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Friday, July 1, 2011

IS THE ECONOMY IMPROVING?

The chief administrator, a Democrat, has reached a budget impasse with the Republicans.  This weekend government services will shut down.  For the good of the country, why can't Obama work it out with Boehner and Cantor?  Oops, this problem is happening in Minnesota.  Governor Mark Dayton and their legislature have a $5 billion deficit and the Republicans won't accept any new taxes on couples making $300,000/year.  Maybe a few casinos could end up being the compromise.  Democrats are blaming Republican Tim Pawlenty, who was governor until this past December.

Only yesterday, Governor Jerry Brown (that's him today, and in 1976) of California signed their budget, which will cut $15 billion.  But their deficit is $26.5 billion.  This is the same Brown who was last governor nearly thirty years ago.  Most states are in some jeopardy. Hawaii's will come crashing down on us the year after oil shoots pass $150/barrel.  I can guarantee this will happen.

Okay, how's about this:  default imminent, banks had overloaned, public workers enjoyed disproportionate and unaffordable benefits and citizens facing higher taxes and few services.  Honolulu today?  Yes, but no.  Greece?  No, their case is worse.  This was New York City in 1975.  Their primary solution was for the State to legislate a moratorium on debt repayment, that is, lenders would not be getting their money now.  Somehow Governor Hugh Carey made this work.

So now to the national so-called crisis on the budget and debt limit.  As some know, my solution is for our country to borrow more at these low interest rates.  While our country can print money at will, apparently this debt limit actually prevents the White House from doing so, which also limits borrowing. So what then?  

Here is the situation.  Treasury Secretary Tim Geithner (who will leave office by this Fall) said that August 2 was the deadline for default.  President Obama, however, this week indicated that the real drop dead date was July 22, and in the process, thumbed his nose at the Republicans.  The White House is seeking a $2 trillion increase, which should carry the government through most of next year.  What will happen is that the $4 trillion in budget savings over the next decade being discussed will not be attained.  The parties will compromise at around $2 trillion and push off the contentious issues until the next time.  The debt limit will be raised to around $15 trillion.  The Congress might miss some recess this month, but the USA will not go into default.

The debt during these times of low interest is really a non-issue (read my HuffPo as to why).  However, the Republicans know that the average voter does not like to be in serious debt (but personal debt is not akin to national debt, which is closer to the financial situation of companies, which want to borrow at low interest to make higher profits), so are playing their "Obama is a one term President" card by trying to embarrass him.  After all, our debt was only a trillion in 1981, and is today at:


That, with the escalating interest payments, scare the heck out of the people.  But then, you must ask yourself, why are we to today the only super power?  Something is going right.

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What in the world is happening to the stock market, as the Dow Jones Industrials experienced it's best week in two years, up 168 to 12,583.  World exchanges also almost all went up, save for China.  Gold fell $14/toz to $1487, showing a pullout of investments to...stocks?  Oil is steady (see graph on the right).

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