The Greek Crisis is Now Threatening the Credit Rating of the Stronger Eurozone Members

Posted by PITHOCRATES - July 29th, 2012

Week in Review

Since 2009 we’ve been hearing about the European sovereign debt crisis.  Also known as the Eurozone crisis.  And here we are in 2012.  Despite numerous rescue packages and recovery plans the crisis continues on.  Greece can’t borrow money in the credit markets because no one believes Greece will ever be able to pay them back.  For Greece has been running some pretty big deficits.  Which has accumulated an enormous pile of debt.  Resulting from their large spending obligations for public sector wages and pensions.  They don’t have the money.  They can’t borrow the money.  So a massive Greek default is likely.  Which because of the common currency will be felt throughout the Eurozone (see Germany’s AAA rating under threat after Moody’s cuts outlook by Jamie Dunkley posted 7/24/2012 on The Telegraph).

Moody’s warned the outlook for the ratings of Germany, Luxembourg and the Netherlands is negative because the threat of a Greek exit from the eurozone and the need for greater financial support for struggling eurozone countries from the strongest members of the bloc.

In a statement, issued after the close of the US markets, it added: “The level of uncertainty about the outlook for the area and the potential impact of plausible scenarios on member states, are no longer consistent with stable outlooks.”

Not some pleasant choices.  Have a Greek default damage your credit rating.  Or make your taxpayers pay for another nation’s debt.  Which begs the obvious question.  Or should.  How is having other people pay for spending you can’t afford going to solve your problem of spending more than you have?  If Greece doesn’t cut their spending nothing will change in the long run.  They will need another emergency bailout following this emergency bailout.  Because this emergency bailout doesn’t address the source of their trouble.  Excessive government spending.

Keynesians encourage excessive government spending because they think it’s stimulative.  That it creates economic activity.  In fact the Keynesian solution to the Greek crisis is more government spending to stimulate the economy.  Which begs the obvious question.  Or should.  If government spending does all of this why after all of their government spending is Greece on the precipice of bankruptcy?  Huh?  Answer that one smart Keynesian person.

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Government Spending

Posted by PITHOCRATES - June 18th, 2012

Economics 101

Money is a Temporary Storage of Wealth used to Reduce the Search Costs in the Barter System

What came first?  Money?  Or the things we buy with money?  Here’s a hint.  Once upon a time there was no money.  Yet we still had things.  We bought things without money, you ask?  Yes.  We did.  And we bought things the only way we could before there was money.  We traded.  We bartered.  We traded things.  Things we built.  Things we grew.  Things we dug out of the ground.  Things.

These things had value.  Value we created with our labors.  Either by digging something valuable out of the ground.  Growing something of value.  Or making something useful that people valued.  And something people were willing to trade something they produced that had value.  These people created value.  They created wealth.  They were wealth creators.  And when they come together to trade the valuable products of their labors they were trading wealth.  After their bartered trade all parties in that trade walked away believing they came out ahead in that trade.  For each walked away with something they valued more.

But the barter system proved to be inefficient.  As the economy became more complex there were so many things to trade for.  And people valued some things more than they valued others.  Which sometimes made it difficult to find someone to trade with.  Search costs increased.  People spent more time looking for people to trade with than they did producing wealth.  Which is why people created money.  A temporary storage of wealth.  Using money greatly reduced search costs.  Instead of finding someone to trade with that also wanted what you had to trade all you had to do was find what you wanted.  Then trade your money for it.  Then the seller could take that money and trade it for something he wanted.  Regardless if the person was interested in anything he produced.

Ultimately People don’t want Money, they want the Things they can Trade Money For

No one likes paying taxes.  They’re one of those necessary evils to live in a civilization.  Because they are the only way to pay for public goods.  Early public goods may have consisted of a granary to store food.  And an army.  To protect your civilization from the hostile environment around it.  Government could tax the grain producers by taking a portion of their crops for the public granary.  And to feed the army.  They could tax the shoemakers and take some shoes for the army to wear.  And so on.  The government would tax the producers by taking a small percentage of what they produced to provide the public goods.   

Money changed this a little.  Instead of shipping a portion of grain from all the grain producers to the public granary the grain producers paid their taxes in money.  For it was easier to collect money from all the grain producers than it was collecting grain.  Then the government would use that tax money to purchase grain to fill the public granary.  Even having the local grain producers compete with each other to fill that large public purchase of grain at the lowest price.  Just like buyers and sellers used money to make their trades easier so did government use money to make public spending easier.  But one thing didn’t change.  Money was only a temporary storage of wealth.  The buyers and sellers created wealth.  And the government took a portion of the wealth they created.

