If you look closely, you will find that nobody at DC tries to implement a long-term solution to the perpetual fiscal deficit and exploding sovereign debt. I have to assume that they are expecting eventual collapse of the financial system, then implement martial law.
Keeping raising the debt limit, pretending nobody is adversely affected, is plain wrong. A solution to address the long-term solvency of this once great Empire is urgently needed.
his political opponents.
It has to happen within two days, such as today and tomorrow.
Obama wants a market crash, and the market is going to deliver one.
He should vividly recalled that in 2008, the market panic triggered by timely lehman bankruptcy helped to elevate him to the US presidency.
The Commander-In-Chief of the Wall Street has spoken: he wants to see a market crash in order for him to bargain effectively.
Obviously, he is getting his wish fulfilled.
and it is likely that he will get what he wants.
In 2008, without the market panic caused by the Lehman's bankruptcy, Obama might have not been elected.
He needs at least 500 points drop in DOW to bargain effectively.
This country is financially broke. It gets by only because USD is the world reserve currency.
I wonder why there is nobody trying to figure out a long-term solution for the problem. It is really troubling: maybe they know something we do not know.
There is a gigantic financial mess out there in US finances. But it seems that nobody really wants to implement a long-term solution.
I have guess that the debt ceiling is also a fake concept. It can probably be automatically extended.
The government cannot shut down SS because the government is only a custodian of the accounts, not the owner.
It indeed has plundered the funds in that SS trust fund.
Using the same logic, we probably should give the politicians the free but mandatory quarterly colonoscopy procedures so that they can contribute more to the GDP than to the national debt.
Redistribution of wealth at work?
If the cost of the new healthcare program is not cut significantly, it will last very long.
Many people would wonder how can one raise the GDP growth by including tens of millions of people who have little means to pay into the system? Let us do some simple maths here:
(1) Healthcare Reform
Assuming $1000 healthcare expense for each of the 45 million uninsured, the increase in annual spending is $45 billion. However, the extra spending, even if all covered by government debt, will have multiplier effects to the entire healthcare industries and other related industries, the total positive effect on the GDP could be 5 x 45 = $225 Billion annually. The healthcare cost for the already insured people might increase due to sudden imbalance in supply and demand. That should contribute to the GDP growth nicely.
My guess is that the insiders are hoping to healthcare reform to add 1.5% to 2% in GDP growth for the next four years.
(2) Immigration Reform
Assuming half of the newly legalized undocumented immigrants are on the benefit-roll, and assuming the annual total payout is $10,000 per person, including direct food assistance, housing assistance, free healthcare etc and indirect assistance, then the increase in annual spending for those on benefit-roll would be 7.5 million * 10,0000 = $75 billion. After adding the multiplier effect, the total contribution to GDP could be $375 billion. The other half could have higher contribution to the GDP.
If (1) can generate $1-1.5 trillion new GDP growth over the next four years, and (2) $1.5-2 Trillion, then we could nicely fulfill the prediction made by OMG and CBO, by running $1+ trillion annual budget deficit. By 2017, we still have a 100% debt-to-GDP ratio.
Many people wonder why expand the healthcare coverage to some 45 million uninsured American and legalize some 15 million undocumented immigrants at the time when US is running "perpetual" large fiscal deficit and having 100+% Debt-to-GDP ratio?
If America is so broke, how could it add such human expenses on its balance sheet? ( I am in favor of both reform, though I suspect the timing.) The key is to manipulate the GDP number.
According to usdebtclock org website, both CBO and OMG have projected real GDP to reach about $19.5 Trillion by 2017 while projecting the total outstanding debt to reach $20 Trillion. The close to 100% GDP-to-debt ratio will give an impression of long-run solvency of US finances.
However, in order to go from the current $16 Trillion to $19.5 Trillion in four years, the compounded real GDP growth rate have to be averaged 5+% annually. Apparently the QE programs from Federal Reserve and massive runup in stock and housing markets have only accomplished 2.5% in the latest quarter. As the pump-up effect of these programs are wearing off, the Congress is forced to step in with the Healthcare Reform and the Immigration Reform to help the GDP numbers.
The comprehensive healthcare reform is the right move.
The next move is to cut the cost significantly. Otherwise, the program will go broke within a decade.
The market is cheering, because as most of people focus on the DC farce, and they would be distracted from the insolvency of fiscal situation and Fed's failure to pump up the GDP growth onto long-run sustainable path so that those massive tax hike/spending cut can be safely implemented.
The end-game is near. The bad drama in DC is simply distraction.
Madoff's PONZI was discovered in 2003 by the Whistle Blower. But it collapsed in 2008.
So there is usually a time lag for this time of game.