Cliff Küle's Notes: "U.S. is Defaulting Now?
'Every time the Federal Reserve engages in more quantitative easing and devalues the dollar, it is defaulting on the American people by eroding their purchasing power and inflating their savings away. The dollar has lost nearly 50% of its value against gold since 2008 .. This is a default. Just because it is a default on the people and not the banks and foreign holders of our debt does not mean it doesn't count.'"
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from Agora Financial:
“You may not know this, but the U.S. has actually defaulted a number of times already,” writes Chris Mayer this morning. He cites five instances:
1779: The government was unable to redeem the continental currency issued during the Revolutionary War
1782: The Colonies defaulted on the debt they took out to pay for the war
1862: During the Civil War, the Union failed to redeem dollars for gold at terms stated by the debt contracts
1934: FDR defaults on the debt issued to finance World War I, refusing to redeem it in gold. The dollar is devalued 40% against gold
1979: A bureaucratic snafu results in interest going unpaid on some small bills.
“With the exception of 1979,” Chris says, “which was mostly due to administrative confusion — the U.S. simply ran out of money each time. The end result was the dollar had to be devalued. Meaning it lost significant purchasing power.
“My guess is that the U.S. will default again. It may not technically be called that, but the only way for the U.S. to meet its financial obligations is to print a lot of money.”
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According to Ron Paul op-ed in Bloomberg:
The U.S. government defaulted at least three times on its obligations during the 20th century.
-- In 1934, the government banned ownership of gold and eliminated the right to exchange gold certificates for gold coins. It then immediately revalued gold from $20.67 per troy ounce to $35, thus devaluing the dollar holdings of all Americans by 40 percent.
-- From 1934 to 1968, the federal government continued to issue and redeem silver certificates, notes that circulated as legal tender that could be redeemed for silver coins or silver bars. In 1968, Congress unilaterally reneged on this obligation, too.
-- From 1934 to 1971, foreign governments were permitted by the U.S. government to exchange their dollars for gold through the gold window. In 1971, President Richard Nixon severed this final link between the dollar and gold by closing the gold window, thus in effect defaulting once again on a debt obligation of the U.S. government.
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The idea that an increase in the debt ceiling is a solution to anything is nonsense. Calling an increase in the debt ceiling a solution to a debt problem, is too stupid to be stupid. - Jim Sinclair
The most fascinating aspect of the debt limit "debate" is the contention by all the authorities that the US government can "preserve, protect and defend" its full faith and credit merely by increasing the amount they are giving themselves permission to spend. This is a wondrous argument. All that it necessary to preserve one's "solvency" is to borrow more money, preferably MUCH more money. One wonders why it hasn't worked in other countries, like Greece or Spain or Portugal or Ireland or Italy for example. - Bill Buckler, Gold This Week, July 16, 2011
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This isn't event mark to market anymore, this is mark to fantasy accounting gimmickry:
Senate Votes to Set Aside 'Cut, Cap and Balance' Plan Proposed by House GOP - FoxNews.com:
"Sources close to the budget talks in Washington told Fox Business Network that the emerging Obama-Boehner deal will likely incorporate a major gimmick to count more than $1 trillion in budget savings over the next decade -- winding down the wars in Afghanistan and Iraq. The wars were being wound down anyway, but by assuming the costs of the wars continue at current levels for a decade, Obama and Boehner can claim $1 trillion in savings. The headline number would also add hundreds of billions in interest savings on the so-called war savings.
Further, the deal could allow modest changes in entitlements, such as replacing the inflation measure used in Social Security, but would otherwise extract little in savings over the next 10 years from the real drivers of the long term fiscal crisis, Medicare, Medicaid and Social Security."
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Study: Gov't. Payouts Are a Third of U.S. "Income"
Study: Gov't. Payouts Are a Third of U.S. "Income":
"If it sometimes feels like almost everyone is on the government dole except you, there may be a reason for that sensation: According to a recent study one-third of all income in the United States comes in various forms of “social welfare benefits.”
The trend toward a growing proportion of the population relying on government programs instead of labor for its income has been an observable phenomena since at least the days President Johnson’s “Great Society” programs were initiated in the mid-1960s. Now, however, the percentage of income received from the government is equal to half of all income received from working for a living, and federal and state budget deficits are metastasizing as politicians whose reelection depends on giving away “other people’s money” find themselves running out of working citizens to tax.
As reported by CNBC, the study by TrimTabs Investment Research revealed that “Government payouts — including Social Security, Medicare and unemployment insurance — make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement.”"
from American Thinker blog:
The 70-Million-Check Constituency
By Michael Filozof
http://www.americanthinker.com/2011/07/the_70-million-check_constituency.html
Seventy million government checks! In a population of 309 million, almost 23% of the population is receiving some kind of check from the federal government.
For the left, money is not something that is earned. Money happens. It happens when you know the right people. If you are a college professor and you make the right impression at enough faculty cocktail parties, one day you will be tenured and named department chair and money happens. If you are an "activist" or a "community organizer" and you hobnob with people from the right foundations, money happens. If you are a Hollywood actress, you spend a couple of hours a day on the set pretending you are a prostitute or a murderer and then go snort cocaine all night, and money happens.
....Obama is a poster boy for the "money happens" mentality. Obama held one private-sector job in his entire life, which he characterized as "behind enemy lines." Obama never published anything as the first black president of the Harvard Law Review. Obama never published anything as a college instructor in constitutional law. Obama was given a publisher's advance for his memoirs -- after a life of accomplishing nothing -- and immediately encountered "writer's block" and sought help. In all probability his two books are ghostwritten. Yet Obama is a multimillionaire, largely from the sales of his books. For him, money happened. Obama's wife, Michelle, made a lousy hundred grand with her Harvard Law degree as vice-president for "community relations" at a Chicago hospital. When her husband was elected U.S. Senator in 2004, the hospital coincidentally decided that she deserved a raise of $200,000. For Michelle, money happened.
.....For the left, because "money happens," there's simply no limit to the things that should be paid for by the government. If you look at the pie charts in the instruction booklet for your Form 1040, you'll see that only 22% of spending goes to "national defense and foreign affairs" and a mere two percent to "law enforcement and general government." The rest -- nearly three-quarters of the budget -- goes to retirement, disability, Medicaid, Medicare, job training, agriculture, Food Stamps, housing assistance, "community development," and so on. From school lunches to saving the snail darter to funding Planned Parenthood to anti-obesity programs to developing electric cars to farm subsidies, government funds just about everything. And it's still not enough. Enumerated powers be damned.
Republicans cannot cut government spending without losing elections, and Democrats know it. They cannot raise taxes without losing elections, either, and the Democrats know that, too. So the Republicans will cave on the debt limit and allow the government to borrow even more than the $14 trillion we're already in hock.
Ultimately this problem will not be resolved by the political class. It will be resolved by the market, when lenders believe that the government is so far in debt that it is no longer worth lending to.---
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