Edited & Revised: Saturday, September 03, 2011
At The Rate of the Wait.
In Uncertainty …
Can the U.S. Afford The Fate of the Cost of the Lost?
What is the Implication of Having Still More Patience?
The U.S.’s Ability to Manage Its Debt/Stimulus?
Is It Merely a Matter of More Money
More Money on Top of More Time & More Money?
The magnitude of the money required to service the interest costs generated by the public debt is stopping for no one today …not even the Tea Party.
With respect to its costs; the rate to wait while uncertainty rules the hearts and minds …can justify no amount of stimulus which has benefited no one …save an administration which has not looked back nor missed a beat in taking every opportunity to turn a blind eye on housing …while jabbing the financial sector in the eye with a sharp stick.
1. Regarding: The cost of the lost __________ (Fill in the blank with the highlighted choice)
A. ) Growth
B. ) Unemployed
C. ) Homeless
D. ) Decade
E. ) Opportunities
F. ) All of the above
An F …while …not necessarily being the right answer; it is the one which would be the more correct honest answer.
In spite of what Americans want to become …this rate is what it was; what it is; and what it will be …if America continues to repeat the same mistakes over and over while being led to believe that this cost is the basis of what hope and change is all that this uncertainty can become.
And what is that, one might ask?
Well, it certainly ain’t about shame and blame …and an inheritance …one which one merely disenfranchises, avoids and side-steps with a mind-set which rather more resembles a “…whatever …â€ attitude.
Owning such an ambivalent entitled attitude is no excuse no matter how much one refuses to take ownership for anything at all …save the solution less dribble of ones grasp on endless rants of shame and blame.
I have to say that it really pains me to have to write a simple and plain piece which wraps up a digestible summary of the direction, rate of travel which the U.S. is moving toward on its destination along the path which the economy is currently traveling.
Make no mistake about it; the path I am talking about has the U.S. headed …unwavering, for a certain destination.
Allow me to explain.
Once upon a time, not too long ago …I lived in Hungary at a time which the rate of inflation was running at 33%. As high as that may have been …it was a promising time. People were full of hope and looking towards a brighter future. And in spite of bleak and oppressive 79 % effective tax rates, optimism was still running rampant.
Unlike the low growth atmosphere of pessimism that has been dominant in cultivating the uncertain U.S.A. fruitless economic landscape of today, there and then …the velocity of money was unsurpassed in the Hungarian’s bustling economy at that time.
One could just smell the level of opportunity that was in the air. It was happening there.
However, here …overall broad spectrum inflation has yet to raised its ugly head …primarily because velocity is anemically so low and slow …that whatever inflation currently exists has been rather moderated and or intentionally destroyed …or dampened with and by the stifling air of uncertainty …that …such as it is …whatever inflation there has thus been to date …has been somewhat limited to commodities in a low demand …low growth environment.
Paradoxically, one may ironically be thankful for a broke or half a limp monetary policy which has produced little but such …compared to full blown …out right unbridled inflation …the likes of which comes close to the 33% I mentioned above with respect to the Hungary of days gone past.
However, when I look back to the activity of the Hungarian banks then, try to imagine (if you will) what it meant to those financial institutions which …in order just to merely eek out the an opportunity to realize a 3 to 6 percent margin.
Could you imagine what these institution’s bank rates were?
If they were making loans available …can you imagine what they might be …if one could qualify for a loan?
In that environment, who in their right mind would offer a loan at a rate below the rate of inflation …especially …if the rate of inflation was still moving higher? And believe me; the increasing rate of their monies’ velocity had all but made sure …a sound reasoning for the insurance that rate’s would increase and stay ahead of forward-looking inflationary pressures.
After all, without planning, a bank would fold rather quickly.
Are we doing the same? Well, we seem to be wishing in one hand …and hoping in the other, yes?
In spite of all our good intentions, it would seem as though we have shoot ourselves in the foot instead by making the banks our whipping child for the sake of politically driven financial reforms …reforms which have missed the mark for the most part …and have added only more to the air of uncertainty.
Such as it has become, such uncertainty has made it all but impossible to plan a course toward prosperity …in the face of a needy government which is demonstrating that there is no inconvenience too great compared to its own brand of selfish political greed.
Yet, for all that, uncertainty has all but been merely one …among a whole host of a jumble whose pile of detriments is holding our economies velocity hostage while …and as long as …the Fed seems to believe that it has to be the answer to all our problems.
