Posts tagged national debt
Farewell Bernanke – Thanks For Inflating The Biggest Bond Bubble The World Has Ever Seen
Federal Reserve Chairman Ben Bernanke is on the way out the door, but the consequences of the bond bubble that he has helped to create will stay with us for a very, very long time. During Bernanke’s tenure, interest rates on U.S. Treasuries have fallen to record lows. This has enabled the U.S. government to pile up an extraordinary amount of debt. During his tenure we have also seen mortgage rates fall to record lows. All of this has helped to spur economic activity in the short-term, but what happens when interest rates start going back to normal? If the average rate of interest on U.S. government debt rises to just 6 percent, the U.S. government will suddenly be paying out a trillion dollars a year just in interest on the national debt. And remember, there have been times in the past when the average rate of interest on U.S. government debt has been much higher than that.
In addition, when the U.S. government starts having to pay more to borrow money so will everyone else. What will that do to home sales and car sales? And of course we all remember what happened to adjustable rate mortgages when interest rates started to rise just prior to the last recession. We have gotten ourselves into a position where the U.S. economy simply cannot afford for interest rates to go up. We have become addicted to the cheap money made available by a grossly distorted financial system, and we have Ben Bernanke to thank for that. The Federal Reserve is at the very heart of the economic problems that we are facing in America, and this time is certainly no exception.
This week Barack Obama publicly praised Ben Bernanke and stated that Bernanke has “already stayed a lot longer than he wanted” as Chairman of the Federal Reserve. Bernanke’s term ends on January 31st, but many observers believe that he could leave even sooner than that. Bernanke appears to be tired of the job and eager to move on.
So who would replace him? Well, the mainstream media is making it sound like the appointment of Janet Yellen is already a forgone conclusion. She would be the first woman ever to chair the Federal Reserve, and her philosophy is that a little bit of inflation is good for an economy. It seems likely that she would continue to take us down the path that Bernanke has taken us.
But is it a fundamentally sound path? Keeping interest rates pressed to the floor and wildly printing money may be producing some positive results in the short-term, but the crazy bubble that this is creating will burst at some point. In fact, the director of financial stability for the Bank of England, Andy Haldane, recently admitted that the central bankers have “intentionally blown the biggest government bond bubble in history” and he warned about what might happen once it ends…
“If I were to single out what for me would be biggest risk to global financial stability right now it would be a disorderly reversion in the yields of government bonds globally.” he said. There had been “shades of that” in recent weeks as government bond yields have edged higher amid talk that central banks, particularly the US Federal Reserve, will start to reduce its stimulus.
“Let’s be clear. We’ve intentionally blown the biggest government bond bubble in history,” Haldane said. “We need to be vigilant to the consequences of that bubble deflating more quickly than [we] might otherwise have wanted.”
Posted below is a chart that demonstrates how interest rates on 10-year U.S. Treasury bonds have fallen over the last several decades. This has helped to fuel the false prosperity that we have been enjoying, but there is no way that the U.S. government should have been able to borrow money so cheaply. This bubble that we are living in now is setting the stage for a very, very painful adjustment…
So what will that “adjustment” look like?
The following analysis is from a recent article by Wolf Richter…
Ten-year Treasury notes have been kicked down from their historic pedestal last July when some poor souls, blinded by the Fed’s halo of omnipotence and benevolence, bought them at a minuscule yield of 1.3%. For them, it’s been an ice-cold shower ever since. As Treasuries dropped, yields meandered upward in fits and starts. After a five-week jump from 1.88% in early May, they hit 2.29% on Tuesday last week – they’ve retreated to 2.19% since then. Now investors are wondering out loud what would happen if ten-year Treasury yields were to return to more normal levels of 4% or even 5%, dragging other long-term interest rates with them. They know what would happen: carnage!
And according to Richter, there are already signs that the bond bubble is beginning to burst…
Wholesale dumping of Treasuries by exasperated foreigners has already commenced. Private foreigners dumped $30.8 billion in Treasuries in April, an all-time record. Official holders got rid of $23.7 billion in long-term Treasury debt, the highest since November 2008, and $30.1 billion in short-term debt. Sell, sell, sell!
