Moo Shu Porkulus
Say hello to our new owners, the Chinese.
Krauthammer in the WaPo on the stimulus scam:
Barack Obama won the great tax-cut showdown of 2010 - and House Democrats don't have a clue that he did. In the deal struck this week, the president negotiated the biggest stimulus in American history, larger than his $814 billion 2009 stimulus package. It will pump a trillion borrowed Chinese dollars into the U.S. economy over the next two years - which just happen to be the two years of the run-up to the next presidential election. This is a defeat?If Obama had asked for a second stimulus directly, he would have been laughed out of town. Stimulus I was so reviled that the Democrats banished the word from their lexicon throughout the 2010 campaign. And yet, despite a very weak post-election hand, Obama got the Republicans to offer to increase spending and cut taxes by $990 billion over two years. Two-thirds of that is above and beyond extension of the Bush tax cuts but includes such urgent national necessities as windmill subsidies.
...Obama is no fool. While getting Republicans to boost his own reelection chances, he gets them to make a mockery of their newfound, second-chance, post-Bush, Tea-Party, this-time-we're-serious persona of debt-averse fiscal responsibility.
And he gets all this in return for what? For a mere two-year postponement of a mere 4.6-point increase in marginal tax rates for upper incomes. And an estate tax rate of 35 percent - it jumps insanely from zero to 55 percent on Jan. 1 - that is somewhat lower than what the Democrats wanted.
No, cries the left: Obama violated a sacred principle. A 39.6 percent tax rate versus 35 percent is a principle? "This is the public option debate all over again," said Obama at his Tuesday news conference. He is right. The left never understood that to nationalize health care there is no need for a public option because Obamacare turns the private insurers into public utilities, thus setting us inexorably on the road to the left's Promised Land: a Canadian-style single-payer system. The left is similarly clueless on the tax-cut deal: In exchange for temporarily forgoing a small rise in upper-income rates, Obama pulled out of a hat a massive new stimulus - what the left has been begging for since the failure of Stimulus I but was heretofore politically unattainable.
We should be looking at a national debt of around $24 trillion by 2015. Its current level, $14 trillion, comes out to around $117K per taxpayer. (Out of the 310 million people in America, 120 million are taxpayers - you have to leave out the elderly, the children, and those who otherwise don't pay taxes.) I don't know about you, but I don't have $117K just lying around. It's the same amount of money I spent on my condo, so I guess if I wanted to pay my share I could start a 30-year plan to pay it off, just like when I had a mortgage. How nice - I'd be 70 years old by then. But I and others like me could pay it off eventually.
But that assumes we didn't borrow more, and as you can see, the spending continues to grow unabated.
Also, the national debt does not include the unfunded liabilities for the entitlement programs. If you include those, each taxpayer's share goes to $1.2 million, which we can never repay. But look what happens if you talk about cutting entitlement spending. Even the most dedicated tea partier starts screaming.
What will happen is that the U.S. dollar will no longer be the world's reserve currency. At that point, there is nothing to stop us from Weimar Republic or Zimbabwean-style hyperinflation. Couldn't happen here? Well why not? Those folks probably didn't think it could happen to them, either. I give it a 50% probability of happening within five years, and a 90% probability of it happening within ten.
We'll end up with some kind of new currency to keep us off a straight barter system, and hopefully that will be sound money - an asset-backed, rather than a debt-backed, currency. (Assuming we learn our lesson at all, and don't just start over with a new Ponzi scheme.) But what a currency conversion means is that your accumulated dollars are worth very little. Maybe you have to trade 100 dollars for one unit of the new currency. You could still feed yourself, assuming you had a job and got paid in the new currency, but your savings will go up in smoke.
What worries me is that when hyperinflation hits, the government will try to combat rising food prices with price controls. That always leads to empty shelves. You can force a grocery store to sell milk at a set price, but you can't force them to sell it, or farmers to produce it, in the first place. And this isn't even taking the effect of rising oil prices into consideration. Fun times ahead.
Pirate Jo at January 1, 2011 6:18 AM
Oh, and Happy New Year!
Pirate Jo at January 1, 2011 6:19 AM
PJ,
That's why I'm buying physical silver on a regular basis.
Gold is just out of my reach. And harder to convert to small purchases.
Also I would suggest you have some food seeds and a stock of canned/non-perishable food on hand.
Jim P. at January 1, 2011 8:19 AM
Jim, I saw an article recently on Zero Hedge that argued against thinking of gold as a hedge against inflation. The argument went that real estate and stocks tracked much more closely to inflation rates (recent bubble aside).
The barrage of comments that came in response carried one theme in common: They were all buying gold, but not as hedge against inflation, but against the very collapse of worldwide fiat currencies itself. One person with 40 years of investment experience felt that his experience was actually a detriment, and that an alien landing on this planet today would have a better chance of navigating the current landscape.
Comparing the current behavior of gold to its bulls and bears during the Great Depression may be useless, as it was unthinkable back then for the government to essentially print billions of dollars in order to borrow from itself. As one person put it, they would have been taken out and hanged.
Pirate Jo at January 1, 2011 12:36 PM
All of the above is true... and that's without even figuring in the fact that, from all appearances, China is about to experience its own real-estate bubble popping. Once this happens, it will no longer have the ability to buy T-bills even if it wants to. Who will that leave? Ahem... Russia. Wanna make a guess about what kind of terms Putin will want to finance our debt?
Cousin Dave at January 1, 2011 4:45 PM
The question of what will happen when paper collapses is sort of answered by the $200 million notes that were printed in Zimbabwe.
If and when it happens -- it will make the Great Depression look like a walk in the park.
Guns, swords, solid historical metal, and food will be the best thing to have on hand. Water can be obtained easily enough. Long term medicine wouldn't hurt.
Jim P. at January 1, 2011 6:15 PM
The reason that Obama was able to negotiate this deal, given his post-election weakness, is that nothing is more important to Republicans in Congress than the tax rates of high earners.
Christopher at January 2, 2011 9:11 AM
Duh. Who do you think are the ones most likely to create jobs? Certainly ain't the folks making under 30 grand a year.
brian at January 2, 2011 1:22 PM
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