4-Jan-11 News -- Republicans say they'll cut gov spending

[John]

4-Jan-11 News -- Republicans say they'll cut government spending

Palestinians to submit anti-settlement resolution to U.N. Security Council

** 4-Jan-11 News -- Republicans say they'll cut government spending
** http://www.generationaldynamics.com/cgi ... 04#e110104

Contents:
"Republicans say they'll cut government spending"
"Additional links"
Palestinians to submit anti-settlement resolution to U.N. Security Council
Germany's Coptic Christians receiving threats from radical Muslims
Greece plans fence along border with Turkey

[vincecate]

One way that we know that a major financial crisis is yet to come is because no serious effort is really being made to reduce the budget deficit. However, the deficit budget must come down, one way or another, and therefore a major financial crisis of some kind, probably forcing a US Treasury default, must occur.

An outright default would be honest and sensible. It would also reduce the debt slavery of innocent grandkids. It would have been better to not bail out the banks. It would be better if states and cities everywhere were declaring bankruptcy and getting ride of unions and big retirement obligations. For years to come people would not loan money to the government. All kinds of good things would happen.

However, as long as the market accepts US dollars there is no pressure to default, they will just print more money. If the market does reject the US dollar, then it won't matter if they print a few more worthless dollars and pay off the debt.

Anyway, I see little reason to hope they will see that the market is about to reject the dollar ahead of time or that the government will do the sensible and honorable thing as long as there are other options (print money). Yes, I count the Fed as part of the government. The government appoints a controlling majority and the government gets any profits the Fed makes.

And in a real sense printing money to pay off the debt is defaulting, as you are paying off debts with currency worth much less than the value at the time you borrowed. So really they will default openly or they default in a clandestine way. Either way bond holders will lose.

Another point. Most of the budget, like Social Security, Medicare, Medicaid, Veterins benefits, etc etc. is "mandatory spending". The only big thing that is "discretionary spending" is defense. So it seems certain that defense will be slashed in the coming years. All kinds of overseas bases will close and the US will pull out of Afghanistan and Iraq. With the "worlds policeman" gone home the world will be more lawless.

[jdpa]

At the onset of the financial crisis, I began to take notice of the condition of the economy. Likewise, I came on board with the generational thinking. Since then I have been trying to protect my money. There is a transactional event that, given my financial backgorund, causes me to ask the question-where did the money come from and where did it go? Please excuse me if I am naive.

The following news appeared in an article written by Chris Isidore on cnn.com on December 1, 2010 (Sorry, I have been unable to attach it): The federal reserve made 9 trillion in overnight loans during the financial crisis to major banks and wall street firms, all of which has been paid back. Did the fed actually print this money on a moments notice in the midst of a financial crisis? Regards

[vincecate]

The federal reserve made 9 trillion in overnight loans during the financial crisis to major banks and wall street firms, all of which has been paid back. Did the fed actually print this money on a moments notice in the midst of a financial crisis? Regards

We have talked about this question here before and I ended up writing a post about it on my blog. The short answer is that the Fed initially does it on computers but if a bank wanted to take out paper money from their account they could.

http://howfiatdies.blogspot.com/2010/12 ... paper.html

[Guest]

"So let it be written;so let it be done!" Thank you, Vince. This is a great site, John. Thanks.

[ridgel]

I'd bet that we see peace in the Middle East before Republicans meaningfully balance the budget. The current leadership started things off by extending tax cuts that were unaffordable 10 years ago and are unaffordable now. And like superstitious aborigines they repeat the mantra "tax cuts will bring growth" before every debate, as if believing hard enough in an idea will make it true. The only thing that will balance the deficit at this point is the complete lack of credit after the collapse of the dollar.