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Author Topic: Debt Ceiling and Default  (Read 5465 times)

Silver

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Debt Ceiling and Default
« on: August 01, 2011, 11:56:44 am »

A friend asked me to post something about the debt ceiling and default issues.  It's a big topic, many books have been written on the subject.  I've read a few, certainly not all or even most.

Some basics: 

The national debt figure is a fraud.  It is a figure made up by government for government purposes.  It has almost no meaning compared to what "debt" means for any individual, honest or otherwise.

The official national debt is $14.3 Trillion, but that ignores most of what is actually owed.  The Treasury bailed out failed government enterprises Fannie Mae and Freddie Mac to the tune of $5 trillion, most of it on underwater mortgages that won't be repaid.  The federal reserve bailed out big banks, paying them full face value for nearly $1 Trillion in toxic waste paper assets that the market wouldn't pay 10% on the dollar.

Every cent in Social Security and Medicare taxes ever stolen from wage earners has already been spent.  In place of real money to pay those debts (the victims of the theft were promised to be paid back in their old age) Congress printed up non-marketable "bonds" promising to pay for Social Security from the Treasury.  The current value of those worthless promises is about $2.5 trillion.

So we're up to over $21.8 trillion, but we've only started.  We know, thanks to a first-ever audit of the fed resulting from a few decades of tireless work by Ron Paul, that the federal reserve made "emergency loans" totaling $16.1 trillion between Dec. 1, 2007, and July 21, 2010.   What we don't know is how much, if any, was paid back. 

But the whopper is the present value of the sum owed to Medicare and Social Security.  Remember, when you hit 65, you're on Medicare.  Apart from medical tourism, there isn't really any choice.  Social Security is a Ponzi scheme, a larger version of Madoff's scam.  Present receipts are immediately spent, and promises to pay much larger amounts in the future given to the victims.  To pay for all the promises made on those two programs with a lump sum today would take between $62 and $200 trillion.  The large range is because the future is uncertain, but no credible estimate comes in lower than $62 trillion.

So the real debt is at least $84 trillion and quite possibly three times that. 

It will never be repaid.  It was never intended to be repaid.  The debt is nothing more or less than a tax.  It represents an attempt to enslave future generations.  They are good tax victims because they aren't around to defend themselves.

Most of the money is created from nothing, impoverishing us all with inflation tax.  In some cases money was loaned to the government by investors, on the premise that the "full faith and credit" of the US government backed repayment.  Translation: the government promises to beat the interest payments out of its victims citizens.  The principle is always rolled over, never paid.

So we have a debt that would require something on the order of $100 to $200 Trillion to repay today; every day that it isn't paid the interest on the debt increases that amount.  If the interest is a low 5%, then $5 to $10 trillion is added to the debt every year, before the government spends any more.

The entire amount of goods and services counted in the GDP is $14.7 trillion per year, but most of that is fake.  For example, government deficit spending is counted as GDP.  Actual productive output is probably closer to $8 trillion.  If you tax all income at 100%, and let people freeze and starve, you'd probably won't get enough money to pay the interest on the actual debt.  Once the citizens were dead, the amount collected would rapidly fall to zero. 

The debt is far too large to be paid.  The US government is completely bankrupt.

Default:

Default is nothing new, all governments eventually default.  Most do it several times.  The US is no exception:

1779: The 241 million paper "continentals" issued during the Revolutionary War became worthless.  Each note promised payment in silver dollars.  Essentially the first act of the traitor Washington on being elected president was to set the army on frontier farmers, attempting to steal money from them to pay speculators who had purchased vast quantities of the worthless paper, in the hopes a more powerful federal government would pay them in silver.  It didn't work.  Google "shinplasters" and "worthless as a Continental."  Eventually payment was made at the rate of 1 for 1,000, the holders took a 99.9% haircut over the face value.  In today's dollars, this represented a ripoff of about $7 billion. 

1782: The Continental Congress borrowed actual money as well as printing worthless continentals.  The interest on those debts began to go unpaid in 1782, and they were repudiated entirely in 1790.

1862: Paper "greenbacks" were issued to pay for the War of Northern Aggression,  in August 1861.  The Treasury refused to redeem them in gold, as promised, in January 1862.

