I was looking at how Treasury gross public debt is now officially over US$9.5
trillion, and was thinking of using that particular bit of terrifying insanity
as an excuse to get really hammered, when I suddenly remembered that I didn't
have any money or credit with which to buy inexpensive but tasty alcoholic
beverages, or even a burrito to get that subtle taste of anti-freeze out of my
mouth. Damn!
Recently, I had forged a lot of IOUs in my kids' names at various bars around
town, and already people were getting suspicious about them, unduly limiting my
subsequent issuances of more IOUs, and I was out of ideas for a new scam.
So it was somewhat coincidental and startling that at the very
next moment I read where Gary North in his Reality Check newsletter at
garynorth.com wrote, "Americans would regard the son's inheritance of a
father's debt as tyrannical. But, with the help of Congress, Americans have
adopted the same system, but on a far larger scale. We have passed our IOUs on
to the children of our neighbors' children."
This brings up one of the points of disagreement between Mr North and me, as he
thinks of these creditors as "neighbors", while I refer to them as "vicious
foreign devils", and not just because I am a xenophobic, fearful, hateful,
paranoid whack-job, but because every lynch mob I have ever seen in the movies
or heard about in real life is always comprised of somebody's "neighbors".
In fact, these "neighbors" to which he refers are actually foreigners, who
actually live in some foreign country, and who actually speak some stupid
foreign languages whenever I am around so that I can't understand the words,
but I know what they are plotting! I know EXACTLY what they are plotting! And
that is why I hate them as much as they hate me!
Apparently, I made my point, as Mr North immediately admits that I was right,
and that these "neighbors" are actually foreigners, and that "Today, the
Treasury sells its IOUs to foreign investors, especially foreign central banks.
Something in the range of 40% of the on-budget Federal debt of $9 trillion is
held by foreigners."
Notice the part about "on-budget" federal debt, which implies that there is an
"off-budget" federal debt, too, which is so corrupt that it is amazing that it
is allowed to even exist! This is where you find the secret money that
government goon squads use to harass me, like last week when the air
conditioner started acting weird! For five years it has worked perfectly, and
now suddenly it doesn't, and I am supposed to think that government
agents/saboteurs are NOT involved? Ha! As Jim Rockford, private investigator in
The Rockford Files, would say, "My coincidence meter is red-lined!"
Perhaps the reason that Treasury Secretary Henry Paulson wants to bail out
government-sponsored entities (GSEs) like Fannie Mae and Freddy Mac is because
of who owns the shares of the companies, which will go to zero if Fannie and
Freddie are allowed to fail like they deserve to do.
It's something to think about when gangsters own your "paper", as I infer from
Bill Bonner here at The Daily Reckoning writing, "Today, fully 21% of Russia's
monetary reserves are invested in the obligations of Fannie, Freddie and the
Home Loan Banks. And the largest holder of Fannie and Freddie debt is another
friendly foreigner, China", which he says, "owns $376 billion worth of US
agency bonds. Altogether, foreigners hold $1.3 trillion of them."
In fact, it is said that purchases of Fannie/Freddie debt by foreigners covered
a third of the US current account deficit of $700 billion over the last year!
Hahahaha!
And anyway, this $9.5 trillion national debt is pretty much chickenfeed when
looking at bigger intractable problems, as we gather from a speech given by
Richard Fisher, the head of the Dallas Federal Reserve Bank, who said, "Add
together the unfunded liabilities from Medicare and Social Security, and it
comes to $99.2 trillion over the infinite horizon."
First off, he is wrong; it comes to infinity at the infinite horizon, not some
piddly $99.2 trillion, and you would think that the president of the Dallas
Federal Reserve Bank would know such a thing. And then you realize that total
gross domestic product (GDP) of the USA is only about $13 trillion, and
suddenly this seems like a lot more than is even comprehensible! Your brain
whirls! Income that is 0.013% the size of liabilities!
Naturally, the mind cries out in its anguish, "No! No! No!" as it is staggered
by the sheer enormity of $100 trillion of liabilities, and you wonder aloud,
"Has there been a mistake in addition?"
Apparently not, as the total breaks down as, "Traditional Medicare composes
about 69%, the new drug benefit roughly 17% and Social Security the remaining
14%." What? The prescription drug benefit is now going to cost more than Social
Security itself? Yikes!
Apparently, he does not want to get into a discussion about that, and tried to
impress me by correctly saying, "We know from centuries of evidence in
countless economies, from ancient Rome to today's Zimbabwe, that running the
printing press to pay off today's bills leads to much worse problems later on.
The inflation that results from the flood of money into the economy turns out
to be far worse than the fiscal pain those countries hoped to avoid", which is
exactly true and I am surprised to hear him say that!
And it almost makes you proud when he says, "Purging rampant inflation and a
debased currency requires administering a harsh medicine. Even the perception
that the Fed is pursuing a cheap-money strategy to accommodate fiscal burdens,
should it take root, is a paramount risk to the long-term welfare of the US
economy. The Federal Reserve will never let this happen. It is not an option.
Ever. Period."
Then you are driven to ask, "If so, then why in the hell are we here, you
lying, complicit, moron Federal Reserve bastard?" He never answered me, which
is all the answer I need, and it is all the justification you need to buy as
much gold and silver as you can.
It is going to be bad. Very bad. Very, very bad. Ugh.
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily Reckoning.)
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