The US government is soon going to need to raise trillions of dollars through bond sales to cover the various housing gambler bailouts and general government overspending.
Who's gonna buy 'em?
What happens if they don't?
Hmmmm...
November 03, 2008
HousingPANIC Stupid Question of the Day
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37 comments:
Isn't the Consumer destined to become the Saver? My guess is that he can be forced-fed these bonds, perhaps with some brainwash ("stocks are just too risky") and regulatory fine-tuning. In the end the purchasing power of bonds may not be as great - but it takes a long time to get there and realize you've been screwed up again.
It's easy, the government will force all citizens to buy them or they will promote owning them as something patriotic i.e. war bonds.
Now all's left to do is start a war somewhere.
New rule: all 401k and IRA money must be invested in 50 year bonds earning 2%. Can't ever sell them. Just pass on the accounts to your heirs, after the government takes out a chunk for income and death taxes.
"Who's gonna buy 'em? What happens if they don't?"
1. Nobody. 2. Gottdammerung Iceland style and major rumble in the jungle. Except there are no big brothers coming to rescue like other Nordic countries are for Iceland.
The need of money is the key why USA is so much worse off now than eurozone countries. Eurozone countries do not need 2000-3000 trillion dollars within next 12-18 months to fund their government deficits and bailouts. USA does...
Isn't that like buying your own crap at a garage sale?
You raise a valid point that will effect the global financial markets.
This effects all consumers, employers and ultimately the homeowners.
This is what I wonder too, in the great inflation/deflation debate.
It is simply assumed that the government can issue bonds, and those bonds will be bought.
Why?
Could they create a special provision to retain more of our income, not a tax, giving us in exchange a 5 year or 10 year bond that we cannot sell or redeem? They might even say that we can use them as collateral to borrow from banks.
Of course, we would be borrowing at a higher rate than the bond bears but who's counting? Effectively we would be borrowing our money back from the semi-nationalized banks.
That seems like one barrel they might try to bend us over.
A combination of the following:
1) new income taxes will be raised to reduce the amount of debt that needs to be issued once the Feds realize they can't sell all of it.
2) new FICA taxes, which will be promoted as shoring up social security but which will be used to pay down the TARP debt.
3) new debt that will be bought by some countries who owe us favors, like Japan.
4) physical paper money that will be printed by the mint that will be dumped into bank vaults.
5) new govt. bond programs offering very high interest rates to entice americans to buy into them.
Maybe Bush and Cheney get hung by vigilantes?
Helicopter Ben will buy them. This is how the Fed creates money.
It will be monitized.
"Why?"
we are the empire. foreign nations buying our treasuries is their "tribute" to the empire.
if they do not buy them then it gets really bad for them.
unless what peter schiff says comes to pass.
demand for goods due to foreign nations' increase in their standard of living offsets the reduction in demand to an extended deep depression in the united states.
"""
But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost
"""
-- http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm
in reference to your sidebar poll (the cuttoff for middle class).
middle class is not a paycheck. it's a state of mind. i just love charles hugh smith's revised definition (quoted below). the middle class is all but dead - "the forgotten man".
"I submit that since income-based definitions do not actually address either asset accumulation or purchasing power, they are a priori of no value. Instead, I propose the following definition of middle-class based on what the income can accomplish/buy:
1. No more than 30% of net income is spent on housing, either to own or rent.
2. 6-8% of net income is saved--not including retirement IRAs or 401K plans.
3. No more than 15% of net income is spent on medical and dental expenses, including insurance.
4. The household can afford to pay tuition, fees and books for two household members living at home and attending a 4-year state university/college.
5. Food (including meals away from home) costs no more than 15% of net income.
6. The household can pay cash for a recent-vintage reliable used vehicle, and can support the one reliable vehicle and a "beater" old vehicle for secondary use; the household carries no auto loans.
7. The household pays off all credit card purchases monthly and carries no consumer credit balance.
8. The household can afford to take a domestic vacation once a year without incurring debt or tapping the 6-8% of income set aside for savings.
9. If the family owns a residence, the equity stands at a minimum of 50% of market value.
10. The household maintains at least 6 months' living expenses in readily accessible savings."
or they could yank the $108 Billion set aside for CEO pay packages and force the banks that get bailout money (if they asked for it or not) to not pay dividends until the $700 billion is paid back...
raise taxes and give the increase to the lower income brackets. they will spend it all and thus restart the economy.
Easy.
Next question?
the foreign country exporters will buy them. they have to. if they don't their export dependent economies will completely collapse.
eventually the music will stop and people will realize that all the chairs are gone!
i think we need a special one time tax on any 401k with more than, say 200k in it.
if you have more than 200k in your 401k then you have benefited more over the last 8 years of bushco rule and you need to share some with those of us who did not benefit under bush.
it is the patriotic thing to do.
"michael said...
in reference to your sidebar poll (the cuttoff for middle class).
middle class is not a paycheck. it's a state of mind. "
Jeez, I thought I was the only person in America thinking like this, Hat Tip to you Michael, BUT:
-Fat Dumb Lazy Americanos will never set these types of goals, it is BENEATH THEM.
They want to drive the 94 mo payment 0% down SUV to Wal-Mart to buy a garbage can size bag of fried chips to eat while watching NASCAR or twiggy playing beach volleyball. They MUST stop at the 7-11 on the way home to the foreclosed McMansion far out in the burbs to fill up the monster truck on credit and run in for some Fried Dough (extra large) and confection sugar to supplement the 1400 calorie cheesedoodle burger and big gulp fries and 1 gallon of sugared water they just ate for lunch.
Burp, fart, Belch Shit.
The New National American Anthem.