1934: Liberty bonds were used to finance World War I in 1917, promising repayment in gold.  They were 20-year bonds, 4.25 percent issue, payable in gold at a rate of $20.67 per troy ounce. By 1933 the interest alone was rapidly draining the US treasury of gold, so FDR confiscated all domestic gold, repudiated the promise to pay the bonds in gold, and devalued the dollar by 40% to screw the foreign holders of Liberty bonds.  Total haircut: about $640 billion. 

1971: France knew the fed was printing money like crazy, and started cashing in their US dollars for gold.  Nixon repudiated that debt, refusing to pay as promised.

So default is nothing new.  The world does not end.  Some people get screwed, some more than others.  Life goes on.  It's generally a different set of folks who get screwed in defaults compared to those screwed daily in normal circumstances, so there is a lot of howling and outrage.

Deficit reduction:

This is such concentrated BS that it gags me every time seemingly intelligent people regurgitate the standard swill.  In 2010, the federal government collected $2.16 Trillion in taxes, fees, and other revenues.  It spent $3.45 Trillion, a deficit of $1.29 Trillion.  They spent $3 for every $2 they collected.  Deficits of about $1.5 trillion are expected this year, the next year, and beyond.

So while the "official," debt is going up $1.5 trillion per year, every newsthing, congressthing, and other vile creature talks about "deficit reductions" over a 10-year period.  A $4 trillion package of "spending cuts" is supposed to be a big thing.

$1.5 Trillion per year x 10 years = $15 Trillion.  If they aren't talking about numbers bigger than $15 Trillion in 10 years, they aren't talking about reduced debt.  The most charitable cover for this torrent of lies is that they are discussing reducing the rate at which they want to go deeper into debt.  If you look at the actual proposals, without exception the reductions come only after the next election.

It's all a lie.  There may or may not be a default, this time.  There will surely be a default, a big one, by some measures the biggest in human history.  I don't know if that will come next year or in 20 years, but it will surely come.  The debt is far too large to ever be repaid.

Debt limit:

Of course they will raise the debt limit.  All the posturing and preening is done because politicians crave attention far more than the lowest junkie craves his next fix.  They've played it very well and managed to convince a lot of otherwise sensible people that there is some drama here.

The has never been any doubt.  They will raise the debt limit because they need to spend more than is sustainable to buy the votes they need to keep their worthless carcass from having to  do anything approaching gainful employment.  The only person talking about genuine spending reductions is Ron Paul.  All of the rest, without exception, want to continue to go deeper and deeper into debt.  The squabble is only about the rate and who gets screwed, not the direction.

Politicians never, ever stop their taxing and spending.  They are parasites, it's what they do.  Eventually the markets will realize that the debts can't be paid, and this empire will end.  Something worse will probably replace it.  But that's a topic for another rant.

Peace,

Silver

« Last Edit: August 01, 2011, 07:57:21 pm by Silver »
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iloilo

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Re: Debt Ceiling and Default
« Reply #1 on: August 01, 2011, 01:09:53 pm »

Thank you for that Silver. An excellent summary.
ff
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Moonbeam

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Re: Debt Ceiling and Default
« Reply #2 on: August 01, 2011, 02:14:08 pm »

SILVER - That was so awesome! I greatly appreciate you taking the time to shed light on the *real* situation. This is information that I can pass along to those I care about :)

PS - Your friend is most fortunate to be able to call you friend!
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Freedom is not being able to do what you want to do; freedom is being able to NOT do what you don't want to do.

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Junker

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Re: Debt Ceiling and Default
« Reply #3 on: August 01, 2011, 05:34:53 pm »

Me too.  Well done, Silver.


And still, people don't, or won't, see that picture.

Or the one that shows it happening in every country on earth.

Or the one that shows it happening in every country on earth most years  for some
three centuries now, ever since England's Bank and King made the first deal.

Or the one that shows its variants happening in every country on earth in every year since Man started trading.

The story of Man, or "HisStory", is one of cheating, lying, and killing-- again, and again, and again.  That is
what History teaches.  Now it is no longer regularly noted at school or home.  And while it is the most important
lesson of History, most people don't consistently pay attention.
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Moonbeam

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Re: Debt Ceiling and Default
« Reply #4 on: August 01, 2011, 10:14:19 pm »

Wow! Our resident financial genius got mentioned on Claire's blog today...  :thumbsup:
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I'm not where I want to be, but I'm better than where I was!