Bond fund redemptions spoke of fear and loathing: in the week ended June 12, investors yanked $14.5 billion out of Treasury bond funds, the second highest ever, beating the prior second-highest-ever outflow of $12.5 billion of the week before. They were inferior only to the October 2008 massacre as chaos descended upon financial markets. $27 billion in two weeks!
In lockstep, average 30-year fixed-rate mortgage rates jumped from 3.59% in early May to 4.15% last week. The mortgage refinancing bubble, by which banks have creamed off billions in fees, is imploding – the index has plunged 36% since early May.
If interest rates start to climb significantly, that will have a dramatic affect on economic activity in the United States.
And we have seen this pattern before.
As Robert Wenzel noted in a recent article on the Economic Policy Journal, we saw interest rates rise suddenly just prior to the October 1987 stock market crash, and we also saw them rise substantially prior to the financial crisis of 2008…
As Federal Reserve chairman Paul Volcker left the Fed chairmanship in August 1987, the interest rate on the 10 year note climbed from 8.2% to 9.2% between June 1987 and September 1987. This was followed, of course by the October 1987 stock market crash.
As Federal Reserve chairman Alan Greenspan left the Fed chairmanship at the end of January 2006, the interest rate on the 10 year note climbed from 4.35% to 4.65%. It then climbed above 5%.
So keep a close eye on interest rates in the months ahead. If they start to rise significantly, that will be a red flag.
And it makes perfect sense why Bernanke is looking to hand over the reins of the Fed at this point. He can probably sense the carnage that is coming and he wants to get out of Dodge while he still can.
By Ron Paul
The Real Meaning of President Obama’s National Security Speeches
The president will continue and even expand drone attacks overseas because they are “less deadly” than ground invasions. He promises to be more careful in the future.
He is entertaining the introduction of “kill courts” which will meet in secret to decide who is to be executed without trial or charge. He promises these will have sufficient oversight.
He will seek a new and updated Authorization for the Use of Military Force to expand his legal authority to wage war wherever and whenever he wants. He promises it will one day be repealed.
He will continue to indefinitely detain at Guantanamo individuals who have been neither charged nor convicted of any crime, and who cannot even be tried because they were tortured and thus the evidence is tainted. He promises to “commit to a process of closing GTMO.”The speech speaks of more war and more killing and more interventionism all masked in the language of withdrawal.
The president warns of the threats of the new al-Qaeda affiliates that have sprung up in places like Iraq without explaining that it was the US invasion of Iraq that opened the door to their entry in the first place. There was no al-Qaeda in Iraq before the US overthrow of Saddam Hussein, just as there was little extremism in Libya before the US attack on that country in 2011.
The president claims that “unrest in the Arab world has also allowed extremists to gain a foothold in countries like Libya and Syria.” However, it was the US-led attack on Libya that resulted in extremists gaining power there, with many fighters afterward spreading unrest and destruction by joining the wars against the Syrian and Malian regimes. The extremists brought to de facto power in places like Benghazi were responsible for the murder of the US ambassador, yet the president says nothing about that unintended consequence of his interventionist policies.
He calls for even more interventionism in the future, but he promises that it will be a different kind of interventionism. He wants the US to shape democratic transitions in Tunisia, Egypt, and Libya while actively supporting those seeking to overthrow the government in Syria.
He wants to take nation-building to a whole new level, urging that the US “help countries modernize economies, upgrade education, and encourage entrepreneurship.” He promises to battle extremism overseas by “training security forces in Libya, maintaining peace agreements between Israel and its neighbors, feeding the hungry in Yemen, building schools in Pakistan, and creating reservoirs of goodwill that marginalize extremists.”