President Obama as his first act should retire the eagle as the symbol of american pride and replace it with a diseased chicken suffering from ricketts. That would look good on the new proposed three dollar bill with George Bushco on one side and Dick Cheneyburton on the other.
America is DEAD
DIE U PIGS
2) new FICA taxes, which will be promoted as shoring up social security but which will be used to pay down the TARP debt.
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this one has potential! sell it as social security but then "borrow" it out of social security like they currently do all SS contributions.
Hey, wait. Obama has already talked about creating a fica doughnut, right? you know, applying fica to income above 200k and below 100k (or whatever the current cap is at)?
i just laughed and laughed when he said he was going to have the "rich" start paying fica on income above 200k in order to shore up social security. I laughed because they currently spend all social security contributions, there is nothing but IOUs in the social security account.
The Fed will buy those bonds. They will then print cash backed by those bonds.
Before you know it, our currency values will be specified using scientific notation.
Are you HP'ers stupid or something? We are the United States of America. The strongest government, economy, military and culture in the entire world. The world HAS to buy our bonds. If they don't then they will just hurt themselves (because they have so many holding in dollars). Thus it's a win-win situation. The rest of the world produces and lends to us and we Americans do what we do best; consume.
time to print
Our system is insolvent, and we're watching more and more of it wash right down the toilet on a daily basis.
Grab your popcorn tightly, it's going to be a nasty ride from here on forward.
RE: The US government is soon going to need to raise trillions of dollars through bond sales to cover the various housing gambler bailouts and general government overspending.
This money will never be repaid.
History shows us that just before the collapse of any great civilization, the criminals in charge always loot the doomed state's treasury.
The US treasury has already been looted.
V.L.
"I submit that since income-based definitions do not actually address either asset accumulation or purchasing power, they are a priori of no value. Instead, I propose the following definition of middle-class based on what the income can accomplish/buy:
-----------------------------------
That definition is perfect! Most households are below middle class.
Anonymous said...
They want to drive the 94 mo payment 0% down SUV to Wal-Mart to buy a garbage can size bag of fried chips to eat while watching NASCAR or twiggy playing beach volleyball. They MUST stop at the 7-11 on the way home to the foreclosed McMansion far out in the burbs to fill up the monster truck on credit and run in for some Fried Dough (extra large) and confection sugar to supplement the 1400 calorie cheesedoodle burger and big gulp fries and 1 gallon of sugared water they just ate for lunch.
Burp, fart, Belch Shit.
The New National American Anthem.
President Obama as his first act should retire the eagle as the symbol of american pride and replace it with a diseased chicken suffering from ricketts. That would look good on the new proposed three dollar bill with George Bushco on one side and Dick Cheneyburton on the other.
America is DEAD
DIE U PIGS
Your posts are continually evolving, seems like you are just getting your game on and it's time to go.
Can't wait for the fried dough shortages. Will think of you. LOL
Has anyone noticed that the national debt grew 5% over only a month?
"... bond sales to cover the various housing gambler bailouts and general government overspending. "
Doesn't money grow on trees?
It will be really interesting to see what China does. They have 2 equally bad options:
1. Buy worthless US bonds to keep US from folding. They'll still be able to sell their crap to US.
2. Don't buy worthless US bonds and find a new market for their crap, good luck with that one.
Option #1 is not a sustainable model while option #2 will sink their economy.
On the other hand, if all else fails, the FED owns the printing presses, inflation here we come!
Got Gold?
Eurozone countries do not need 2000-3000 trillion dollars within next 12-18 months to fund their government deficits and bailouts
You say that so confidently.
The Eurozone welfare states are more bloated, the incomes are lower, the resources are scarcer (what does Europe have or make that the world wants in quantity), and the demand for government cash -- immediately -- will be just as strong over there.
Jim Rogers calls it 'inflationary holocaust'.
Yup, that about sums it up.
if the banks don't pay back uncle sam every dime we loaned then we need to send in luigi the ball buster to extract a pound of flesh from all the execs.
@12:16 AM,
Re: "what does Europe have or make that the world wants in quantity"?,
The worlds biggest trade surplus is run by Germany, a country of only 80M people. In a typical year, the Germans run about a $200B annual trade surplus. To by honest, it blows my mind how a high wage country can do this, but those are the facts.
I don't know how well the rest of the EU does.
Re: "what does Europe have or make that the world wants in quantity"?,
The worlds biggest trade surplus is run by Germany, a country of only 80M people. In a typical year, the Germans run about a $200B annual trade surplus. To by honest, it blows my mind how a high wage country can do this, but those are the facts.
I don't know how well the rest of the EU does.
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it is because they setup trade protections. google "EU trade surplus" and you can read how the EU is threatening to take a retaliatory stance if the trade deficit with china continues.
unfortunately, here in america, our leaders are fine with letting china run a huge imbalance.
"the Germans run about a $200B annual trade surplus. To by honest, it blows my mind how a high wage country can do this, but those are the facts.
I don't know how well the rest of the EU does.
--------------------------------------
it is because they setup trade protections."
No, their markets are flooded with cheap crap from China just like ours. But they still make stuff the rest of the world wants to buy. Cars, tool & die machines, Chemicals, airplanes, heavy machinery, etc.
What do we make? Happy meals and toxic debt. That's about it.
No, their markets are flooded with cheap crap from China just like ours. But they still make stuff the rest of the world wants to buy. Cars, tool & die machines, Chemicals, airplanes, heavy machinery, etc.
What do we make? Happy meals and toxic debt. That's about it.
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yes, they do. look it up. i didn't say they stopped ALL imports but they do manage it closely and are willing to act when imports are getting out of hand (like they are with china) relative to exports.
here in the usa we don't seem to want to do anything against our trading partner when they have fixed the game to their advantage.
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