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Kucinich on Default and the Debt Ceiling

On August 2, 2011, in Debt, by Tim

It’s hard to disagree with a lot of what Rep. Dennis Kucinich (D-OH) has to say in this rant the other day about a possible default and raising the debt ceiling (hat tip Patrick.net).

His point about the Fed subsidizing big banks when that money could just as easily be used to fund government jobs programs to build infrastructure and do other things that, over the long run, will actually benefit society, is worth considering, though Congress is not likely to do so or they’ll have to find some other source of funding for their next election campaign.

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A New Perspective on the Debt Ceiling Deal

On August 2, 2011, in Debt, Our Culture, by Tim

Rep. Ron Paul (R-TX) has about the best take on the debt ceiling deal that has crossed my computer screen, most people losing sight of the fact that the agreed to “cuts” are not really cuts at all, at least not in the way that most people use the word in their own finances.

When a Cut is Not a Cut

One might think that the recent drama over the debt ceiling involves one side wanting to increase or maintain spending with the other side wanting to drastically cut spending, but that is far from the truth. In spite of the rhetoric being thrown around, the real debate is over how much government spending will increase.

No plan under serious consideration cuts spending in the way you and I think about it. Instead, the “cuts” being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases.
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In reality, bringing our fiscal house into order is not that complicated or excruciatingly painful at all. If we simply kept spending at current levels, by their definition of “cuts” that would save nearly $400 billion in the next few years, versus the $25 billion the Budget Control Act claims to “cut”. It would only take us 5 years to “cut” $1 trillion, in Washington math, just by holding the line on spending. That is hardly austere or catastrophic.

What’s most disconcerting about all of this is that we are told we live in a world where inflation is quite low, employers all across the land using this as justification for freezing wages, benefits, and the like while, in Washington, the notion of enacting a simple “freeze” is anathema, an other-worldly concept that, somehow, isn’t even on the radar.

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Sovereign Debt by Country

On July 29, 2011, in Debt, by Tim

With Congress still stalled on a bill to raise the debt ceiling, President Obama’s job approval rating falling to its lowest level ever, and U.S. stocks having their worst week in a year, here’s something we can still feel good about – our pristine credit rating via Reuters, that, when compared to the rest of the world, still looks pretty good.

Of course, we may not have that AAA rating from Standard & Poor’s for very long, so, we should probably feel good about it now rather than saving it for later.

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The Difference Between a Billion and a Trillion

On July 27, 2011, in Currencies, by Tim

From WTFNoWay via this HuffPost item comes another helpful visual aid for understanding the difference between billions and trillions, the old saying “a billion here, a billion there … pretty soon you’re starting to talk about real money” sounding almost quaint today.


Click to enlarge

In the top image, that’s one small stack of $100 bills totaling $10,000 next to a small pile totaling $1 million in  front of ten pallets  that total $1 billion (you might recall that the U.S. shipped many pallets like these to Baghdad during the Iraq War). In case you don’t immediately see them, these three are all reproduced at the lower left of the bottom image.

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The Elephant in the Deficit Living Room

On July 27, 2011, in Our Culture, by Tim

As a recent convert to a low-carb way of life that has had a profound effect on how I view both the American food industry and the practice of medicine in the U.S., these thoughts expressed by Ambrose Evans-Pritchard in this Telegraph story today on the subject of the ongoing  U.S. budget troubles are really worth reading a couple times. Hopefully, the extended length rant will soon follow.

The great health care cartel is in my view the villain here. It is the root cause of US ruin, and is itself responsible for the epidemic of diabetes, Alzheimers, and several other mass ailments afflicting America. It has systematically failed to keep up with the scientific literature, and refuses to abandon grievous policies when shown to be wrong. Americans need to confront this huge vested interest (nearly a fifth of GDP) before it destroys the country. But that is a rant for another day.

While I don’t know much about the Alzheimers example cited above, I do know something about the obesity/diabetes problem that seems to get worse and worse every day.

In case you didn’t already know, there is an important relationship between cheap, carbohydrate-rich food produced in massive quantities by the U.S. food industry and the nation’s obesity epidemic that, if not reversed, will make today’s health care problems look trivial as all the fat little American kids age.

It seems we’ve stamped out hunger by ensuring that everyone gets enough calories, but, they are the wrong kinds of calories and, unfortunately, there are so many vested interests in the status quo when it comes to nutrition, change will come painfully slow.

Anyone wanting to learn more about this subject is encouraged to start with this story in Men’s Journal – Everything You Knew About Nutrition is Wrong.

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This Can’t Be Good…

On July 27, 2011, in Bonds, Debt, by Tim

Yesterday’s Chart of the Day at Bloomberg depicted dramatic changes now taking place in the cost of insuring short-term U.S. Treasuries due to the debt ceiling stalemate, one year credit default swaps now more expensive than the five year variety for the first time ever.

The bad news is that it’s getting worse. According to this Telegraph report, one-year credit default swaps have risen 8 more basis points to a new record high of 85 basis points, higher than at the peak of the financial crisis a few years ago.

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