This is a crucial point in understanding government spending.  Money isn’t what’s important.  It’s those things of value the wealth producers create that is important.  Because ultimately people don’t want money.  They want the things they can trade that money for.  Those wonderful things creative wealth producers bring to market.  Things government does NOT produce.  Even though they can print money they cannot produce these things of value.  Other people do.  Other people who incur costs.  Who pay for supplies.  And provide pay and benefits to their employees.  Which is why they don’t like paying taxes.  Because it leaves them less to spend on their business.  Or on themselves.  And they don’t like the government printing money.  Because money is a temporary storage of wealth.  And when you arbitrarily increase the amount of money in circulation for the same amount of wealth in the economy you cause inflation.  More dollars chasing the same amount of goods.  So the dollar is worth less than it was before the inflation.  And because the dollar is worth less it takes more of them to buy what they once did.  Meaning prices increase.  Which is why people don’t like inflation.

A Country never went Bankrupt by Spending too Little

So even though the government has the power to print money responsible governments don’t.  Because inflation causes a lot of economic damage.  So governments rely on taxes to fund their public goods.  But excessive taxation also causes economic damage.  By pulling wealth out of the private sector.  Leaving business owners with less.  And increasing the cost of business.  Making it difficult to hire more people.  Which lowers economic activity.  For the more people who work and earn a paycheck the more people are in the market place buying things.  So it’s important for governments not to tax too much.  Which means they shouldn’t spend too much.

Of course that’s easier said than done.  Because people tend to vote for politicians that give them free stuff.  Which is why politicians love to spend.  And to tax.  Tax and spend.  And during good economic times when government coffers are flush with cash they tend to spend more.  And tax more.  Because they can.  But they all run into the same problem.  Government raises revenue on economic activity.  By applying tax rates on income, sales, value added, property, etc.  The government collects a small percentage on these items based on the tax rate.  When income, sales, value, etc., are large that tax rate generates a lot of revenue.  When income, sales, value, etc., are low that tax rate generates a lower amount of revenue.  And when governments spend too much during the good times they raise their spending obligations.  Based on that robust economic activity.  But when the economic activity becomes less robust there is a problem.  Tax revenues fall.  Because those tax rates are taking a percentage of a smaller income, sales, value, etc.  So tax revenue falls while those spending obligations remain the same.  Leading to a budget shortfall.  Which leaves them with two choices.  Cut spending.  Or borrow money.

Well, people rarely vote for people that take stuff away from them.  So the politicians borrow money.  And they keep borrowing money.  Because their spending obligations were based on the rosiest of projections of economic activity.  Which rarely happens in real life.  So they borrow.  And they borrow more.  Soon they have to borrow to pay the interest on what they’ve borrowed previously.  Soon the debt grows so great that the credit rating agencies lower their credit rating.  Making future borrowing more expensive as they have to pay a higher interest rate.  Some may turn to higher tax rates.  But that also lowers economic activity.  Which reduces overall tax revenue.  Some may turn to printing money. Which also lowers economic activity.  And overall tax revenues.  By causing inflation.  And raising prices.  Which eventually leads a country down the road to bankruptcy.  And on their knees begging for a bailout.  Which is the ultimate destination for all nations with excessive government spending.  To throw themselves on the mercy of those countries who have lived within their means.  Which rarely ends well.  Because they expect the bankrupt country to start living within their means.  Meaning austerity.  Which the people accustomed to generous government spending are not too keen on in the least.  And often reply to austerity demands with a little rioting in the streets.

There is one simple way to avoid all of these troubles, though.  All a nation has to do is NOT spend so much.  If they do then they will never have a financial crisis.  For a country never went bankrupt by spending too little.

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Moody’s teaches France, Austria and the UK that Debt Matters

Posted by PITHOCRATES - February 18th, 2012

Week in Review

Things are not well in the Eurozone.  After a series of credit rating downgrades Moody’s warns France and Austria.  And even one country outside the Eurozone.  The UK (see Moody’s warns UK, France, Austria over AAA rating by Rodrigo Campos and Walter Brandimarte posted 2/14/2012 on Reuters).

