreed to; and appeals for Washington's swarm of spending frenzied politicians to act like responsible adults instead of immature children do not grapple with the fundamental problem facing America.

Whether they're evil or just plain stupid really doesn't matter much, because either way, this bipartisan cabal is going to bury the dollar and the republic along with it either way.

The Decline and Fall of the American Empire

The United States Government and its presstitute media have wasted time and energy creating hysteria over a non-existent "debt ceiling crisis."

After reading the "news" in the Ministry of Propaganda and witnessing the stupidity of the US government, the rest of the world is struck dumbfounded by the immaturity of the "world's only superpower."

What kind of superpower is it, the world wonders, that is willing to go to the eleventh hour to convince the world, which holds its banking reserves in US Treasury debt, that the US government will default on the debt?

To be clear, there was never any risk whatsoever of US default, as President Obama has power established by President George W. Bush's Presidential Directive 51 to declare default a National Emergency and to set aside the debt ceiling limit and Congress' power of the purse, and to continue to issue the debt necessary to fund the US government and its wars.

That the American press ever took this highly-hyped “crisis” seriously merely demonstrates their prostitute status.

How's that "unitary executive theory" working out for you conservatives? Because it sure sounds a lot like "dictator" to me.

Let's see ... Your food costs are climbing, gas prices are nearing luxury status, clothing costs are going up ... but hey, no worries! Uncle Sam says there's no inflation to be found.

But then again, Uncle Sam has been known to be a liar.

For most Americans the federal government's inflation figures are hooey

For most Americans the federal government's inflation figures are hooey because rising prices are here. They came in sneaky and spread out fast. But, the government keeps saying that inflation is mild. Our reply is, phooey. Each of us is different in how we spend our money. We see inflation only on how it affects us ... the price of specific things we choose to buy.

Here's an indicator that the government reports only in fine print. The dollar lost a full 5 percent of its value in the past year and continues to slide. Among other things, that means anything imported will keep costing more, including oil. And just about all domestic products will be caught in the upward whiplash. Are East County locals worried about it? You bet they are and they talk about it.

"We're on the verge of seeing inflation hitting us big," said Martha Bledsoe of Brentwood. "I see the dollar losing over 10 percent in the next two years. At the same time interest rates and taxes will take a bigger bite. Gas could go to $6 or $7 a gallon and food supply shortages will add to raising the prices."

Antioch's Pat Patterson agrees. "Gas prices will be going a lot higher and the general inflation over the next 12 months will hit 5 percent," he said. "The sad part is that incomes keep shrinking. I know I'm spending much more of my income now on food."

Carol Kelley of Oakley put it bluntly. "The government is lying to us. For most of us around here food prices have gone up 25 percent in the past two years. The reality is we can't spend extra money on anything. That means we just buy necessities and we've given up going on vacations."

Fed and Inflation

[T]he subcommittee which I chair held a hearing on monetary policy and rising prices. Whether we consider food, gasoline, or clothing, the cost of living is increasing significantly. True inflation is defined as an increase in the money supply. All other things being equal, an increase in the money supply leads to a rise in prices. Inflation’s destructive effects have ruined societies from the Roman Empire to Weimar Germany to modern-day Zimbabwe.

Blame for the most recent round of price increases has been laid at the feet of the Federal Reserve's program of credit expansion for the past three years. The current program, known as QE2, sought to purchase a total of $900 billion in US Treasury debt over a period of 8 months. Roughly $110 billion of newly created money is flooding into commodity markets each month.

The price of cotton is up more than 170% over the past year, oil is up over 40%, and many categories of food staples are seeing double-digit price growth. This means that food, clothing, and gasoline will become increasingly expensive over the coming year. American families, many of whom already live paycheck to paycheck, increasingly will be forced by these rising prices into unwilling tradeoffs: purchasing ground beef rather than steak, drinking water rather than milk, and choosing canned vegetables over fresh in order to keep food on the table and pay the heating bill. Frugality can be a good thing, but only when it is by choice and not forced upon the citizenry by the Fed's ruinous monetary policy.

Another way of saying inflation is, debasing the currency. When a government debases its currency, it is in default.

John Williams: Debt Limit Debate & Deeper Dysfunction

TGR: Is printing more money really what the government is going to do to pay its debt?

JW: That is what countries that spend beyond their means usually do if they can't raise adequate tax revenues. I can tell you that the current government cannot raise enough taxes to bring the actual deficit under control. It could tax 100% of income, take 100% of income and corporate profits, and it would still be in deficit. In terms of generally-accepted accounting principles (GAAP) that include annual increases in the unfunded liabilities on a net present value basis, the US is long-term bankrupt. A true balanced budget approach would require excessive overhaul – I'm talking massive cuts in the social programs because cutting every penny of government spending except for Social Security and Medicare would still leave the country in deficit. We are spending well beyond the bounds of reason in a number of areas. The country just does not have the ability to pay for all the services it provides.

TGR: What would default or downgrading mean for the dollar?JW: If the US defaults or gets downgraded, that likely will end the US dollar as the global reserve currency. That's not a viable option for the United States. People involved with getting the country to that point should be removed from office. If you are the most financially powerful country on earth, you don't fool around with your creditworthiness.

Goodbye Federal Reserve Notes, and thanks for all the fish!

Big Banks and Brokers to Treasury: Too Much Short Term Debt Means Rollover Risk is Real

From Bloomberg yesterday (bolding and brackets ours):

The committee of bond dealers and investors that advises the U.S. Treasury said the dollar's status as the world's reserve currency "appears to be slipping" in quarterly feedback presented to the government.

The Treasury Borrowing Advisory Committee, which includes representatives from firms ranging from Goldman Sachs Group Inc. to Pacific Investment Management Co. [not to mention JP Morgan Chase], said the outperformance of haven currencies and those from emerging nations has aided in the debasement of the dollar's reserve status, according to comments included in discussion charts presented ahead of the quarterly refunding. The Treasury published the documents today.

"The idea of a reserve currency is that it is built on strength, not typically that it is 'best among poor choices'," page 35 of the presentation made by one committee member said. "The fact that there are not currently viable alternatives to the U.S. dollar is a hollow victory and perhaps portends a deteriorating fate."

The exposure that the US has on the short end of the curve (less than five years) is a key concern of these well-connected financial insiders.

Robert Wenzel adds: "If there is a serious flight out of the dollar, the price inflation the United States will face will be the mother of all price inflations."

Paper money always dies. Always.

Starting to get the picture?

Debt, Smoke, Mirrors, Inflation is a post from: The Classic Liberal Blog