What the president does not seem to understand is that we do not have the money to build schools, upgrade education, modernize economies, and encourage entrepreneurship overseas at a time when our national debt is $16 trillion. And besides, isn’t it a deeply flawed idea that the US government can achieve all of these remarkable results overseas when we know what a disaster these big government undertakings have produced at home? What we reject at home as Soviet-style central planning is fully embraced as effective foreign policy overseas. Should it really be the US government’s role to “modernize economies” or “encourage entrepreneurs” anywhere? Those are activities best left to the private sector, whether here at home or in far off lands.
President Obama’s speech is not at all what it seems. It is a call for more empire and more power to the executive branch. The president promises that “this war, like all wars, must end.” Unfortunately the war on the American taxpayer never seems to end. But end it will, as we are running out of money.
Written by Ron Paul
Posted on http://www.freedomsphoenix.com
(H/T Donna Hancock)
By JG Vibes
Many people believe that the Federal Reserve is an organization that operates as a public service, there are not many out there who realize that this is a for profit business.
Of course, there is nothing wrong with providing a service and turning a profit, but there is something wrong with using the government to monopolize a vital aspect of society, forcing the whole society to use a particular service whether they like to or not.
It turns out that The Federal Reserve makes billions per year through this coercive monopoly, and this much activists and researchers have known for a long time. However, until now there has been very little hard evidence or sources to reference, which tell us exactly how much money they really do make. Recently, some numbers were revealed that can at least shed some light on a portion of their income, and these preliminary figures amount to at least $90 Billion per year.
“While leaders in Washington stare down the fiscal cliff, let’s not forget the fiscal fact that brought us to the edge: The annual U.S. government deficit of more than a trillion dollars. But through it all, one government-related entity has been hauling in record surpluses. New data capture the scope of profits at the U.S. Federal Reserve, estimated to be $90 billion this year.”
“The last five or six years their profits have roughly tripled,” says Allan Sloan, senior editor-at-large at Fortune Magazine.
According to Sloan, the Federal Reserve owes its success to its practice of buying securities with newly printed money.
“If you go out an buy $2 or $3 trillion of securities that pay interest and you don’t have to pay any interest on the money used to buy the securities, you make a lot of money,” says Sloan.
Not only that, but a great deal of the national debt is actually “owed” to the Fed, due to their charging of interest on every dollar that they print and loan to the US government.
It is likely that this revelation will be swept under the rug by the mainstream media, and it is also highly probable the $90 billion figure is merely scratching the surface.
Published on Sep 8, 2012 by martysoffice
A 13 Minute Video Every Moderate/Undecided Voter Should Watch -
A short un-narrated documentary that looks at Obama’s first term with regards to transparency, healthcare, taxes, fairness, energy and the national debt through his own words
WordsMatter2012 was launched this past March to offer non-partisan and objective insight into whether President Obama delivered on the many promises he made when running for office. The project was in fact inspired by a speech he gave in 2008 in which he said that “words matter.” Through short weekly videos highlighting his promises, we merely ask, “Did his words matter? And do they matter today?”
Another point to consider in a related link with the upcoming election in mind:
Funny thing how those “choices” work out when people let the mainstream media tell them how to think and what to believe…
If you’re like most Americans, you woke up on April 18 dazed and sore, a victim of the not-so-gentle attentions of the U.S. Tax Man.
But now that he’s left with your wallet and your dignity, what is he going to spend your hard-earned but easily surrendered money on? What exactly is Uncle Sam going to do with all the cash he collected in his annual, anti-Santa- like dash across the country?
Thanks to the Center on Budget and Policy Priorities, we have a handy breakdown of federal tax revenues and expenditures, including USA Today-esque pie charts (mmmm….pie), which shows a couple of surprising and depressing things.
For one, those who think that all those foreign wars being fought by our large and professional warrior class are bankrupting the country are dead wrong. “Defense and International Security Assistance” accounts for only 20 percent of the federal budget (all numbers are for 2011) totaling $718 billion, of which only $159 billion was allocated for operations in Iraq and Afghanistan. Now, whether you think that number could be higher or lower, few would argue that national defense is not the fundamental province of the national government, and therefore undeserving of a significant share of national expenditures.