Rating agency Moody’s warned it may cut the triple-A ratings of France, Britain and Austria…

Moody’s move was less aggressive than rival agency Standard & Poor’s, but its action puts London’s prized top credit rating in jeopardy for the first time…

Germany’s top-tier rating was described as “appropriate” by Moody’s, and it affirmed the triple-A rating on the euro zone’s bailout fund, the European Financial Stability Fund (EFSF)…

The precarious state of European sovereign finances was underlined on Monday, when the head if [sic]China’s sovereign wealth fund brushed aside an appeal from German Chancellor Angela Merkel to buy European government debt, saying such bonds were “difficult” for long-term investors…

A retreat from European government debt has already been boosting relatively high-yielding Australian and New Zealand debt, as cashed-up Asian sovereign wealth funds and other major bond investors look for safe havens to diversify their holdings.

The two big countries of the Eurozone are Germany and France.  If they go so does the Euro.  So far Germany retains its triple-A rating.  But France may lose theirs.  Even the UK may lose its coveted triple-A rating for the first time.  Just like the U.S. did last year.  Neither of which is in the Eurozone.

Things are not well in the world of government finance.  Even the Chinese are refusing to buy European debt.  And they’re not the only ones.  And it’s because of the debt levels.  Australia and New Zealand debt is closer to 30% of GDP.  Compared to the European Union.  Which is closer to 80%.  Simply put, debt matters.  And the more you have the less perfect your credit rating.  And the lower your credit rating the higher the interest rates you must pay to sell your government bonds.  If you can sell them.

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Moody’s follows Fitch and Standard & Poor’s and downgrades Eurozone Countries

Posted by PITHOCRATES - February 18th, 2012

Week in Review

Now it’s Moody’s turn to show their lack of confidence in the Eurozone (see Moody’s downgrades European countries by James O’Toole posted 2/14/2012 on CNNMoney).

Moody’s cut the credit ratings of six European countries on Monday amid continued anxiety over the continent’s debt crisis and its sluggish economy.

Italy, Malta, Portugal, Slovakia, Slovenia and Spain were all downgraded, while three other countries — Austria, France and the United Kingdom — had the outlook on their current Aaa ratings changed to “negative…”

The move follows similar downgrades of European nations recently by fellow rating agencies Fitch and Standard & Poor’s, and comes as investors are waiting to see whether euro-area finance ministers will approve the latest bailout for Greece this week…

Investors may be heartened by the fact that Moody’s didn’t downgrade the eurozone’s bailout fund, the European Financial Stability Fund.

Interesting.  They didn’t downgrade the European Financial Stability Fund.  But they downgraded the countries that fund it did.  Interesting because the member states guarantee the loans.  The interest costs.  And the capital raising costs of this Eurozone bailout fund.  So if the member states are greater risks one would think the thing they fund and guarantee would be a greater risk, too.

Looks like those social democracies of Europe are learning their lessons about socialism.  It’s costly.  And it bankrupts nations.  Capitalism doesn’t do this.  Only those nations that abandoned capitalism in favor of social democracy find themselves in these financial messes.  Sadly, two of the great nations of capitalism are limping down this same road.  The UK.  And the USA.  Who had their credit rating downgraded themselves only last year.  And the latest budget offered by the Obama administration forecasts a $1.3 trillion deficit.

Those who do not learn the lessons of history are condemned to repeat history’s worst mistakes.  And, apparently, we are.

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Standard & Poor lowers the Credit Rating for Nine European Countries

Posted by PITHOCRATES - January 15th, 2012

Week in Review

Interest rates are subject to the laws of supply and demand.  The more questionable a borrower looks to be able to repay the loan the higher the interest rate.  Because there is a low supply of people willing to loan to such risky borrowers.  So they have to offer higher rates to get people to take a greater risk.

When S&P took away America’s AAA rating this did not happen, though.  Not because America was immune to the laws of supply and demand in the bond market.  But because Europe had even bigger problems.  And they just got worse (see S&P cuts credit ratings for France, Italy, Spain by JAMEY KEATEN posted 1/14/2012 on Yahoo! News).

Standard & Poor’s swept the debt-ridden European continent with punishing credit downgrades Friday, stripping France of its coveted AAA status and dropping Italy even lower. Germany retained its top-notch rating, but Portugal’s debt was consigned to junk.

In all, S&P, which took away the United States’ AAA rating last summer, lowered the ratings of nine countries, complicating Europe’s efforts to find a way out of a debt crisis that still threatens to cause worldwide economic harm.

