FedUpUSA

One word response to Krugman today:  Ridiculous.

At the moment, as you may have noticed, the U.S. government is running a large budget deficit. Much of this deficit, however, is the result of the ongoing economic crisis, which has depressed revenues and required extraordinary expenditures to rescue the financial system.

A crisis that was caused by the refusal of the government to enforce the law, just as the spill in the gulf is a result of the government refusing to enforce the law.

Regulated corporations cannot act in a fashion necessary to destabilize the economy or harm the environment unless the government regulators are willfully blind or worse.

So let’s put the blame where it belongs: Squarely in Washington DC.

It is illegal to deceive investors by claiming you have “good recordable titles” for each loan when you do not.

It is illegal to take bearer paper in trusts in a state where that practice is not permitted.

It is illegal to bribe government and other officials to rig bids on GIC contracts, sewer system bonds and derivatives.

It is illegal to back-date deposits with full knowledge of the regulator overseeing your institution so as to falsely present a balance sheet and liquidity that does not reflect the firm’s actual condition.

And it is illegal to rig appraisals so as to “support” deals that are fundamentally unsound.

All of these facts and acts (plus many more) were known to The Federal Government as early as 2003.  All of them were intentionally ignored at best and actively conspired in by the government at worst.

To date, none of them have led to material numbers of indictments for these acts.  Indeed, I can’t seem to find any indictments against the “captains of the financial industry” who committed these acts.

As the crisis abates, things will improve. The Congressional Budget Office, in its analysis of President Obama’s budget proposals, predicts that economic recovery will reduce the annual budget deficit from about 10 percent of G.D.P. this year to about 4 percent of G.D.P. in 2014.

No it won’t.  Things didn’t improve last time.  Here we are again with the graph:

During the 2000s, Bush tried the same thing.  The recession of 2001 brought out the Keynesian spending and loosening of credit.

Did the government ever back off it’s spending?  Nope.  The above chart shows it clearly – that’s the blue line.  The claim that when “prosperity returns we will save” was a lie.  We did no such thing, and we won’t this time either, because….

Unfortunately, that’s not enough. Even if the government’s annual borrowing were to stabilize at 4 percent of G.D.P., its total debt would continue to grow faster than its revenues. Furthermore, the budget office predicts that after bottoming out in 2014, the deficit will start rising again, largely because of rising health care costs.

Right.  And who turned that into a structural deficit issue?  Well, it was Congress, but during Bush’s administration it got added into massively – by Medicare Part “D”.

Penny-pinching at a time like this isn’t just cruel; it endangers the nation’s future. And it doesn’t even do much to reduce our future debt burden, because stinting on spending now threatens the economic recovery, and with it the hope for rising revenues.

There is no hope for rising revenues until the excessive debt is defaulted or paid down.  Since it can’t be paid down with a depressed economy, it has to be defaulted.  There is no other option.

But defaulting that debt means forcing those “captains of industry” to eat their losses.  It means forcing public pension systems to admit that they cannot pay what they promised, and to force adjustments down the throats of those teachers in Illinois and firefighters and cops in California who were promised $100,000+ annual pensions post-retirement – money we simply don’t have and can’t obtain.

But the time for such a deal is a long way off — probably two years or more. The responsible thing, then, is to spend now, while planning to save later.

We hear that ever time there is a recession Paul.  But “tomorrow” never comes.  It didn’t the last time and it didn’t the time before that.  Indeed, it never does.

Government will spend every penny it obtains and then add more spending onto it.  This is the nature of government when half or more of the people don’t pay taxes any more.  They will always vote for the guy or gal who says they’ll give ‘em the most.  They get what they ordered, without regard to ability to pay.  Those people don’t care whether the funding needs can be met or the spending can be funded, and neither do the lawmakers.

When the ability to fund the government and private debt binge via honest taxation and earnings are exhausted, we then get massive, pervasive and pernicious fraud that runs rife through both corporate and government life, without exception.  The cops refuse to prosecute and the crooks then literally steal everything up to and including the shelves on the wall.  All of this happens with government not only acquiescing but in direct contribution and complicity.

You’re a fool Paul.  30 years of history says you’re 100% full of crap, and your prescription, if it is followed, will guarantee the collapse of our nation.

It is time for the whining children to be sent to timeout and adults to enter the room – while there is still time before the good ship America impacts the Grecian Iceberg.

We can start by locking up all the fraudsters and returning budgets to fiscal sustainability, accepting that our present consumptive path cannot be afforded – whether we want to or not.

The Market-Ticker