If only Big government could find a way to manage to step out of the way, instead.
Then, maybe …quite probably …organic private sector growth might have a chance to prevail to a point which actually produces fruit.
As is, those private sector seeds are not being sown …and we have yet to achieve anything close to escape velocity.
In Hungary …at that time, velocity was therefore, primarily retail …consumer driven, but expendable income was also scarce. Private saving was therefore constrained. But, then again …everyone who had emerged out from under Soviet Russian dominated occupation …just had to have goods made from the west …a Sony Walkman not withstanding.
Bright and shiny Shell gas stations were springing up everywhere and …as the gas flowed in their tanks, so their money flowed out of the country. Their net balance of trade was not working in their favor.
One may very well ask; how does this all relate to current economic affairs in the U.S. of A?
Imported oil poses one of the greatest risks to our trade balance’s affect upon the value of the dollar.
It stands as the greatest conflicted interest which acts more and more like a tax to consumers …more so with the rate at which money moves through the economy …with higher velocity, pressure or force.
This conflict stands as a headwind against any efforts to bring about a recovery in housing …for the outcome in terms of what such efforts’ impact would have upon velocity …and how that dynamic’s unintended consequences would affect inflation.
The end game of such a scenario will raise rates and thereby impact service requirement costs to tote the note and pay the debt load on the public debt.
This all will require the Federal government to rethink its plans to cut spending.
In fact, such interrelated multidimensional economic dynamics will certainly force spending cuts as debt loads rise …and rise they will …because the planned deficits which are already on the books …are plans which will produce such a negative harvest …all in terms of unavoidable obligations.
In this way; there will be no where to hide from the overflowing scourge of the consequences of the debt’s service obligations …and in a low growth environment cuts would …then become also a forced necessity …like it or not.
In such a case, people may look back and wish that more tax payers owned homes to share the burdens which are now mounting up to become the cost of the rates we are now willing to pay while we wait for nothing to become something rather which …then will become unavoidably …unbearable.
In the meantime, with today’s levels of ideal tolerance of socialism …there are many who are saying that jobs …not housing is single factor which is primarily at the root of the main issue.
Those who are pounding the table with their shoes on this issue …do so by arguing idealistically that the nation needs must …first add jobs if, housing is to rebound.
Where are the incentives to make this fantasy a worthwhile reality?
Let me digress …if you will.
Now, let’s see; which came first …the chicken or the egg.
For the past three to five years we have failed to place the horses ahead of the cart …in a responsible fashion.
Instead, trillions of dollars in so-called stimulus have been proposed with no more thought and planning than is poked fun at by the Red-Green show on public television.
Please Note: The reference to the Red Green show is meant in a manner to compare its humor’s satire which pokes fun at hicks to the antics so prevalent within Washington’s political and bureaucratic circles.
Laying all manners and pretzel logic aside; what I am saying is that those who would place jobs before housing for political reasons. These are also those who have done nothing to build the housing and banking institutions in the interim.
Seeing that these are those who have bent over backwards to go out of their way to badly injure the industries which are the engines and captains of industry …namely the financials; I have to ask myself …what do these types of people have to gain by tearing down the financial and housing sectors?
Are not these the two sectors whose institutions which form the backbone of our great nation …when there are healthy and firing on all cylinders?
Then, who are these idealists and individuals who can make and give great speeches all day …all month and all year long …yoyo …without having done a dammed positive thing to promote the economy.
These are also those who bang the table …pointing to the fat cats who are setting awash in cash …while doing nothing.
Nothing? Oh, Really?
O faire contraire mon chaire!
These are those who managed to by choice …to deal with all adversity according to every uncertainty in the environment …socio …political and economic factors not withstanding.
And manage they did quite well in spite of a down-turn sluggish economy …an economy which …unlike the Hungarian economy I mentioned above …has pretty well not been flowing at any rate which could be characterized as flowing with torrents.
It is one thing to throw good money after bad, but it is entirely noble to make the most of a bad situation.
In this regard, I have to salute the surviving American business men and women …those who have weathered and waded through the last few years of those who have offered nothing but idealist crap.
Yes, crap! For what good has come of the trillions of stimulus …if because it has also entitled and empowered the idealists to stand on the garden hose of prosperity to do what? Point fingers?