Austria also lost its AAA status, Italy and Spain fell by two notches, and S&P also cut ratings on Malta, Cyprus, Slovakia and Slovenia.

Some are arguing that this won’t impact the Eurozone bailout.  Because of the austerity measures the troubled countries have taken.  But it doesn’t help.  It just pushes the final resolution of the Eurozone debt crisis further out.  And probably makes it more unpleasant.

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The future of the USPS is questionable, Ditto for Obamacare

Posted by PITHOCRATES - August 12th, 2011

New Technology has Destroyed Snail Mail 

A government established monopoly is having problems.  Revenues are down.  Costs are up.  The United States Postal Service (USPS) is virtually insolvent.  And they’re looking to take some desperate action (see Postal Service proposes cutting 120,000 jobs, pulling out of health-care plan by Joe Davidson posted 8/11/2011 on The Washington Post).

The financially strapped U.S. Postal Service is proposing to cut its workforce by 20 percent and to withdraw from the federal health and retirement plans because it believes it could provide benefits at a lower cost.

The layoffs would be achieved in part by breaking labor agreements, a proposal that drew swift fire from postal unions. The plan would require congressional approval but, if successful, could be precedent-setting, with possible ripple effects throughout government. It would also deliver a major blow to the nation’s labor movement.

You can’t blame this on outsourcing of American jobs.  Only the USPS can deliver first class mail.  And it’s not free trade.  It’s just progress.  New technology has destroyed snail mail.  People email.  Text.  Pay their bills on line.  And where competitors (UPS and FedEx) were allowed to compete the competition blew them away.

In a notice informing employees of its proposals — with the headline “Financial crisis calls for significant actions” — the Postal Service said, “We will be insolvent next month due to significant declines in mail volume and retiree health benefit pre-funding costs imposed by Congress.”

During the past four years, the service lost $20 billion, including $8.5 billion in fiscal 2010. Over that period, mail volume dropped by 20 percent.

And they can’t afford their health care.  Unless they can somehow raise revenue.  By forcing people to use mail instead of new technology.  But that’s not likely to happen.  Revenue is not much of an option here.  People have just stopped using their services.  And you can’t fix that by raising the stamp price.  You have to cut costs.  To reflect that 20% drop in business.

In a white paper on health and retirement benefits, the USPS said it was imperative to rein in health benefit and pension costs, which are a third of its labor expenses…

The USPS said the programs do not meet “the private sector comparability standard,” a statement that could be translated as meaning that government plans are too generous and too costly…

 “Unfortunately, the collective bargaining agreements between the Postal Service and our unionized employees contain layoff restrictions that make it impossible to reduce the size of our workforce by the amount required by 2015,” according to the optimization document. “Therefore, a legislative change is needed to eliminate the layoff protections in our collective bargaining agreements…”

 “We are absolutely opposed” to the layoff proposal, he said. “We are opposed to pulling out of the Federal Employees Health Benefits plan.”

It will be an interesting debate.  On the one hand, you can understand how employees don’t want to lose any pay or benefits.  But on the other hand, there is no other option.  Unless people start using first class mail again.  Because you can’t raise taxes to solve this problem.  They are not part of the government.  Even though a monopoly, they have to function as a business.  Which means costs can’t be any greater than needed to support a given revenue.

Without Competition, Nothing gets Better

Obamacare will be a lot like the USPS.  It will have out of control costs.  That will forever outpace revenues (i.e., taxes).  And it will be no doubt be a dysfunctional bureaucracy.  As all government agencies are.  As all monopolies are.

Competition makes everything better.  Therefore, without competition, nothing gets better.  Because it doesn’t have to.  That’s why the USPS lost so much business.  Because technology created better ways to do things.  So the old monopoly stagnated.  Still trying to do business with an out of date business model.  As Obamacare will do to health care.  Because it won’t have to do anything better.  And, unlike the USPS, the government can keep raising taxes to meet those out of control costs.

If there is an Obamacare, that is.

With the Individual Mandate, there is no Choice

Another court has ruled the individual mandate of Obamacare unconstitutional (see A Stunning Victory for the Constitution over Obamacare by Todd Gaziano and Robert Alt posted 8/12/2011 on Heritage).

