Impending Economic DOOM (Amagi Podcast @ Think Liberty Episode 8)

Nima and Dylan discuss indicators of economic doom.


Regarding the Kalecki Equation: What Does the Market’s Response to Trump’s Election Tell Us About Investor Expectations?

The Permanent Portfolio (

Currency crisis candidates:

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Bonds Don’t Lie; Thoughts on Sovereign Debt Investments; And Who’s To Blame for the Financial Crisis

A refreshingly interesting and open conversation on CNBC.

I happen to agree that bond markets are the best predictor of where markets in general are headed. As I noted before, treasuries have been rallying pretty much since February of this year, portending a slowdown that may be the second leg down for the double dip recession that is to come. It’s likely that gold, the Dollar, and Treasurys will to continue to do well …

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More Debt = Lower Unemployment?

This is the video in question:

These are the numbers I am looking at:

History of the US Public Debt

History of US Unemployment

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Congress Increases Debt “Limit” to $12.4 Trillion

In yet another predictable move, Congress has increased the debt limit by another $290 billion:

Congress’s move to lift the federal government’s borrowing limit by $290 billion — enough to last about two months — sets the stage for a contentious debate early next year on government spending.

The Senate on Thursday approved the increase in a 60-39 vote that was largely along party lines. The House passed the measure last week.

The additional $290 billion in borrowing ability lifts the total public debt the federal government can hold to about $12.4 trillion and will allow the government to keep borrowing through February.

Treasury officials had warned that the current limit of $12.1 trillion was close to being breached. Congressional leaders scrambled to raise the ceiling before they began the holiday recess.

An increase in the debt ceiling is largely symbolic as it represents money already spent by the U.S. government. In the unlikely scenario where it was ever breached, however, there would be significant consequences for the financial markets. The federal government would be forced to default on its obligations, and could lose its top credit rating, having to pay much higher interest rates as a result.

Just two weeks ago, several senior Democratic lawmakers had said they were close to reaching an agreement on an increase in the debt limit of $1.8 trillion to $1.9 trillion, enough to support the federal government’s borrowing needs through 2010. That would have avoided the need to take up the issue again next year, when many Democratic lawmakers are expected to face tough re-election battles.

But when it became apparent there wouldn’t be sufficient support in the Senate for that, Democrats scaled back their ambitions and moved forward with the more modest increase.

That leaves Congress facing another debate on the issue before the end of February. Senate Majority Leader Harry Reid (D., Nev.) said this week that would be the first order of business the Senate deals with when lawmakers return Jan. 19.

Republicans are hoping to tap into the public’s anxiety about the federal government’s finances to make gains in the polls next November.

When the Senate takes up the debt issue in January, Republicans plan to hold votes on a number of measures that would seek to restrain the federal government’s ability to spend. These include discretionary spending caps, a move to strip out already-committed funding from the fiscal 2010 budget and the creation of a commission to investigate longer-term solutions to the debt issue.

I love the part about “creating a commission to investigate longer-term solutions to the debt issue”. This is precisely what we can expect from Congress. More commissions, debates, talk, surprises about this or that shortfall, and so on and so forth.

Every month someone from some party says we have to deal with the debt issue, reign in spending, cut expenses and return to fiscal discipline. Yet, when it comes to actually voting on the single measure that matters in this regard, they are rather quick to approve more of the same.

Note that the official debt numbers are a sham anyway. Total US debt is not at $12 trillion. The Treasury itself estimates that total government obligations for Social Security and Medicare are at $43 trillion, as I noted before:

The SOSI provides additional perspective on the Government’s long term estimated exposures and costs. However, it should be noted that the Government’s financial statements do not reflect future costs implied by any current policy, such as national defense, the global war on terrorism, and disaster relief and recovery. Table 3 shows the Government’s estimated present value of future social insurance expenditures, net of dedicated future revenues for the programs reported in the Statement of Social Insurance (SOSI), projected to be $43 trillion as of January 1, 2008 for the ‘Open Group’6. While these expenditures are currently not considered Government liabilities, they do have the potential to become liabilities in the future, based on the continuation of the social insurance programs’ provisions contained in current law.

A liability, or debt, is simply “the obligation of one person or group to provide future goods to another person or group.” Thus, for the discerning economist, it is rather irrelevant if the government “considers” or “officially calls” them liabilities. As far as their impact on human action is concerned, and thus all that economics cares about, they are debts.

This brings the total US government debt up to $55 trillion, an implicit mortgage burden of $491,000 per US household. Anyone in Congress wanna deal with THAT?

Of course not, they will continue to push the boundaries, and of course they will raise the limit once again, come February.


From 1989 on, the Japanese government has launched one stimulus after another to no avail, leaving Japanese taxpayers with the largest public debt per capita of all industrialized nations.

A burden that the US government seems to be more than willing to have its taxpayers shoulder over the years to come unless someone picks up a history book and tries not to feverishly repeat mistakes others made in the past.

Thus the long term outlook for the US economy is the fate Japan took: A long lasting correction supercycle with one failing “stimulus” program after another, and with on and off periods where the economy slips out of and back into recessions from time to time.

The public should not be deluded into thinking that such thing as a “limit” exists in the minds of their representatives.

May I ask: If all Congress keeps doing is to raise the debt limit quarter by quarter, why not get rid of the damn thing altogether?

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Geithner Asks Congress to Raise Debt Limit

Today is August 11th. I just double checked. It is not April 1st. Nor does it seem like Geithner issued the statements below for The Onion. He appears to be serious … seriously, Geithner Asks Congress to Increase Federal Debt Limit:

U.S. Treasury Secretary Timothy Geithner asked Congress to increase the $12.1 trillion debt limit on Friday, saying it is “critically important” that they act in the next two months.

Mr. Geithner, in a letter to U.S. lawmakers, said that the Treasury projects that the current debt limit could be reached as early mid-October. Increasing the limit is important to instilling confidence in global investors, Mr. Geithner said.

The Treasury didn’t request a specific increase in the letter.

It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations,” Mr. Geithner said in a letter to lawmakers.

Mr. Geithner said the that it is “clearly a moment in our history” that requires support from both Democrats and Republicans for the increase.

Congress has never failed to raise the debt limit when necessary,” Mr. Geithner said.

The non-partisan Congressional Budget Office said Thursday the federal government’s budget deficit reached $1.3 trillion through the first ten months of fiscal 2009, on track to reach a record high of $1.8 trillion for the 12-month period.

A statement like this could be out of some of the more bizarre sections of Atlas Shrugged, at the point where nobody really cares about anything or anybody anymore.

Is this for real? When I ask banks to loan me more money, and that it is of critical importance that they do so, will this instill confidence in other investors of mine?

How is it more likely that I will meet my obligations if I take on more … obligations?

Hasn’t Congress’s biggest failure been its lack of fiscal discipline, its rampant and neverending spending, its inability to pay down some of its debt? How then can we even for one second consider calling it a failure to not add to this public debt?

How badly has brain damage progressed in Tim Geithner’s head? How gullible and stupid does he think the people are? This guy needs to step down and needs to do so quickly. Listening to his nonsense is painful and insulting.

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