Some numbers published here:
Government needs funding this year of $2.0 trillion (that includes the federal budget deficit, off-budget spending, and state and local needs). Private industry needs about $0.5 trillion. Part of the funding will come from the country’s savings. Total gross savings (new savings) is estimated to be $1.5 trillion. Assuming all savings is available, a shortfall of $1.0 trillion exists.
This money can come from foreign lending or inflation. But…China, Japan and everyone else are saying, “No, thanks.”
(Gee – both these record drops in foreign investment SINCE The Messiah became president… and since Pelosi became Speaker….. Coincidence? I don’t THINK so.)
Which kinda leaves us with “Quantitive Easing,” (QE) which is, “the printing of money to stimulate the economy and fund the deficits.” Sooo….
Foreign funding was insufficient last year and will be even more so this year. The deficit will be larger, and foreign funding will be smaller. QE must be larger. There is no way to fund these deficits without QE [emphasis in original].
But wait! It gets better!
The problem is bigger than the numbers above might suggest. Budget forecasts show that the problem increases over time. In addition, 40% of existing debt matures in the next year. That means $2.8 trillion of debt has to be refinanced. The Treasury must sell on average $90 billion of debt a week! In five weeks, we need to sell $450 billion. That is equal to the largest full-year deficit in history, at least until Obama’s first year.
Read that again: “In five weeks, we need to sell $450 billion. That is equal to the largest full-year deficit in history, at least until Obama’s first year.”
Cool – we’re now “a banana republic with ICBMs.”
In FIVE WEEKS we need to sell as much debt as any full-year period in our history. And we’re only on Obama’s first year! And he has not YET forced Obamacre and Cap-n-Tax down our throats.
So – what can Bernanke do and when will he have to do it?
Well – he’ll have to do it in March. That’s when Bernanke promised to end QE.
What will he do?
Bernanke seems to have two choices: Rein-in America’s spending – and destroy Obama and the Democrat party… or… accept huge inflation.. and destroy Obama and the Democrat party….
Bernanke has two options, neither of them good. He can do what he promised and stop QE [inflation]. Or he can renege on his promise. Either alternative has radically negative consequences for the country, Bernanke’s role in history, and Obama’s presidency. If Bernanke stops QE, he fulfills his role as an independent central banker. Presumably, that action stops the decline in the dollar and reduces the risk of future inflation. It was the course that Paul Volcker chose in the late 1970s.
Volcker’s action was bold, highly controversial, and highly criticized. Volcker’s action had the support of President Reagan, who was willing to face short-term unpopularity to fix the economy. Bernanke’s task is harder than Volcker’s. Volcker stopped the economy dead in its tracks. If Bernanke ends QE, he will stop both the economy and the federal government dead in their tracks [Emphasis in original].
Bernanke’s second option enables the government to continue operating irresponsibly until market forces eventually stop the profligate behavior. Market discipline would likely be imposed in the form of a collapse of the dollar or raging inflation (or both).
Under either scenario, the Obama presidency is destroyed.
.. couldn’t happen to a nicer guy.
Will Obama rein-in his spending? He just increased the Debt Ceiling to $1.9 Trillion.. I think it’s pretty safe to say, umm: No, Obama will not stop his profligate spending…
Obama loses either way. He inherited a difficult situation, but then, via foolish policies, he turned it into a terminal one. At this point, Jimmy Carter may be the happiest person in the country. His lead position in the Pantheon of Shame is in jeopardy thanks to Obama.
SO – this is where the Baby Boomer Dems and Republicans have taken us, most specifically the Dems, but the GOP sure didn’t help anyone under Bush.
And the country is whiling-away its leisure hours worrying about the Totalitarian (i.e. Democrat) Party takeover of healthcare. When the country is heading toward fiscal disaster in a few weeks, according to the author of the column above…
Let’s review: The Democrats took-over Congress in 2006. Obama became president in 2009. Obama, as Senator, voted for W’s budget, for TARP, etc. His budget over the next ten years shows an addition to the deficit of about a trillion a year. Already – ALREADY – we are borrowing more in a five-week period than in any previous YEAR in our history. And if the columnist is correct, by March we’ll be well and truly screwed.
Recommendation: Buy seed. Potato, Lettuce, Tomatoes. Buy rabbits and learn to butcher them.
If I may be blunt… If you still support Obama and the Totalitarian – sorry, Democrat – Party, either you have no children or no sanity.