Danger to self or others

Click image for full Rob Rogers/Pittsburgh Post-Gazette cartoon.

The factual background from Keith Ellison (D-MN):

Well, Tom, the problem with saying this is the president’s idea is that you voted for the Budget Control Act. I voted against it. We wouldn’t have ever been talking about the Budget Control Act but for your party refused to negotiate on the debt ceiling something that has been routinely increased as the country needed it. You used that occasion in 2011 August to basically say we are going to default on the country’s obligations or you’re going to give us dramatic spending cuts. That’s how we got to the Budget Control Act.

Size matters

European central bankers and the US Republican Party don't understand percentages. It's that basic.

When the New York Times headlines a story, "Despite Push for Austerity, European Debt Has Soared", they should really say, Because of Push for Austerity...

The size of debt only matters when measured against the size of GDP. No matter what you do to the numerator, the denominator is essential to understanding what policy to adopt against debt. Europeans and Republicans are trying to shrink their way out of debt. They are choosing masochism over effective economic policy.

Of course, it's all the little people who do their suffering for them.

The fraud of Republican debt hysteria

On their watch, they didn't give a shit about the deficit:

The money quote:

A few lessons can be drawn from the numbers. First, the Bush tax cuts have had a huge damaging effect. If all of them expired as scheduled at the end of 2012, future deficits would be cut by about half, to sustainable levels.

Fever swamp

See, it's a rising tide!

Click image for full Adam Zyglis/Buffalo News cartoon.

Who steals my purse steals trash

Now that the world can no longer deny America's willingness to blow off our debts, who'll put money in our purse?

Of course, [China's moves into the euro, South Korea's into the renminbi and gold, and other nations' into gold] are all minor moves in a currency market still dominated by U.S. dollars. That's good news for the U.S. economy in the short-term, because it lessens the threat of a massive sell-off and keeps borrowing rates relatively cheap. But the recent pileup of central banks and sovereign wealth funds into gold (according to the FT, central banks are on their biggest bullion buying spree in 40 years) is a warning signal that global esteem the almighty dollar (and the U.S. economy's strength) is already eroding.

There's a huge and growing overhang of dollar positions that other countries want to unwind. Whenever the race for the exit starts, it's going to get ugly for us. Uglier.

Just wait for the sequel

Click image for full Tim Campbell/Current Publishing cartoon.

What the debt hostage crisis told the world and the markets

There's no longer a consensus in American politics, particularly on the ascendant insane right wing, that the U.S. should pay its debts.

You'd sell your stock - and your dollars - too.

Of course, the fact that we're beginning a double-dip recession and the debt deal is contractionary should drive the stock market down.

Would you buy a used T-bill from this man?

Licensed by Keith Allison under Creative Commons Attribution-Share Alike 2.0 Generic license.


Click image for details.

Honor killing

Click image (or here) for full Bruce Plante/Tulsa World cartoon.

Shorter Boehner

It's the President's fault that the House Republican caucus won't compromise on anything.

In a letter sent out earlier to House lawmakers, [Speaker John Boehner] blamed Obama for the deterioration of the talks, saying that the president insisted on including tax increases.

“It became evident that the White House is simply not serious about ending the spending binge that is destroying jobs and endangering our children’s future,’’ Boehner wrote. “A deal was never reached and was never really close.’’

“In the end, we couldn’t connect,’’ he added. “Not because of different personalities, but because of different visions for our country.’’

Holding one of our federal government's three main political institutions, the Republicans want to make radical changes in an 80-year-old vision of the country. And they'll hold their breath until they turn blue to do it, ignoring the damage to the economy that they will do.

Of course, it has been obvious to me for three and a half years that they were willing to sabotage the economy for political gain. The oblivious voters rewarded the screaming infantile Republicans in 2010. Why would they be measured, mature, and responsible now?

It's going to be a long downhill ride.

A House divided

Elected by voters whose memory couldn't outlast a station break...

The fundamental mission of the G.O.P. is to shovel ever more money to those who are already rich. That’s why you got all that disgracefully phony rhetoric from Republicans about attacking budget deficits and embracing austerity while at the same time they were fighting like mad people to pile up the better part of a trillion dollars in new debt by extending the Bush tax cuts. ...

Have we forgotten already who put us in such grave peril? Republicans benefit from the fact that memories are short and statutes of limitations shorter.

Banking stimulus

Click image for full Tom Tomorrow/Truthout cartoon.

Better

Better to keep silent and be thought a fool than to speak and remove all doubt.

"Since when can you get out of huge national debt by creating trillions of dollars of new debt?" [Sarah] Palin asked. "It all really is so backwards and skewed as to sound like absolute nonsense when some of this economic policy is explained."

