2010 Will Be Worse

[Frisco_Slug_Esq]

No, I am not hoping for bad things to happen so that good things can happen for Republicans. I'm looking at numbers.

The year 2010 is likely to be the pivotal year where pundits stop referring to the recession and begin openly talking about a depression.

Our economic problem is rather simple to describe: There is too much debt relative to income and/or wealth. Below is a single graph that depicts the condition of our economy. It shows total debt of the U.S. as a percentage of GDP from 1870 forward. The debt figure includes all private and public debt. It does not include liabilities associated with unfunded government mandates like Social Security and Medicare. (Note: according to the U.S. trustees of these funds, the present value of the liabilities is about $106 trillion. Including them would boost the ratio below to nearly 1,000%.)

See chart here and discussion of numbers:
http://www.americanthinker.com/2010/01/2010_will_be_worse.html

If you don't like American Thinker because it's a biased rwingnut source of propaganda, then ease on out of this thread with my best wishes and the assurance that in 2010, thanks to the Democrats and no thanks to me, the economy is going to rebound.

Have a nice New Year.

For everyone else, the bad news continues:

The amount of debt relative to GDP is staggering from a historical perspective. Several points are worth making about the graph:

The long-term "norm" for the ratio appears to be around 150%. The red lines band the "norm" at 130% and 170%, respectively.

Other than the two boom periods that commenced in the 1920s and the 1980s, the ratio never exceeded the upper band.

Each cross resulted in enormous credit-driven booms. The first ended in the Great Depression. The second will produce a similar if not bigger bust (we are merely at the beginning of this event).

The credit expansion that led to the Great Depression was not nearly as overextended as the current expansion.

Peak credit occurred after the Depression began. Government spending and the shrinkage in GDP continued to drive the ratio up early in the Depression.

Since this graph was published, today's ratio has grown to near 380%, about double the level when the U.S. entered the Depression.

While it appears as though current private borrowing may have peaked, funding enormous government deficits continues to drive the ratio up, as does GDP shrinkage.

No economic theory rationalizes a proper "norm," yet intuitively, we know that such a number exists. Debt must not exceed some percentage of income, or else it cannot be serviced. Equivalent conceptual ratios for individuals and businesses have been used by the banking industry as lending criteria for more than a century. For various reasons, banks neglected these guidelines over the past couple of decades, contributing greatly to the credit bubble.

The government has decided that the cure for too much debt is more debt. This solution cannot work, especially when credit is already so overextended. Income and wealth cannot support present debt levels. Credit will adjust back to the mean, regardless of what the government attempts. Whether this is via orderly payment or via default, the reduction in debt is inevitable.

Ludwig von Mises addressed the limits of credit in The Theory of Money and Credit, originally published in 1912. As he expressed in later work:

There is no means of avoiding the final collapse of a boom brought about by credit [debt] expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit [debt] expansion, or later as a final and total catastrophe of the currency system involved.

In 2009, it was not possible to finance U.S. capital requirements through conventional markets. Only via the Fed's explicit (and surreptitious) Quantitative Easing was the government able to fund its 2009 deficits. Discussing 2009, Zerohedge stated:

There was a huge credit and liquidity crunch, and then there was Quantitative Easing. The last is the Fed's equivalent of band-aiding a zombied and ponzied corpse, better known as the US economy. It worked for a while, but now the zombie is about to go back into critical, followed by comatose, and lastly, undead (and 401(k)-depleting) condition.

Zerohedge estimated that demand (financing) for U.S. fixed-income securities must increase elevenfold in order to fund capital needs in 2010. Continued shrinkage in foreign participation in U.S. fixed-income markets makes that increase impossible.

There are only three possibilities with respect to meeting 2010 funding needs:

The Fed continues its QE beyond their planned cessation in March 2010.

The Fed raises interest rates to levels that would attract the capital necessary to fund government operations via conventional credit markets.

No Fed action is taken. That would cause the government to default on some of its obligations.

