The Ghost of Snapped Shot

Or, welcome to my low-maintenance heck.

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Hell Is A-Comin' And Misery Is Riding With Him

I recently ranted up a storm about how our amazing progressive, open, transparent, honest, for-the-people, constrained, miserly, respectful, honorable, and heaven-sent administration has been sending out their "flurries" of reports about how great this economy is, despite the obvious facts.  I even showed some of those facts that would make a 5 year old little snit pee in his pants.

It would appear that I wasn't presenting as dire a picture that I could have.  If you want to be shocked and pee your shorts like a scared little kid, then click to the next page.

I my previous post I presented some tidbits of information that showed that our economy is not as rosey as the Obama administration makes it out to be.  Our banking system is about reading to come crashing down from defaulted loans that the government forced them in to.  Our employment sector is not going to be looking any better any time soon.  And, to top it all off.  This new Socialist "regime" (seems everyone loves that word these days) has passed some  of the most anti-business and anti-America bills that the former USSR (and current CubaVenezuela) would fawn over.  And, let us not forget about the massive tax increases that will ensue.

No, don't let that bladder loose yet.  I have just begun my tale of horror.

Let's go visit Mr Denninger's The Market Ticker web page.  Take note the title of his article -

DEATH SPIRAL INTERCEPT

Now, let's be perfectly clear here.  I am by no means an economic scholar.  I barely made a C in my college Accounting class.  But, I can read between the big words here.

Let me show you something...  (and I thank Mr Denninger for sharing this info)

Take a look at that.  Basically, the way I understand it, while the economy keeps getting worse and worse due to one crisis after another (caused by the governmetn intervention ironically), the amount of private sector debt keeps climbing.  That is scary folks.  Denninger says this about the graph:

This presents two problems:

    *      Lower lows have run into the zero boundary.  That wasn't sufficient this time, which of course is why we got "Quantitative Easing" and other similar abortions intended to distort market rates - like guarantees on bank debt, for example.  Ultimately this devolves into The Fed or The Government (as if there's a real difference) guaranteeing everything to prevent spreads from blowing out.

    *      Far more sinister, however, is what happens to the top line.  The top line - that is, the maximum rate between crises, declines because it becomes impossible to normalize rates - nobody can afford to pay "normal" rates with the amount of leverage they have.

This is where the ultimate failure in policy arrives, and it leads to at best a Japan-style scenario where the economy fails to come out of recession or, at worst, monetary and political system failure.

To me, either way, that means one thing:  We're screwed.  Unless things change drastically and dramatically.  Yes, it will hurt, but like a bandaid coming off, it hurts for only a little bit as compared to letting the rotting bandage sit there and fester.  Then you have to take the whole leg.

Next up we have a picture of what the government is doing to itself.  And us.

Tell me that doesn't fill your undies with moist icky warm-ness.  And, that only goes to the present.  Imagine what it looks like now out to 2020 due to all the crap these Socialists have been piling on to our grandkids pocket-books.

Denninger describes this as:

The 2000s were marked by even more leverage.  Why?  Because it was the only way to get return left.  The Government, having stepped in to support the economy with $500+ billion annually  in deficit spending, was unable to pull back without instantaneously crashing the economy:

And then this:

We now have both driven the low end of the rate curve to zero and taken on more than $3 trillion in new Federal debt.  To put this in perspective the total outstanding accumulated Federal Debt at the end of 1992 - from the founding of the US to January 1st of 1993 - was just $4.2 trillion.

We added more Federal debt than had been accumulated in 217 years in just a little over THREE years - from 2007 to the third month 2010.

What?  Not scared enough yet?  Panties still dry and fresh?  HA!  This will give you nightmares then...

The ugly is that this debt load (currently $12.8 trillion, more or less) presents interest expense.  If the Fed Funds Target was to reach just five percent, and every bit of the Treasury debt was to be refinanced into overnight obligations at that same 5%, the interest expense alone of the current debt would be $640 billion a year.

If the Treasury was to have to pay a roughly 6% average coupon (reasonably aggressive with a 5% Fed Funds Target) the interest expense would be $768 billion annually.

To put this in perspective that is an amount roughly equivalent to that spent on defense, and is higher than Social Security, Medicare, or all other "mandatory" program spending combined.

It would consume nearly all of Social Security and Medicare tax receipts ($891 billion) or the personal income tax ($915 billion)  (ed. All 2009 federal budget numbers)
.

It is also four times what we spent last year on interest.

There is not a snowball's chance in Hades that the Federal Government can afford that.

Let that soak in a bit before you run out of your shack and start screaming in to the night.

"There is not a snowball's chance in Hades that the Federal Government can afford that."

There are only a few outcomes from this disaster.

1 - Raise taxes like crazy on the rich along with all the other classes. 
2 - Create a Value Added Tax that would make Canada quiver in fear.
3 - Cut the spending by over 50% from now on and then after that pass a Flat-Tax bill.

or

4 - as Rep Grayson suttely put it on the House floor: Die Quickly!

He continues with his own dose of reality:

What we're doing now will inevitably lead to another crisis, this one much worse than the last.

What comes with that is anyone's guess - in particular, whether civil order survives in a world where half of Medicare and Social Security are gone, all other "mandatory" programs are erased, and taxes are running at roughly double the rates we have today.

Timing?  Best case, a few years.  Worst case, anything could set it off.  Defaults in other nations, a loss of confidence in The Fed or Government, war.

Lock and Load folks.

  #Dictatorship

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