Terminator Toxic Debt Shakes the Faith in FIAT

by Gayle Plato

Bloomberg is reporting that the Treasury announced it will auction off just over 100 billion dollars of two, four, and seven year notes next week. This is in addition to short-term paper totalling $61 billion on the auction block.  Simply put, Secretary Geithner is trying to dump paper to pay the debt. In reference to previous articles written, I noted how the FED, and the Treasury were planning to funnel more money onto the world market: quantitative easing is in play.  But you can’t shovel out toxic manure and call it green fertilizer:

‘“We are at a point where the supply considerations are overwhelming to the dealer community,” said David Ader, head of U.S. government bond strategy at Greenwich, Connecticut-based RBS Greenwich Capital, in an interview on Bloomberg Radio. “The world is having a hard time digesting all this supply.”’


While the stories are put out that the economy is stablilizing, the average consumer can just look around at reality. Lay-offs are on the exponential rise, credit is tight and defaults of all kinds (mortgage, commercial, and municipal) continue to increase, government programs are being cut, wages are dropping, and yet prices are going up.  Have you noticed these jumps of late: food, dry goods, and the most obvious- gasoline? Though it’s a holiday weekend and gas always jumps, the price of oil dropped just over a dollar a barrel, yet I noted at the local Circle K station a jump in price from $1.85 to $2.31 a gallon just over the last two weeks.  Are we destined to see $4.00 a gallon again?  Remember last summer?

The current administration’s plan to print more dollars (humming B-52s song Legal Tender) is not working. How is this fiscal plan of running deficits, flooding the market, imposing elaborate restrictions on all aspects of business and production working so far?   Think about GM and Chrysler hustles, Cap and Trade devastation legislation, while incorporating expansive federal programming; think universal healthcare.

To Live and Die in L.A.

As California goes, so does the country. Cali voted for the Terminator and even he cannot stop the bleeding.  Unless Arnold gets in that Terminator, Mr. Peabody Way-Back Machine and changes the future, that blue state will keep bleeding until every last citizen with a few bucks, a functioning blackberry to phone home, and the ability to mark an X on a ballot paints the town RED.  I can think of another John Cameron movie more appropriate as imagery for Cali. It’s the Titanic and California just hit a fiscal iceberg.

Over regulation and deficit spending keep coming up in all budget debate. Now CA either raises taxes or slash and burns the beatnik budget programs. California must dump the bong water green pieces of legislation that choke growth, protecting mice and owls while human beings go wanting.  Also, as DSW noted today in recent post, Governor Schwarzenegger is looking at getting California out of the medical welfare state business.  This is being slammed by the Amnesty, LARASA, Che Guevaras of Liberal programming.  But reality is that illegals rely on much state funding. 

The state of confusion is a simple thing.  According to Governor Schwarzenegger, programing to illegals costs that state upwards of six billion a year. While their budget deficit is more like 42 billion, it still deserves discussion that 12-15% of the deficit will be spent on illegal residents.  That six billion number is also just a direct cost analysis. From criminal activity to housing foreclosures, illegal aliens are hurting the state.

Bueller? Bueller?

Ben Stein’s legendary performance as the Economics teacher in Ferris Bueller’s Day Off all-too-accurately describes most Americans’ working interest and knowlege of economics.  Yet, no other issue is more relevant to one’s day.  How the gasoline is produced, refined, distributed, taxed, and used on any give day effects millions of citizens in a spider webbing of ways.  Gas is just one aspect of daily economic interaction.

Money itself is not really there.  As I’ve written before, the currency is backed by faith-its FIAT, and unless the daily user of money knows how it grows, he cannot create his own victory garden of capital. Are the FED and the TRES promoting stagflation? If the economy seems to be rallying, why is the dollar losing ground?   Are we caught between a deflating market and an aritifically created inflationary status?  Watch interest rates, cost of living, our paper AAA rating decline, and how global economies react. Look to Europe and the United Kingdom especially as an example of over-regulated programming killing the economy; see how citizens are literally uprising.