None of these alternatives is attractive. The unpalatable choices arise from prior Fed and governmental policies. To avoid recessions over the past fifty years, the government abused and then finally exhausted all reasonable options. After years of mismanagement, the government is in a quandary of its own making from which there is no escape.

All alternatives will be very painful, and none offer the possibility of a traditional recovery. No matter what alternative is chosen, the country cannot avoid a depression. At this point, "do no further harm" should guide policy.

Of the three alternatives, what is best economically is worst politically. This natural conflict between good economics and good politics is not unusual. Economically, the country would be harmed least by implementing alternative 2. From a political standpoint, alternatives 2 and 3 are probably unacceptable. Thus, it is likely that alternative 1 will be tried (again!). It is precisely the continual overuse of this alternative that has led to the current sad state.

Alternative 1 cannot work. It will not avoid a depression. Worse, it will likely result in hyperinflation. Thus, we likely end up with the worst of all worlds. With hyperinflation, money will cease to be a medium of exchange. Markets will cease to work, except on a barter basis. The middle class will be wiped out. Their savings will become worthless along with the dollar. The end will be as Mises warned so many years ago.

The possibility of losing our form of government is a real risk under any of the alternatives. So is civil unrest and strife. All are probably more likely under alternative 1 because of the corrosive effects of high inflation combined with a depression.

Beware the turn of the calendar. Things are going to get interesting, and probably very quickly.

Monty Pelerin
__________________
"The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy."
Milton Friedman

 

[busybody..]

American STINKER

 

[Frisco_Slug_Esq]

As the economy rebounds, so too will the price of energy and we've done nothing.




We could have opened up Alaska to drilling, but it seems to be the Democrat consensus that since it won't meet all our needs, it won't meet any of our needs...

i

 

[Frisco_Slug_Esq]

American STINKER

and National Rightwingnuts online!

 

[Songcatcher]

Kisenger is still alive.

I've feeling he works for the Rothchilds.

 

[Beco]

thanks dip shit! things are getting better, just let it go

 

[Frisco_Slug_Esq]

This is true, things are getting better and by year's end, I will have proven to be an idiot...

Today we are faced with circumstances of our own making in a world far different from any we have ever known. The choices we have made in the past and the policies that we are in the process of ratifying may well achieve what the Civil War, the Great Depression, and World War II did not: the downward spiral of the American people and nation.

In all the years of the nation's existence up to the end of 2007, the total national debt held by the public amounted to 36.2% of the Gross Domestic Product (53.8% by the end of 2009). By the end of 2012, based on the proposed budget of the Obama administration, that percentage will be 71.6. Thus, in five years, the debt will nearly double. If the trend is not stopped, then by 2019, the debt will triple to over 100% of GDP.

These projections do not include the overwhelming future impact of the health care reform bill recently passed in Congress, which will cost over $2.5 trillion in its first ten years of implementation. Nor does it include the carbon cap-and-trade or any other pending spending and regulatory bills. Beyond the expenditures contemplated, these actions will stifle domestic economic growth, so necessary for government revenue, and leave the now-global economy in the hands of our potential adversaries.

To put this into perspective, by 2019, three items -- interest on the debt, Social Security, and Medicare-Medicaid -- will account for 92% of all revenue to the federal government. Everything else will have to be funded by borrowing.

To whom will we turn to borrow the needed funds, and what exorbitant interest rate will we have to pay as the national debt exceeds 100% of our GDP? The answer: Countries such as China, who have their own designs on world hegemony, can dictate the interest rate. Will the first place the United States chooses to cut its spending be national defense? The answer: It has already been proposed by the current administration and Congress. In the future, could our lenders of record demand that we cut military spending? The answer: Yes.

A debtor nation, as we will be if we stay on this current path, cannot support a viable military, particularly one that has to defend our world-wide interests. Nor can we look to our traditional allies in Europe to increase their military spending, as they cannot financially, nor do they have the will to do so.

