... I feel this issue must be posted since the economic overtones are SO profound and systematic ...
from
(snip)"You knew this was coming...
The Republican co-chairman of the bipartisan deficit panel said Sunday that the members' inability to strike a deal is a "huge missed opportunity," while refusing to say definitively that the committee had failed.
Rep. Jeb Hensarling, R-Texas, and Rep. Xavier Becerra, D-Calif., another member of the so-called Super Committee, both said on "Fox News Sunday" that members are not giving up on striking some semblance of an agreement before a Wednesday deadline.
"There's still time on the clock," Becerra said.
But the committee has a matter of hours to submit a plan in order to give congressional budget scorekeepers enough time to review it. The de facto deadline could be as early as Sunday night. While Hensarling said lawmakers are "not going to give up hope" and continuing to talk, he did not dispute suggestions that the committee was headed for failure.
I really wish people would stop talking about "success" like it would actually be success, because it's not.
The "target" is $120 billion a year or $1.2 trillion over ten years. The deficit last year was $1,700 billion, and this year through October has been $765 billion, with two "bad" months remaining that last year were good for more than $350 billion between them.
$120 billion a year is ten percent of what has to happen to reach budgetary balance, and that is deemed "unachievable."
These so-called "representatives" and "senators" are frauds. All of them, from both sides of the aisle.
They're still trying to preserve the "skittles" that came from this over the last 30 years:
You can't. The promises made are simply unable to be fulfilled. It's a matter of mathematics and no amount of arm-waving and complaining changes this.
Back in July I advised a member of the "Tea Party" caucus to take the hit now and pull the plug on deficit spending by refusing to raise the debt ceiling. I said the same thing in a Senator's office with Bill Still. This was ignored, of course, but the fact of the matter is that the longer we wait to do the right thing the worse the outcome will be.
I fully understand the political implications of doing the right thing -- they're bad, even horrific. But the implications of not doing the right thing are that we will go through the sort of upheaval that is happening in Italy, Greece and the rest of Europe.
We not only are not doing the right thing, we're not forcing the banks to quit writing credit derivatives they cannot cash and are allowing them to "back them" with depositor's money. That's an outrage -- an out-and-out fraud upon the public in that these "derivatives" cannot be performed upon when the time comes and thus won't, and what's worse is that the Bankruptcy "Reform" law passed in the 2000s arguably puts those derivatives in front of depositor payouts in the event of failure.
This insanity must stop now.
Europe is going to blow folks. It cannot be otherwise. "Money" (really just naked-created credit and a short on the Euro) has been issued to debtors that cannot be paid back. The governments in question have made promises they cannot keep and as they fail to keep them their tax revenues have and will continue to collapse. This is the precise mechanism of failure that I have talked about for more than four years and it is going to nail us as well. While we cannot avoid some of the effects if we do not take steps to effectively firewall off the risks from the core of our government we're going to find ourselves with no alternatives but a crash collapse in government spending along with literal and immediate impoverishment of those who have taken to rely on that which we cannot deliver.
I wish there was a clean and simple way to solve this problem but there is not. There is also no time to play the "we'll stop overspending later but now we must support the economy with more deficits" game. We're here because we manufactured false economic demand that did not exist and in doing so caused people to build supply to fill that false demand. As the marginal economic expansion of this additional debt went to an effective zero we hit the wall in 2007. Now everyone is trying to repeat the same conditions that provided this false "prosperity" in the hope pulling out of the tailspin.
It's not arithmetically possible for that path of action to succeed, and once that which we cannot do is eliminated we're left with what can work, which is to tell the truth and then figure out what can be provided with current tax revenues and reset the size of government to provide exactly that -- and no more."(snip)
The take-aways from Karl Denninger's 'spirited' analysis should be fairly obvious ...
When the super committee fails to reach agreement on gov't deficit reductions, the 'automatic backstops' will trigger large reductions in defense spending and health care spending. This will quickly trickle down to reduced profits and falling stock valuations for businesses involved in these market sectors.
When the super committee fails to reach agreement, implying that the US gov't has no effective plan to 'stabilize' the US economy, the 'bond vigilantes' who are currently giving Greece and Italy a serious 'working over' are very likely to begin the same regimen regarding US treasury bonds ... and by inference the US dollar. This will quickly translate into rising US interest rates as well as rising prices ( in US dollar terms ) for world commodities like oil, food, precious metals etc.
The bit about bankruptcy law changes involving investment firms is highly disturbing. Essentially it means that in potential future MF-like situations, other investment firms may be forced to make payouts to foreign banks, sovereign investors, and other counterparties BEFORE investment money belonging to domestic individual and/or institutional investors is paid back. This has profound implications where personal and institutional investment money is concerned ... i.e. in a worst case scenario the mutual fund shares, commodity fund shares, money market fund shares etc. supposedly 'owned' by personal and institutional investors potentially become subject to 'second tier' creditor status when attempting to 'collect' that money from a bankrupt investment firm. For any who think this is fictional ... see
(snip)"After weeks of intense lobbying by customers and exchanges, trustee James Giddens last week won court approval to release another $520 million in funds from MF Global accounts that contained only cash as of October 31.
But that has still left thousands of customers in an uproar. Clients who had a mix of cash and trading positions have yet to see a dime of their excess funds, they say. The trustee is planning a third cash transfer to cover these clients, but no timing for that tranche has been announced.
"The whole process is a mess," said Jason Skole, a private investor who had invested $200,000 at the start of this year in a small hedge fund who traded through MF Global.
"Those who had just cash positions will get some of their money. All I've got is 60 percent of the small amount of collateral I had backing trades," he said. He says around $185,000 of his money is still frozen at the bankrupt firm."(snip)
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