Something else a lot of conservatives and liberals can agree deserves a share of federal spending is national transportation infrastructure (this is debatable), which indeed accounts for 3 percent of the federal budget. That takes care of guns and roads, which every nation needs. Unfortunately, any further forays into Budget Land gets us into more and more controversial territory. Conservatives think we spend too much on education, and they’re right, but that still only takes 2 percent of federal spending. Liberals think we should spend more on scientific research, and they’re right, but we still spend a robust 2 percent on such sundries.
Now we get to the big boys, the Entitlement programs which by far consume the vast majority of federal dollars. In fact, entitlements combine to devour a whopping 54 percent of the entire budget. Social Security alone takes 20 percent, or $731 billion. The insurance programs Medicare, Medicaid, and CHIP (Children’s Health Insurance Program) together total another 21 percent, or $769 billion. Other safety net programs, food stamps, housing assistance, school meals, etc. combine to take another 13 percent, or $466 billion.
It would be nice if we had the money for all of these programs, of course, but we don’t. Which brings us to the last major slice of the federal budget pie — interest payments. You see, last year the government only raised $2.3 trillion in tax revenue, but spent $3.6 trillion. The balance, of course, was borrowed, which behavior explains why 6 percent of our budget, $230 billion, went to paying interest on our shameful national debt.
We are literally borrowing money to make interest payments on borrowed money. And yet still we throw more than half our federal dollars at an Entitlement State that has produced neither prosperity nor security, but has instead turned millions of Americans into serfs to the national bureaucracy.
Back in 2009 I made a visualization about the deficits we were expecting under President Barack Obama. I called it the “National Debt Road Trip” and it was moderately popular.
Today, after nearly 3 years, I have updated it with a new video:
The video itself is just an overview of data that I’ve been toying around with for a month or so. I’ll do an in depth look at the data first and then answer some questions close observers might have about the data.
The National Debt Road Trip Details
The debt data has been collected from Treasury Direct website and adjusted for inflation using the Bureau of Labor Statistics CPI data. For the future debt, I used the debt projection for 2016 from President Obama’s 2013 budget (Historical Tables, Table 7.1 – Federal Debt at the End of the Year).
For the presidents where I had daily debt data (from 1993 – present), I used “inauguration-to-inauguration” debt numbers.
When I didn’t have those (for Ronald Reagan & George H W Bush) I used the yearly debt numbers including the fiscal year for which they were responsible. So for Reagan I used October 1981-October 1989 and for HW Bush I used October 1989 to Jan 20, 1993 (when daily data became available).
With all this information, I came up w/ the following data points (adjusted for inflation)
Ronald Reagan debt
from $2.29 trillion to $4.82 trillion
$2.53 trillion increase over 8 years
$316 billion / year
George H W Bush debt
from $4.82 trillion to $6.54 trillion
$1.72 trillion increase over 4 years
$430 billion / year
Bill Clinton debt
from $6.54 trillion to $7.38 trillion
$0.84 trillion increase over 8 years
$105 billion / year
George W Bush debt
from $7.38 trillion to $11.17 trillion
$3.79 trillion increase over 8 years
$474 billion / year
Barack Obama (measured) debt
from $11.17 trillion to $15.57 trillion (March 21)
$4.40 trillion increase over 3 years, 2 months
$1,390 billion / year
Barack Obama (future projection) debt
from $15.57 trillion to $20.39 trillion
$4.7 trillion increase over 4 years, 10 months
$995 billion / year
It was then a simple matter to apply the $5.8 billion-per-mile, 1 hour-per-year calculation to get what you see in the video.
Ron Paul with 8,500-plus Voters at UC – Berkeley Shatters Town Hall Meeting Attendance Record
Unprecedented crowd of supporters and undecided voters greets Dr. Paul at final of three California events held during this visit
LAKE JACKSON, Texas – 2012 Republican Presidential candidate Ron Paul attracted a peculiar 8,500-plus voters to the third of three town hall meetings he held in California this week, this time at UC-Berkeley. In drawing such a huge crowd to Berkeley, the 12-term Congressman from Texas shattered his unrivaled town hall meeting attendance record.