Yet the threat from radical Islam will not diminish; rather, it could well increase if a country such as Pakistan falls into the hands of the Taliban, or if Iran, using its radical surrogates, overwhelms its Middle East neighbors to control the world's oil prices. China could choose to exert its influence over Asia either militarily or economically, bringing the entire area into its sphere of influence. Russia may opt to reestablish its hegemony in Europe. In South and Central America, governments sympathetic to China and/or Russia could be implemented in virtually all countries.

The United States, unable to underwrite a powerful military, would then be totally isolated, dependent on the largess of its lenders, and forced to adhere to policies antithetical to its history and foundation of individual freedom and liberty.

The present administration in the White House, the majority of Democrats in Congress, the media, and academia believe in a utopian view of the world. They prefer a reliance on internationalism, open-ended negotiations, overwrought concern for the dubious claims and rights of any antagonist, and a belief in a unique ability to convince the most brutal of adversaries to live in peace.

This current ruling class believes that this approach, which has never succeeded, will keep the United States safe and prevent others from seeking to dominate our country. However, the very real danger of the Obama administration's socialist policies and their attendant spending and debt creation are ignored.

If the agenda of the most radical government in our history becomes embedded in the fabric of our society -- i.e., nearly impossible to overturn -- the long-term future of the United States will be bleak. Bankruptcy and secondary world status will be nearly inevitable. Thus, the next three years will be the most important in our long history.

Steve McCann
American Stinker

 

[Wok]

American Thinker is a biased rwingnut source of propaganda. Like FOX News, NRO, and sometimes New York Times.

 

[Frisco_Slug_Esq]

American Thinker is a biased rwingnut source of propaganda. Like FOX News, NRO, and sometimes New York Times.

Stick with Salon and the Huffington Post for real information...


That's where you can go to find all the best economic news.


'Cept for jobs, we're in the peach, and they're just lagging. They'll be along any day now...

We stopped them at the border and sent them back.

 

[busybody..]

American Thinker is a biased rwingnut source of propaganda. Like FOX News, NRO, and sometimes New York Times.

and like WOK

aka, Busybody(aco)Lite

 

[trysail]

As the year ends, let's take a look at the U.S. national debt outstanding as reported by http://www.usdebtclock.org this morning. At the moment, it stands at a stunning

$12,130,035,400,000

( for U.S. based innumerates, that's TWELVE TRILLION ONE HUNDRED THIRTY BILLION THIRTY-FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS ) or $39,349 per person or $111,290 per taxpayer.



U.S. Debt Clock:
http://www.usdebtclock.org/

 

[Frisco_Slug_Esq]

We're all going to have to get second jobs...




Too bad the Mexicans are going to get an amnesty and take them from us.

 

[Byron In Exile]

See chart here and discussion of numbers:
http://www.americanthinker.com/2010/01/2010_will_be_worse.html

This is the expected outcome of the implementation of the Federal Reserve System.

Shouldn't be a surprise to anyone.

 

[Saint Peter]

u

It is going to be a fine year.

 

[Byron In Exile]

$12,130,035,400,000

That's public debt only. Total debt, which is what the article's chart is based on, is 4.5 times that, or $54.6 trillion.

 

[Tungwagger]

As the economy rebounds, so too will the price of energy and we've done nothing.




We could have opened up Alaska to drilling, but it seems to be the Democrat consensus that since it won't meet all our needs, it won't meet any of our needs...

i

I have a bumper sticker on my car:

"YOUR WALLET: The one place Democrats ARE willing to drill"

 

[MeeMie]

http://www.humanevents.com/images/NewYearsTeaParty.jpg


Happy Tea Party New Year


It has been my custom to write a lighthearted year-end column, full of cheerful grumpiness that pokes fun at friend and foe alike. But not this year.

It’s not that 2009 hasn’t provided a wealth of material. Senate Majority Leader Harry Reid (D-Nev.) is a constant source of laughable chicanery, but Reid is beyond parody. He was perfectly serious in saying that opposition to the healthcare bill is tantamount to opposing the elimination of slavery. How can any parodist improve on that?

And what better joke to make about our wastrel president than to merely repeat his statement that we can’t continue to treat tax dollars as Monopoly money? That would be hilarious but for the fact that we are more in debt -- by at least $2 trillion -- than we were when he took office.