This afternoon, a three-judge panel of the U.S. Eleventh Circuit Court of Appeals in Atlanta ruled that the individual mandate in the Patient Protection and Affordable Care Act (PPACA), more commonly known as Obamacare, is unconstitutional…

In short, the Obama administration has lost its battle to delay review of the individual mandate until after the 2012 election.  Until today, there was at least a chance that the Supreme Court would pass on the case until after its forthcoming term, but now, with a split between the Eleventh Circuit and Sixth Circuit, the High Court will have little choice but to take the case and resolve the fate of the forced-purchase mandate.  After over a year of delaying tactics, the Obama Administration has no more options to slow-walk the constitutional end-game for the mandate.  Our best estimate is that the case will be argued either in late March or in April 2012.  The Court will issue its decision near the end of its term in June, during the presidential candidate nominating season.

The Obama administration has been delaying this till after the election because this won’t help the president’s reelection chances.  During the debate to pass Obamacare, they insisted that this mandate wasn’t a tax.  But, instead, it was just commerce.  Like forcing people to buy car insurance.

But not everyone drives a car.  And those who don’t?  They don’t buy insurance.  And are not compelled to do so.  So there is a choice.  With the individual mandate, there is no choice.  Which is why the U.S. Eleventh Circuit Court of Appeals in Atlanta ruled it unconstitutional.

So this places this uncomfortable subject in an election year.  Where the Obama administration will argue in court that the mandate is a tax after all.  Which government does have the power to do.  But, of course, this will mean they were not telling the truth during the Obamacare debate.  So there’s that uncomfortable truth coming out.  And the possibility that his signature accomplishment may get overturned by the Supreme Court.  Which also won’t help his reelection chances.

You couldn’t ask for a Better Spending Cut than Obamacare

One can almost hear the cries for the government to take over the USPS.  So we can bailout the USPS with our tax dollars.  Which would probably not be a good thing what with S&P downgrading our debt because of excess government spending. 

And we really don’t need to dig our debt hole any deeper with Obamacare.  Perhaps the recent court ruling will save us from that.  And in the process restore our credit rating.  For in Obamacare lies that additional $2 trillion in spending cuts S&P wanted.  And the best part of it is that it’s all future spending.  No one will lose anything by cutting Obamacare.  You couldn’t ask for a better spending cut.  No one loses.  Except, of course, Obama.

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Only Obama can make the U.S. Default on its Debt Obligations

Posted by PITHOCRATES - July 15th, 2011

$172.4 Billion is a lot of Money

Still no closer to a budget agreement to raise the debt limit.  Obama wants more taxes and more borrowing.  The Republicans want a little fiscal sanity.  Because something is definitely wrong in Washington when $172.4 billion a month isn’t enough (see August Invoices Show U.S. Treasury’s Limited Choices by David Rapp posted 7/12/2011 on Bloomberg Government).

The U.S. government, whose legal authority to borrow money expires on or about Aug. 2, expects to take in $172.4 billion next month — enough to cover little more than half of its bills due then, according to a study for the Bipartisan Policy Center, a research organization.

The U.S. may not have to default on outstanding debts or withhold interest payments for that month; it may be able to cover $29 billion in anticipated interest due on Treasury securities with its cash receipts…

Jay Powell, undersecretary of the Treasury for Finance under President George H.W. Bush, calculated for the policy center that $306.7 billion in bills will come due after Aug. 2. They include Social Security benefits, defense vendor payments and military active duty pay, along with federal pay for every department and agency, in addition to the interest payments.

I think we’re missing the bigger picture here.  The government collects $172.4 billion but spends $306.7 billion.  That is, for every dollar it collects it spends $1.78.  In other words, the government’s spending is 78% over their cash budget.  Managers in the corporate world get fired for performances like this. 

That is either a big spending problem.  Or a big revenue problem.  So are taxes too low?  I don’t think so.  I mean, $172,400,000,000 is a lot of money.  How much?  It’ll buy 542 of the new Boeing 747-8 jetliners.  Or 149 Dallas Cowboys Stadiums.  Or 27 nuclear powered aircraft carriers.  It’ll even pay for the Apollo moon program with $41.3 billion left over.  $172.4 billion is an enormous amount of money.  You couldn’t spend this much money if you tried.  Even if you bought the best houses, cars, jewelry, clothes, island, etc.  And if you had the mother of all drug addictions.  It’s just a staggering amount of money.  And if you’re collecting in taxes more money than the cost of the Apollo moon program each month, guess what?  You don’t have a revenue problem.  You have a spending problem.