Freedom is not being able to do what you want to do; freedom is being able to NOT do what you don't want to do.

"We must not amuse ourselves with the notion that we have done something when we have only formed a good resolution. Power comes by doing and not by resolving." Charlotte Mason

"Don't hurt people and don't take their stuff." Courtesy of FreedomWorks

gaurdduck

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Re: Debt Ceiling and Default
« Reply #5 on: August 02, 2011, 12:10:23 am »

Wow! Our resident financial genius got mentioned on Claire's blog today...  :thumbsup:

COOL!!!

Linky?
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Bill St. Clair

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knobster

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Re: Debt Ceiling and Default
« Reply #7 on: August 02, 2011, 05:50:40 am »

Wow! Our resident financial genius got mentioned on Claire's blog today...  :thumbsup:

 :notworthy: :wav: :occasion14: :headbang:
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Silver

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Re: Debt Ceiling and Default
« Reply #8 on: August 04, 2011, 06:43:03 am »

Thanks to everyone for the kind words.  Claire was very sweet to link to my rant and made some nice comments as well. 

The debt farce went pretty much as I expected, only worse.  There is no reduction in spending at all. The "reduction" next year is $12 billion - literally a rounding error in spending orgy that will probably exceed $4,000 billion.

The claim of trillions cut in future years is a lie, of course. The "cuts" are to projected increases in spending, all with deficits.  If every dollar of "cuts" are actually made (very unlikely) AND the projections about tax revenues, economic growth, and inflation are correct (preposterous) we will end up with an official national debt over $22 trillion in 2022, up from $14 trillion today.  If the economy manages to flounder along as it is now, the official debt is more likely to be above $30 trillion in 2022.  The actual debt will increase from about $100 trillion to well over $300 trillion. 

In the increasingly likely event of a hyperinflation, the numbers go to the moon, and we'll be using scientific notation to discuss budgets and deficits.

So they didn't increase revenues at all, didn't cut spending at all, but voted themselves a huge increase in debt so that they don't have to talk about it again before the next election.  Because that's what really matters to the corrupt morons infesting Mordor: avoiding any discussion of any substantive threat to American liberty and prosperity.

But it's far worse than that.  The appointment of a "super congress," the "council of 13" is quite likely a mortal blow to any pretense of republic or representative government.  I won't elaborate here; Ron Paul, members of this forum, and plenty of others realize the depth and danger of this latest betrayal.

Peace,

Silver
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ZooT_aLLures

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Re: Debt Ceiling and Default
« Reply #9 on: August 04, 2011, 05:58:35 pm »

Quote
I won't elaborate here; Ron Paul, members of this forum, and plenty of others realize the depth and danger of this latest betrayal.

yeah, but in actuality it's no more or less of a danger than all the "czars" we have covering everything and anything, unilaterally making "laws" that were never nor will ever be voted on, which is called "policy" but which are enforced as law.

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Even some cowboy and indian outlaws in the 1800's eventually stopped sleeping under buffalo skins, and came to town to entertain paying customers. For some I imagine the bruising of their ego never healed.

We all have some scar tissue that never lets us completely forget the intent of the adventure.

Klapton Isgod

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Re: Debt Ceiling and Default
« Reply #10 on: August 04, 2011, 07:56:53 pm »

Quote
I won't elaborate here; Ron Paul, members of this forum, and plenty of others realize the depth and danger of this latest betrayal.

yeah, but in actuality it's no more or less of a danger than all the "czars" we have covering everything and anything, unilaterally making "laws" that were never nor will ever be voted on, which is called "policy" but which are enforced as law.



The guy who burned himself to death on the courthouse steps in New Hampshire referred to these as "the second set of books."  His suicide note was worth reading just for his insight on this particular topic of stuff that no one ever votes on, but still get enforced at gunpoint.
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tex703

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Re: Debt Ceiling and Default
« Reply #11 on: August 04, 2011, 07:58:01 pm »

Thanks for the explanation.  Do you mind if I print it out and teach it to my history classes this year?