It’s not that our president is dumb: but he is what the good ol’ Soviets used to call “nekulturny”: uncultured in the sense of being willfully ignorant of too many things that make our country what it is. And hostile to those things he doesn’t appreciate.

There’s humor in a judicial nominee who proclaims herself a “wise Latina woman” and says her heritage affects the way she chooses facts on which to decide cases. But the fun part was over the moment she was sworn in as a Supreme Court associate justice.

Let’s face it: liberals aren’t humorous: they’re tendentious and dogmatic. And predictable. Anyone who was surprised that after dropping out of the race Dede Scozzafava then endorsed her Democratic opponent in New York’s 23rd district special election just doesn’t know liberals.

But liberals are also reckless. When Speaker Pelosi accused the CIA of lying about whether she had been briefed on the waterboarding of terrorist detainees -- itself a lie that created the black cloud of distrust that still hangs over our intelligence community -- she was unconcerned about damaging our national security. Defense Secretary Gates isn't unconcerned about national security. Which makes his slash and burn approach to the defense weapons budget inexplicable, except in liberal political terms.


Dennis Goodman, former US economic councilor at the UN, once told me that the third-world bureaucrats who run the UN, “…think the U.S. Treasury is the common heritage of mankind.” Mr. Obama apparently agrees with them. There is no project so expensive, none so aimless or counterproductive that our spendthrift president will not agree to pay for it with funds from the American treasury.

The Copenhagen global warming conference skidded to a close while Washington suffered a record December blizzard. No agreement was reached among the Copenhoaxers, despite President Obama glaring icily at the Chinese and Indian representatives. But it didn't end before our president declared our willingness to provide some of the $100 billion in compensation developing nations demand in return for cooperating in limiting carbon emissions.

This year alone, thanks to President Obama’s spending spree, our deficit has expanded from 41% to 53% of the gross domestic product, from $5.8 to $7.6 trillion. And now, on Christmas Eve, the Senate has passed the healthcare "reform" bill which won’t cut the costs of healthcare but will increase taxes and limit Americans’ personal freedom.

President Obama’s insistence on nationalizing healthcare as a way to reduce costs and federal spending is just as Senate Minority Leader Mitch McConnell (R-Ky) said: “It was a blind call to make history, even if meant making a historic mistake -- which is exactly what this bill will be if it’s passed because in the end, this debate isn’t about differences between two parties, it’s about a $2.3 trillion dollar, 2,733-page health care reform bill that does not reform health care and, in fact, makes its price go up.”

2009 has been a year of failure, destructive of our national foundations. President Obama’s agenda has weakened our economy, causing a false recovery that is merely a prelude to a longer and deeper recession. Our enemies -- especially Iran -- have been emboldened, slapping away Obama’s “open hand” repeatedly with their clenched fist.

Our president has not led: he has, instead, pronounced one crisis after another, each to be “solved” by the expansion of government, the reduction of personal freedom and the reduction of America’s economic and military might. He has subcontracted the details to congress, willing to go along with whatever the liberals there propose to remedy the problem, real or imaginary. Mr. Obama is quite uncomfortable with our superpower standing in the world and has worked determinedly to end it.

Secretary of State Hillary Clinton, not known for straight talk, admitted one of the greatest failures of the Obama presidency when she described the results of the “open-handed” diplomacy with Iran. Clinton said, “I don’t think anyone can doubt that our outreach has produced very little in terms of any kind of a positive response from the Iranians.” Iran is stronger, and bolder, because of that failure.

2010 may be better, but the odds aren’t good. Whatever the results of the House-Senate conference on the healthcare bill, what isn’t passed this time will be added incrementally on whatever bills may be available. Sen. Chuck Schumer (D-NY) is planning another illegal immigrant amnesty bill, which Democrats shouldn’t dare pass in an election year. But will they? Some are already telling Obama to back off the "cap and tax" scheme in 2010.