"We need to be aware of the creation of a fearful population, and fearful lawmakers, being led to believe that big government is the answer, to bail out the private sector, because then government gets to get in there and control it," she said. "And mark my words, this is going to be next, I fear, bail out next debt-ridden states. Then government gets to get in there and control the people."

"Some in Washington would approach our economic woes in ways that absolutely defy Economics 101, and they fly in the face of principles, providing opportunity for industrious Americans to succeed or to fail on their own accord," she said. "Those principles it makes you wonder what the heck some in Washington are trying to accomplish here."

I don't think Palin could pass Economics 101. She's never heard of Keynesian stimulus. She doesn't know the difference between private debt and public debt. She has no idea of the vicious cycle of contraction that's still a very real danger.

And she "explains" it all as a nefarious plot to take over the country. She has all the analytical skills of Pinky combined with the good will toward his fellow mice of the Brain.

Obama needs to read this

No, not my (non-humble) opinions - Paul Krugman's:

[E]arly on in this crisis, it was possible to argue that it was mainly a panic. But at this point, that’s an indefensible position. Banks and other highly leveraged institutions collectively made a huge bet that the normal rules for house prices and sustainable levels of consumer debt no longer applied; they were wrong. Time for a Swedish solution.

Debt crisis, not subprime

Unregulated mortgage markets cause housing price bubble, which inevitably bursts. Poorer homeowners tighten their spending. Sources of credit can't or won't ease retail through hard times. Stores go belly up, putting more people out of work. Like a spreading illness or a power outage, safety measures that are too weak and too late fail.

Not good.

The picture of retail's financing is interesting and something I didn't know. Sounds a lot like farming.

We ain't breaking China

A friend sent a link to this James Fallows piece in The Atlantic about China's $1,400,000,000,000 in U.S. Treasury bonds. Yes, that's the right number of zeros - $1.4 trillion dollars, a bit more than $4500 for every mother-loving one of us.

This was my response (lightly edited):

Yeah, there it is. No reason I can see for optimism about the U.S. dealing with this massive debt overhang - our political and media culture is too broken and too infantile, all the way down to the electorate.

The third rail of American politics is more general than just Social Security. It's telling voters that they have to pay for what they want, Want, WANT!!! Just try to tell us we have to take any bitter medicine.

Duhbya's constant requests that we "sacrifice" by taking borrowed money and going shopping is the perfect example of our childishness. A mess of pottage.

The Chinese will have to unwind their position. A wise steward of the American economy would be urging them to start now, since the longer it builds, the harder the fall will be. The only safe way I can see is for them to convert their liquid holdings into assets, but that becomes a political problem (and I have to concede that being economically overwhelmed by an authoritarian and mercantilist nation like the PRC is scary).

We were a debtor nation before Duhbya's disastrous, Nero-fiddling regime, but American policy in the last 7 years made it much worse. Clinton's austerity budgets made a big difference and started us down the path back to solvency, back to where we wouldn't have to sell off the family silver to keep us in la dolce vita for another year.

If I were managing the Chinese dollar-denominated nest-egg, I'd be looking into the third world economies in Africa and Latin America where the dollar is a parallel (or even official) currency, and I'd be quietly buying up natural resources and viable business assets. I might even send American agents to do the deals. I'd be looking for equity bargains in the U.S. but at levels that don't provoke SEC reporting (<5%?), but I wouldn't buy anything blue chip. Anything selling for a premium now is a sure loser. But I'm not a very sophisticated investor. Thoughts?

I'm pretty sure we'll pay no thought to the morrow. The question is how a gimlet-eyed misanthrope like me can make money off this - or at least protect some of what I already have. Get there first, I guess.

2008

Click image for full Mike Luckovich cartoon.

May we all have a healthy and prosperous new year. A few things I'm hoping for in 2008:

• Categorical rejection of Bushism at the polls
• Return to Constitutional government
• Some serious damn accountability that starts to put Republican criminals in jail
  
• Resolution of the debt crisis without a depression

I'd wish for a return from Iraq, but I know that's not possible without impeachment.

Most important personally, I hope for my daughter to get into the college of her dreams.

Oh, and no hangover tomorrow!

Other people's problems

There are no firewalls in the residential mortgage market. Subprime lender collapses lead to problems up market.

In turn, this artificially adds to the real estate price drag, further deflating a sector that was one of few bright spots in the Bush economy and whose psychological effects on homeowners helped maintain spending. With those effects reversed, there's one more deflationary force in an economy that has massive debt bombs lurking around every corner.

If our huge outstanding note is coming due, the hangover will be painful.