Oh, brother …where fore art thou? Watching the Red Green show?
As is, GDP growth depicts an economy which might be characterized best as “tricklingâ€ …but certainly not as …flowing with torrents.
I would argue that less would be more …in terms of stimulus.
Such as has been the case that there has been so little bang for the trillions …even those who the Red Green show make fun of could see that doing more of the same and expecting different results is akin to begging for more insanity, YES?
My purpose in writing this stems primarily from pondering how much GDP growth there would need to be in order to realize what would …could …and should be enough to pay for the hundreds of billions which represents the growing portion of the annual budget which is the actual public debt’s …debt load …an amount expressed as its service requirement.
I do know that expression …when taken as a percentage of all of the actual real …organic tax receipts actually represents.
But I do know that its size is continuing to be growing at an increasing rate (in step with inflation) …according to the pace of each and every year’s + trillion dollar deficit’s annual contribution.
This view of the debt load compared to real revenues collected may currently well be above 22 percent.
This figure represents a …less deficit comparison, because deficits swamp out and diminish the service costs in a way which obscures their actual magnitude. Therefore the only way to realistically view debt service costs is to omit the portion of the budget which are comprised by deficits.
In a slow to no-growth economy, the percentage of the annual budgets’ service costs have been …are …and will be …rising with each and every planned successive year’s + trillion dollar deficit …those deficits which the U.S. is on schedule to borrow and spend over the next few years …much of which leading economists are now lining up projections which include the highly likelihood that we will be …as we are now …in a projected, long protracted low growth period which may last for several years.
Wow! That will require some patience, but that patience …if true will cost more given the opportunity to do nothing …or more of the same which has netted nothing while we have waited patiently.
One thing can be counted on in these lean low to no-growth years is that the service cost portion of each and every one of these lean years to come will become a larger burden …for the service costs promise to do nothing but continue to grow larger …even if the economy …were to become like Japan was …stuck in a lost decade.
Isn’t it bad enough to look forward to bear the social costs of the needs of those who are already lost and found …jobless? What about the homeless? With a greater service cost …the U.S. will likely have to cut somewhere.
Stimulus and tax are polar opposites unless one is politically motivated …dead set on redistribution ownership and other assets which can be found in the private sector.
Sounds to me rather like the talking plant of The Little Shop of Horrors. It was well known for having repeatedly demanded; “…Feed Me Seymour! Feed Me …!â€ Check out Little Shop of Horrors on Wikipedia.
And if you do …and you still can’t seem to distinguish the difference between “…of the people …by the people …and for the people …â€ any more than of the government …by the government …and for the government …then you …my friend have been apparently watching too much Red Green show on public t.v.
The growing service costs and the amount of the endgame of such a lost decade should …then, be enough of a motive to get anyone up off the spitter-tooner and actually do something constructive.
No doubt, though …as sure as we all have been made to sit here patiently all day in the rain and wait, there are certain sectors which will notably perform better than others.
However, with respect to housing, the term “tricklingâ€ may not even be altogether as appropriate as …would be the more honest and appropriate term “forgotten.â€
Therefore, the blind-eyed lack of due diligence which helped to usher in the housing bubble’s burst …is strangely enough …also allowing for its stagnant, lack-luster recovery …jobs not withstanding.
But, I am certain there is a justification for this blind-eyed lack of focus though.
After all, aside from the cost of the patience required to usher in more blind-sighted change …the change that is ain’t the hope we all envisioned …was it now?
No, because the costs are a measure of what ARTIFICIAL RHEMEDIES …are not compared to those which are ORGANIC.
Is it any wonder why people get freaked out about the promise and or just the very mention or hint of another round of GOVMENT STIMULUS?
And I am equally certain that there are those who whose rhetoric might even resort to employ some smoke and mirrors …in order to keep your ANGST STOKED, SIDE-TRACKED AND OFF THE BALL …AND OUT OF MIND AS TO WHAT THIS EXTENDED WAIT MAY COST IN THE LONG RUN.
You know, it is said that patience is a virtue, but who can afford to be virtuous who is and or may become …one day …without a roof and a job?
Who for that matter can afford to have and raise a child …the remnant of the BABY BOOMERS?
Just as is the case with private home ownership in some communities; when there are fewer homes owned privately; private home owners must bear the burdens …which ultimately show up in the form of higher appraisals …which fly contrary to and in spite of what the market conditions may otherwise strongly suggest.