The lesson of 2009 is that the Democratic members of congress are more afraid of the wrath of Obama, Pelosi and Reid than they are of their constituents. No clearer a message could have been sent by the marvelous Tea Partyers in the August town hall meetings and the marches on Washington in September and December. But the Democrats chose to ignore them.

About a month ago, I met a gentleman from Iowa, one of the state’s top Republicans. He told me that men are angry but women are furious. That anger -- throughout the nation -- can be turned into constructive -- i.e., conservative – political energy.

If Republicans adopt a national election strategy next year and reach out to the Tea Party independents, November 2010 can begin the reversal of our fortunes. The platform -- and the slogan -- are in three words: roll Obama back. Run against Obama in every state and district race. Promise to repeal his agenda: end it, don’t mend it.

But Republicans need to realize that such a strategy can only succeed only if it is pursued outside the Washington beltway. The Democrats know this, which is why they will keep congress in session endlessly, reducing the time Republicans can campaign.

That, then is the 2010 challenge: can Republicans still fight Obama’s agenda in congress while spending the time at home they need to transform the voters’ anger at Obama into votes for them and against the liberals? If they can, 2010 will be a very Happy Tea Party New Year.



Jed Babbin, editor of Human Events
Cartoon by Brett Noel

 

[off2bed]

I call BS. They're all wrong. I know, because as we watched the ball drop last night, the crowd was swaying to Lennon's "Imagine" and NBC's announcer was crowing about the clear signs of economic recovery and the rosy picture for 2010.

It was a sad sight to see so many delusional people.

 

[The_Trouvere]

No, I am not hoping for bad things to happen so that good things can happen for Republicans. I'm looking at numbers.



See chart here and discussion of numbers:
http://www.americanthinker.com/2010/01/2010_will_be_worse.html

If you don't like American Thinker because it's a biased rwingnut source of propaganda, then ease on out of this thread with my best wishes and the assurance that in 2010, thanks to the Democrats and no thanks to me, the economy is going to rebound.

Have a nice New Year.

For everyone else, the bad news continues:



Monty Pelerin
__________________
"The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy."
Milton Friedman

Wishful thinking from American Thinker.

 

[Tungwagger]

As the economy rebounds, so too will the price of energy and we've done nothing.




We could have opened up Alaska to drilling, but it seems to be the Democrat consensus that since it won't meet all our needs, it won't meet any of our needs...

i

"Sorry folks, the bus won't be leaving the station until EVERYONE has a ride, ..

Now, get on the bus please, and be patient..."

 

[Karen Kraft]

The fools made a mess of it, but once they are dispatched, you will be astounded at the recovery: the fastest in history. I guarantee it.

Once we have an American in the White House and send the Congressional Communists packing, their crap will be appealed, reversed, terminated, etc., and the economy will bounce back better than ever.

We just have to hope they don't suspend elections when they see the handwriting on the wall.

 

[hogjack]

Get on the BRIC (Brazil, Russia, India, China) bandwagon, baby! The desperate, delusional and stupid will stay behind (circa 1980, baby!).

The BRIC portfolio with a dash of Africa, a smidgen of Indonesia and a dab of Latin America tastes like early retirement, baby!!!

 

[Frisco_Slug_Esq]

u

It is going to be a fine year.

Of course it is. Finest kind...



The smartest people in America are at the helm; who an I to doubt them?

I didn't go to Harvard...

 

[Frisco_Slug_Esq]

I have a bumper sticker on my car:

"YOUR WALLET: The one place Democrats ARE willing to drill"

My favorite after all these years is still,

Don't Steal!
Government Hates Competition​

 

[Frisco_Slug_Esq]

How good were you on your last year's predictions?

http://www.worldtribune.com/worldtribune/WTARC/2010/mz0001_01_01.asp

Green blackmail — The Global Warming lobby has morphed
into a secular “religion” where seemingly sober scientific
predictions are taken as unquestioned theological fact. Even
after the crisis of the Copenhagen Climate Conference, the
Global Warming mantra has become a near embedded hysteria
among many. Yet recall the dire predictions of the feared Y2K
global computer crisis a decade ago. Could global warning be
the new Y2K?