December 9, 2004, Deficit Reduction by borrowing, no tax increases (and free pie too)
The President continued his policy to destroy the financial underpinnings of this country (see "mandate") more or less unabated, today "taking payroll tax increases off the table" to fund his (insane) social security privatization scam... scheme.
Obviously, if we (1) won't raise payroll taxes and (2) won't reduce social security (or medicare) benefits, and (3) won't increase other federal taxes, then that pretty much leaves (4) massive borrowing as the only available option to fund proposed increased costs of social security administration envisioned by the private account gifts to Wall Street... er, younger workers.
The issue, of course (the real issue) is whether our financial overlords in Beijing (as opposed to our political overlords in Riyadh) are willing to buy another couple of trillion in funny paper. Frankly, fans as they are of a government that puts Mitch McConnell's wife in the amusing position of Secretary of Labor, there is a limit to the PRC's indulgence. And two trillion more dollars of unnecessary deficit is almost certainly going to take us to and past that limit.
And therein lies the problem: we have been on borrowed time and money for so long, we think there is no limit. Well, there is a limit. We're watching it now as the dollar is collapsing in every market in the world (except artificially pegged Beijing, and a few outliers like that). After a while, even though it encourages us to buy Chinese tchotchkes, Beijing will not be able to sustain a yuan at levels that are really several times what a floating or market rate would sustain: they'll literally be giving us the fruits of their slave labor... and they surely don't want to do that.
Interest rates, of course, must increase, to draw foreign capital here. This will, automatically and inexorably, reduce home values, and eventually, the vicious cycle of economic contraction will get going. And it won't be pretty.
The Bush Administration gives us its usual answer to the foreboding economic conditions: "bring it on".
My financial advice remains pretty much as you'd expect: invest generously in canned goods, bottled water and ammunition.
Comments
And homestead a water hole somewhere.
Posted by Linkmeister at December 10, 2004 12:40 AM
Well, you could try indexed U.S. gov't bonds--interest rates on those suckers should hit the roof (for as long as they keep performing--it's the default ya gotta worry about).
Posted by mamayo at December 10, 2004 10:45 AM
Bush's swaggering toward US economic meltdown is the perfect set-up for testing one of my favorite theories, ie, the corporatists really run the country/world. If they do, they won't let Bush trip over the edge. Something will happen: scandal (those pesky TANG papers turn up), impeachment (threatened or real), resignation (for health reasons or otherwise), etc, etc. If the corporatists aren't in control, then sketch in your personal vision of economic armageddon. You have to wonder if plundering Iraq and dismantling Social Security are really worth risking the full faith and credit of the country.
Posted by Miss Authoritiva at December 10, 2004 3:02 PM
Don't know about that; corporatists (and assorted allied banditti) were probably in charge in Argentina, too, and seemed to have no problem at all letting it go to hell... Have we not foreign currency denominated bank accounts and securities, gated communities, armored vehicles and heavily armed personal body guards...?
Posted by the talking dog at December 10, 2004 5:24 PM
Thanks TD...I have plenty of bottled water and canned goods in my post-election cave...Tommy Boy didn't mention 'canned' food supply, did he? Oh well.
Posted by alicia at December 10, 2004 10:47 PM