Bloomberg has a nifty little calculator on their website.  You can put checks on the things you want to pay.  And leave the things you don’t unchecked.  It’s an interesting list of bills coming due this month.  There’s a lot of stuff we can cut easily to save $47.1 billion.  Federal salaries & benefits ($14.2 billion).  Small Business Administration ($0.3 billion).  Education Department ($20.2 billion).  Department of Housing and Urban Development ($6.7 billion).  Energy Department ($3.5 billion).  Labor Department ($1.3 billion).  Environmental Protection Agency ($0.9 billion).  What taxpayer would miss any of these?  Cuts to Social Security and Medicare, on the other hand, will be a little more difficult.  For they actually do something.  And people will miss them.

Incidentally, interest on the debt is $29 billion.  Though a lot of money, it’s not too high for the $172.4 billion to cover.  So if the Obama administration doesn’t pay this and causes a downgrade in our credit rating, President Obama will have some ‘splaining to do.

Monthly Spending Equivalent to 1.3 Apollo Programs should be Enough

The president has no intention of cutting spending.  Their goal is to make Republicans look bad.  And to better position themselves for the 2012 election.  So the president will lie and spin misinformation in hopes that this stuff is just too complicated for the layperson to follow.  And that they only remember one thing.  That Republicans stopped Social Security checks going out because they’d rather give tax breaks to the rich.  And that they miss the fact that Obama and his Democrats gave us this crisis to begin with.  With the greatest spending orgy of any peacetime president.  So he threatens that if the Republicans don’t pay for his reckless spending, he’s going to tell everyone it’s their fault that the country defaulted (see Obama: Chance for ‘something big’ to calm economy by Jim Kuhnhenn, Associated Press, posted 7/15/2011 on Yahoo! News).

Obama urged Republican lawmakers to make tough calls, too. He attempted to turn their opposition to any tax increases back against them, warning that a government default caused by failure to raise the debt ceiling would increase interest rates, “effectively a tax increase for everybody.”

No, a failure to raise the debt ceiling won’t cause a government default.  Barack Obama will.  If and when he decides to pay something he thinks is more important than the interest on the debt.

Obama sternly rejected any plan of that size that did not include increases in tax revenue.

Apparently spending the equivalent of 1.3 Apollo programs a month just isn’t enough.  Obama gives new meaning to tax and spend liberal.  Pity Ted Kennedy didn’t live long enough to work with his kind of liberal in the White House.  Or see his pet cause, national health care, signed into law.  Then they both could have seen their policies destroy this country.  Don’t believe me?

Spending/Debt so bad it’s bringing back the Gold Standard

Then ask the Chinese communists.  Though their economy is rife with cronyism and will no doubt collapse as the Japanese economy did in the Nineties, they know too much debt when they see it (see Return of the Gold Standard as world order unravels by James Quinn and Ambrose Evans-Pritchard posted 7/16/2011 on The Telegraph).

Xia Bin, an adviser to China’s central bank, said in June that the country’s reserve strategy needs an “urgent” overhaul. Instead of buying paper IOU’s from a prostrate West, China should invest in strategic assets and accumulate gold by “buying the dips”.

Step by step, the world is edging towards a revived Gold Standard as it becomes clearer that Japan and the West have reached debt saturation. World Bank chief Robert Zoellick said it was time to “consider employing gold as an international reference point.” The Swiss parliament is to hold hearings on a parallel “Gold Franc”. Utah has recognised gold as legal tender for tax payments.

A new Gold Standard would probably be based on a variant of the ‘Bancor’ proposed by Keynes in the late 1940s. This was a basket of 30 commodities intended to be less deflationary than pure gold, which had compounded in the Great Depression. The idea was revived by China’s central bank chief Zhou Xiaochuan two years ago as a way of curbing the “credit-based” excess.

So the Chinese, the World Bank, the Swiss, Utahans and a dead John Maynard Keynes agree that the U.S. has a spending problem.  A spending problem that is racking up debt to saturation.  So bad that the once invincible U.S. dollar should no longer serve as the world’s reserve currency.  A sad development indeed.  And painful to hear.  Especially coming from a commie.

Tax Hikes First, then Broken Spending Cuts Promises

And yet the president is in denial.  He doesn’t see a spending/debt problem.  He sees a revenue problem.  Because high taxes and high debt are okay in his world.  As long as they pay for liberal government spending.  That’s why he’s dead set against spending cuts only.  He wants those tax hikes.  He needs those tax hikes.  And will promise almost anything to get those tax hikes.  Because once he does, and mark these words well, he will break every spending cuts promise he made to get them.

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