Finally, look right here in Arizona at the new budget plan.  While no new taxes are in place, is our Governor Brewer going to push for them anyway?  Does the budget as it stands rely on hopefuls of things like impact fees on commercial real estate even though that industry is just starting to default in a freefall?  How does the state collect fees on businesses risking bankruptcy?  Ask yourself the question–Who profits from all of this and follow that money to the truth.  Currency is a promisory note, and right now not many citizens trust any government’s promise.

“Unfortunately for Bernanke and Geithner, the deleveraging process has commenced, and regardless of how many treasuries are issued, and how much additional debt the U.S. incurs, the demand side for credit is just not there, sticking banks with basements full of shrinkwrapped packages of hundred dollar bills, that will sit dusty and unused for years.” (http://zerohedge.blogspot.com/)


  1. JR Snyder Jr says

    This is well framed and what a great topic in context. The Fed and Treasury have now created a Treasury bubble to burst.

    As rubber smacks the road Americans are going to see taxes and politicians for what they’ve become. The GOP needs to regroup well enough to make sure, as people fall into a red camp, they’re seen as the viable option.

    For me the 70s economic era vaguely starting around 1969 and didn’t really end until 1982. Sure there were ok years in there, but over the long decade plus years, it was mostly slogging with stagflation or rampant inflation, massive layoffs and industries disappearing forever. This is more than that and the biggest disruptive economic event since Reconstruction. People have to come to terms that this revaluation of the worth of ultimately almost everything can’t be avoided by propping it up with fantasy money.

    This is terrible because we’ve over-inflated and over-valued everything since the housing boom began after WWII and what people warned back then, regarding a decades later economic crisis, is really here…no fooling This is historically a predictable economic event, that has periodically appeared through time, but fits ours going back to FDR. On the one hand it’s disruptive in a positive way, a reordering/revaluating of capital/money, except we have an administration that is taking a destructive approach.

    Willful economic destruction achieves nothing. You destroy what you had and then expend all of your energy and remaining capital fixing it, leaving no capital for reinvestment in growth. duh. Currently Obama and the Democrats are destroying what is left of our economy with vague plans on restoring it through (for example) new “green” (or insert another category) companies.

    Just exactly where does he think the capital is going to come for these pipedream companies when he has made printing money a huge industry? The inflated dollars he pumped out to build a wind farm from scratch? While we’re also trying educate children and keep food supplies working? When we are in the midst of a major adjustment of the valuation of what are things really worth and what is real money?

    We all know that’s crazy and will be ultimately be the downfall but we will all pay the price. I dread an era like the 70s when stagflation was constant and it took until 1978 for the tax issue to spark change. This time I think it will occur much more quickly and explosively but we will still have to come to terms with value.

  2. Полностью согласна!

  3. Grumpy Gus says

    Jeez, can someone summarize in three sentences what this blogger is posting for me? Or hire an editor for Gayle. I like SA, but only have a few minutes a day to engage…skip the overbearing rhetoric and clever quips and get to the point.

  4. Grumpy Gus- Economy going to Hell in a market basket of rotting goods as FED pumps press, prays World buys the paper. I give it until late July. If paper doesn’t sell, we’re having a going outta business sale. Hope that helps GG 🙂
    Just trying to write of dry topic with literary paint. Me, I tire of the comment firing squad. You’ll probably get your wish. I love good talk, jokes, banter–mean tires. I do not write what I would not say in person.

    BTW- CNN and USA Today have good factoids with Sanjay Gupta smiling through.

    (ps factoid defines as neither factual nor accurate)

  5. Честно говоря, сначала до конца не понял, но со второго раза дошло – спасибо!

  6. Okay, the Russian wins as unique. Why here? As Google tells much, I’ll answer thank you, and Пещера Платона это в другом месте и лучше места.

    Either odd advertising bot or- a certain smart guy–Do not use SA to be cagey.

  7. А кряк от всего этого счастья есть у кого? Или я что-то совсем не догнал?

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