And your explanation also shows us all the importance of buying real physical assets such as gold and silver.  It also shows us that buying other physical assets is a must in today's economic environment.  Do you think we will see an underground financial/barter market evolve over the next few years?  And if so, how do yo see it happening?  I have already seen signs saying that merchants will take silver coins in lieu of US paper money for payment.


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Silver

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Re: Debt Ceiling and Default
« Reply #12 on: August 04, 2011, 08:04:05 pm »

Quote
I won't elaborate here; Ron Paul, members of this forum, and plenty of others realize the depth and danger of this latest betrayal.

yeah, but in actuality it's no more or less of a danger than all the "czars" we have covering everything and anything, unilaterally making "laws" that were never nor will ever be voted on, which is called "policy" but which are enforced as law.

I think it may be different than the czars.  Those are certainly a threat, but at their core they are a case of the executive branch consolidating it's powers into a few individuals.  That's a major problem, and if the craven congressthings hadn't ceded so much power it wouldn't be possible.

But the "super congress" is fundamentally different.  Now the legislative branch has crippled itself, reduced the number of participants from 535 to 13.  They've also gutted the ability of 40+ senators to hold up particularly bad laws; there is no filibuster allowed on the decrees of the 13.  

So in the executive branch we see concentration of power, always a bad thing.  Now we see concentration of power in the legislative branch.  The nine nazgul long ago cemented their hold.  This is not good.  Less than 40 people hold most of the power in this country.  What was supposed to be a system of checks and balances has devolved into a tiny group of morons that couldn't conduct an entertaining dinner party ruling 330 million people.

Peace,

Silver

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Silver

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Re: Debt Ceiling and Default
« Reply #13 on: August 04, 2011, 08:11:03 pm »

Thanks for the explanation.  Do you mind if I print it out and teach it to my history classes this year?

You're welcome, and feel free to use anything I post here as you see best.

Quote
And your explanation also shows us all the importance of buying real physical assets such as gold and silver.  It also shows us that buying other physical assets is a must in today's economic environment.  Do you think we will see an underground financial/barter market evolve over the next few years?  And if so, how do yo see it happening?  I have already seen signs saying that merchants will take silver coins in lieu of US paper money for payment.

As you point out, it's happening now.  The battles of Amazon and other retailers over state sales tax are another front in the same war.  "Black market" is a government concept; it means a free market that doesn't gladly suffer the interference of morons in the transactions of free men.

There is an underground economy now.  By definition, we don't know how big it is.  But all signs suggest it is growing larger. 

Barter is very inefficient. I expect alternative currencies, whether silver coins or (IMHO) much more questionable bitcoins and their ilk.  Markets select currencies precisely because almost any currency is more useful than barter.  I look forward to a vigorous, competitive market in currencies, with entrepreneurs striving to provide financial products that consumers desire.

Peace,

Silver
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mutti

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Re: Debt Ceiling and Default
« Reply #14 on: August 06, 2011, 07:32:13 pm »

Sources Say • Tax pledge may be a conspiracy

Quote
Congress who signed no-new taxes pledges engaging in a criminal conspiracy to overthrow the government of the United States because President Obama is black? That’s the theory put forward by Calvin O. L. Henry, president of the Oregon Assembly for Black Affairs, in a July 5 letter to U.S. Attorney General Eric Holder.

In his letter, Henry requests that the U.S. Department of Justice open a criminal investigation into the 274 Republican and three Democrats who have signed the pledges circulated by anti-tax activist Grover Norquist and his organization, Americans for Tax Reform.

“The undue influence of the Americans for Tax Reform and Grover Norquist and the signed pledges by 274 of the 289 members of the United States Congress reveal a sinister and open conspiracy to overthrow the Constitution of the United States by trying to cause President Obama to fail,” wrote Henry, who describes himself as a black American who served as an elections official in the Oregon secretary of state’s office.

....and little fairies flitted across the S&P Chairmans desk sprinkling forget me dust so that $2 Trillion used to pay for recent/future US expenses could be diverted to a new secret jet program to reduce the time needed to time travel while collecting children's teeth and replace them with useless FRNs. .....(even though as ND pointed out that the FAA didn't have funding).

Now we see the true meaning behind everything  :rolleyes:.
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