Therein, lays the conundrum …a diabolical conundrum at that …I might add.
The rate of the expansion of U.S. Debt …of late (in the last 3 to 5 years) has piled up …to a large degree …on the short handle.
However, the debt load is an annual fixed burden …one whose cost (I say) is a rather fixed portion of the budget. None the less, taken as a percentage against the whole …it is …a piece of the budget’s annual pie whose portion is threatening to get larger each year …especially as the economy stagnates while the deficits thrive and have become a routine matter of ….business as usual.
Same as it ever was …Same as it ever was. The Talking Heads theme song is not just another river in Egypt.
And aside from denial, which …when deficits …are expressed and viewed as a percentage of the over all budget’s pie …that expression can grow rather quickly in a remarkable variety of ways.
And this can and will occur rather easily in a rather sickly …and dysfunctional environment …in spite of the fact that our debt load’s service requirements are an annual fixed cost. As such, the debt load is an unavoidable obligation …one in which failure is not an option …regardless of however dysfunctional a bunch of idiots there may be in Washington who may find it more convenient to debate (seemingly) more important issues …those ahead of housing.
A huge portion of the maturities’ mix …those which the U.S. Treasury Department offers at auction are U.S. public debt instruments which have maturities which periodically come due and have to be either turned or treated as a function whose real-time needs forms a basis expressed in terms of current (daily)redemption demands.
Otherwise, the periodic turn of maturities which come due …is reset using a new …current rate.
Oh, if rates could only remain forever low; then, the debt service costs would also stay fixed …allowing the turn to be shoved off of the shelves of the short end of the handle …and be reallocated well out onto the shoulders of a few other future generations’ shoulders to deal with …in place of this generation’s miserable sots.
So, what’s the problem with that?
Well, one needs some time in order to pull these big f’n rabbits out of the hat …or (Jackson’s Hole’s Summit announcement) in order to lift …or shift the Federal Reserve’s handle’s weight …off the short side in order to get it successfully (???) moved to the long side of the handle.
Well, again …one might ask; what is wrong with that?
Nothing …as long as you have the Patience Require …and the P.R. necessary to pull this out of the HOLE in Jackson …and that ain’t talking …Jackson, Mississippi.
Man O’live …that’s a lot of S&Ps …no?
What I am trying to say is; that …in order to pull a whole mess of rabbits out of the Hole …one must count on …S L O W M O N E Y.
WHY IS THIS?
Fast money …as in torrential velocity …would spell instant inflation.
Why would this be bad?
What’s wrong with that?
Higher Debt Loads …that’s what.
What’s wrong with that?
The rate at which the debt service requirement grows will impinge upon the federal government’s discretionary spending at first …but then …also upon its ability to return chartered social obligatory social services.
The RATE at which (these wild card trumping) debt service requirements is and will grow …will most certainly impact the monetary allocations for entitlement spending.
Unlike GNP which is the private sector’s contribution to GDP, the government’s portion of consumption will most likely …as it always has …turn to and lean against the private sector to make up its short falls.
The bottom line is that …in the mean time …in protracted periods of slow money …deficits are like Vegas …the city that never sleeps.
Current deficits will ensure that this journey’s destiny is one which will end in a train wreck.
Don’t ask me; well, Bill …what’s wrong with that?
Instead, when 2012 roles around; vote your conscious …not your emotions.
Until then, there will be no end of those who will make endless plays on your emotions.
Those are they which merely seek to catch you in the nets of their political agitation’s promises.
In the mean time, be more discerning.
Agitators may make endless speeches, but community organizers do and accomplish monumental builds.
Agitators break down. Agitators build angst and leverage covetousness for no good end.
Otherwise, the jealous and envious lot would be builders.
Beware of those who pick up stones.
Until then, believe more, expect more and do more.
Participate in building.
Until then, say less and make more happen.
Agitate less and cooperate more.
If anything, pick up the pieces …and put the house back together …free from what caused the problem in the first place.
Strive to be debt free.
Strive to live truly free …not from hand to mouth …and from one speech to another ad nausem.
Good lord ….save us from the speech makers.
Give us a house maker!
Give us a house …united once and forever more.
And while I’m on this subject …give me a Senate and a President which agree to stand united together on this house’s foundation.
Above all, may the Lord God our Father and all heaven above help us all to strive to reach and achieve this end?