Daily Archives: July 23, 2009 @ 9:49 am (Thursday)

Debt problem and policy response

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The ‘problem’ is lack of income to service the debt, not the debt per se. Take a look at the personal income chart, particularly the interest income component.

Restoring the ability to pay restores the quality of the debt.

With the deficit terrorists in charge it’s going to continue ugly for a considerable period of time for the population at large.

Meanwhile, businesses figure out how to scratch out a living with less top line growth and modestly improving earnings, and banks benefit from the net interest margins at the expense of ‘savers’ pretty much offsetting their ongoing loan losses.
So who’s been the big winner this year to date?

Stocks up 50%, financials up more with record earnings in some cases.

Corporate bonds up as corporate borrowing costs fall.

Consumer interest rates remain high.

Household savings earning near 0.

Unemployment near 10%.

GDP now around flat and forecast to modestly improve.

Real wealth is again flowing upward.

>   
>   (email exchange)
>   
>   Take a look at this next chart, which has gained some currency in
>   the worried circles of financial people. It’s worth a bit of study.
>   It shows you the other dancers on the floor.
>   

>   
>   The first thing to jump out at you is that subprime is only about
>   a $1.5 trillion market – not anywhere near the biggest of the risky
>   loans. There are other layers here.
>   


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CBS “EVENING NEWS” INTERVIEW WITH OBAMA

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There is something you can do about this self destructive government.
Both sides have it dead wrong, and we and our children are already paying the price.

Go to www.mosler2012.com and send in your contributions in now, thanks!

All funds go to help get the word out and save us from ourselves.

(I’m doing all I can with my remaining personal finances.)

House Votes to Strengthen Anti-Deficit Budget Rules

By Brian Faler

July 22 (Bloomberg) — The U.S. House voted to toughen its often-ignored budget rules that require lawmakers to offset any new spending initiatives and tax cuts with savings to avoid adding to the federal deficit.

The chamber voted 265-166 for legislation that would put Congress’s so-called paygo rules into law and impose automatic budget cuts when lawmakers spend too much. Currently, legislators can vote to waive those rules.

Democrats said the bill, endorsed by President Barack Obama, would help put the government’s books in order after the annual deficit is projected to quadruple this year to more than $1.8 trillion.

“We have a moral responsibility not to heap mountains of debt onto our grandchildren,” said House Speaker Nancy Pelosi, a California Democrat.

Obama praised the House’s action and said, “It is time to stop the practice of passing today’s costs onto future generations.”

Republicans scoffed at the plan, saying it included too many loopholes and that Democrats frequently ignore the paygo rules adopted when they took over Congress in 2007.

“This is PR politics,” said Representative Paul Ryan, the top Republican on the House Budget Committee. “This is not a bill to get Congress to live within its means. This is a bill to give congressmen and congresswomen an ability to put a press release out to make it look like they’re being fiscally responsible.”


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