Ron Paul’s college campus town hall meeting took place at 7:00 p.m. PST at UC-Berkeley’s Memorial Glade, where he addressed the crowd from atop the steps of Doe Library, Berkeley, CA 94720.
Dr. Paul spoke about his platform of constitutionally-limited government, the enduring bonds between economic and civil liberties, and elements of his ‘Plan to Restore America,’ a fiscal blueprint the cuts Washington spending, shrinks the national debt, and reverses the federal government’s harmful growth and intrusiveness.
Ron Paul’s town hall meetings in California were organized by ‘Youth for Ron Paul’ (YFP). YFP, an initiative of the Ron Paul 2012 Presidential campaign, launched in September 2011, and since its inception, students nationwide have organized 591 chapters and recruited more than 53,600 people. To learn more about ‘Youth for Ron Paul,’ including how to sign-up and establish a local chapter, visit the YFP website by clicking here.
Photographs of Ron Paul’s UC – Berkeley town hall meeting with 8,500-plus voters follow.
Stand up for Liberty, help stand down Tyranny!
Now more than every we need the Champion of the Constitution!
Please visit Ron Paul’s official campaign site by following the link below and donate today!
Today at The Daily Caller I make the point, albeit in an entertaining way, that only Ron Paul actually delivers what every Tea Partier and conservative Republican claims to want most:
No single leader or individual group controls the Tea Party but most Tea Partiers would agree that balancing the budget and reducing the debt is their top priority. The question today is, ‘For which presidential candidate is this a top priority?’
A recent study indicates there is only one. After examining each candidate’s economic proposals, last week the independent Committee for a Responsible Federal Budget reported that Newt Gingrich’s plan would add $7 trillion to the national debt, Santorum’s would add $4.5 trillion and Romney’s would add $250 billion.
But Ron Paul would actually cut our debt to the tune of $2.2 trillion.
But many conservative Republicans say they aren’t necessarily comfortable with Paul on every issue. This doesn’t change the fact that Paul is the only one who’s right on what has always been the Tea Party’s primary issue. It doesn’t change the fact that Romney, Santorum and Gingrich all fail miserably on what has always been the Tea Party’s primary issue.
The entire purpose of our Constitution was to limit the federal government, including its power to spend recklessly. Paul’s purist constitutional approach is nothing less than hitting the reset button on the republic of the Founders. As the Daily Caller’s Max Borders has observed:
One of the cleverest things Justin Timberlake ever did was bring sexy back. After all, sexy never really went away. But once the song came out, it didn’t matter. People welcomed sexy back with open arms. Now there’s nothing particularly sexy about the Ron Paul campaign…
But just as Justin Timberlake brought sexy back, Ron Paul is bringing the Constitution back even though it never went away…
Now more than every we need the Champion of the Constitution!
Please visit Ron Paul’s official campaign site by following the link below and donate today!
By Vanessa Carr
or decades, animal activists have gone undercover to take jobs inside large-scale livestock farms in order to document conditions for farm animals that they say are routinely inhumane. Their hidden camera footage has resulted in criminal charges against owners and workers, plant shutdowns, and after one at a California slaughterhouse in 2008, the largest meat recall in U.S. history.
But these images could soon be made illegal. Legislation pending in five states — Indiana, Iowa, Minnesota, Nebraska, and New York — would criminalize the actions of activists who covertly film farms. Proponents of the various pieces legislation say that their proposed laws would lead to beneficial consequences, including the protection of such farms from potential terrorist infiltration (preserving the integrity of the food supply) and espionage; the prevention of images that mislead consumers; as well as regulating the job application process to circumvent potential employees from lying in order to be hired. See the legal assault on animal-abuse whistleblowers.
These so-called “ag-gag” bills have ignited a national debate about undercover videos and have raised concerns about free speech and journalists’ and whistleblowers’ ability to report on the farming industry.
TIME traveled to Iowa, the nation’s leading producer of eggs and pork and the first state to propose a ban on undercover videos, with one former investigator for a rare glimpse at how these videos are made and why they are so controversial.
eggs, pork, industrial,