National Debt? What National Debt?

If you’ve been watching the national news much lately you’ll wonder what ever happened to all the concern about the national debt and the massive budget deficits planned for the next decade.   On the up side however you will be quite an expert in addressing issues relating to repairs to the late Michael Jackson’s nose.  But I digress….

Hey, maybe we solved the debt and deficit spending problems?   Oh.  No.  We.  Didn’t.    We owe 11.5 Trillion and it’s rising faster than an inconveniently untrue  misinterpretation of a globally warmed sea level on a Florida shoreline.   Although it’s true that most economists from most sides felt a stimulus was important, and in fact it appears that has stemmed the tide of a financial death spiral, I think most would agree that as the recovery starts to take shape we need to look long and hard at how much we spend.   The *key cut* is obvious and it is the defense budget, but the legions of fake conservatives (often aka “Loyal Republicans”) who carp about a few million wasted here or there refuse to tackle the defense budget, blinded by an absolutely incomprehensible lack of understanding of basic global strategics which have shown throughout history that seeking massive military superiority has little or no justification.   From the Ming Dynasty’s Great Wall of China to the Viet Nam to Iraq,  “defense” become “offense” and results in massive spending with hugely negative ROI and often just exaggerated the unstable conditions you sought to avoid  (e.g. Afghanistan, Middle East).

Incredibly, the concern about the debt has flipped to paying an extraordinary amount of attention to fixing the problems we don’t have anymore.     Obama was explaining to a crowd yesterday all the things the government is doing now to prevent the financial troubles *we do not have anymore*.     Overvalued real estate?    That ship sailed and sunk.    We are probably near the bottom now, things seem to be picking up a bit, so lets move on.   Financial system?   It’s not in great shape but the catastrophe appears to have been averted.

Yes we need oversight but not a huge bureaucratic encumbrances many Democrats are calling for now- ironically many like Barney Frank who are squarely at fault in this crisis for the crappiest era of congressional oversight in the history of the country.    The system failed to address the risk factors properly for reasons that are slowly becoming clearer – a combination of corporate greed and incentives run amock, defective ideas about how huge economies work, terrible government mismanagement of the regulatory systems, and I think by far and MOST IMPORTANTLY people using their homes as piggy banks, raiding their paper equity from stocks and Real Estate to live at inappropriately high standards, work less, retire too early, buy boats, speculate in MORE stocks and real estate, etc, etc.

We all made this bed  and now we are sleeping in it.   YES, even those of us who did NOT mismanage our finances were involved unless they lived alone on an island and didn’t do any investing, borrowing, or buying during the bubble.

The economy has been reset at a lower, more appropriate levels given all the prevailing circumstances.   Welcome to how economies *really work* and why the risky investments of the bubble were … risky.     But those aren’t the investments people are making now that will put them at risk.    New crops of scams are brewing as we speak and more importantly the debt on our backs is weighing down the future prospects *for our children*.   The massive debt is unconscionable yet we are fretting over things that will have relatively trivial impacts compared to that debt.    The country is acting a lot like the most irresponsible among us during the bubble who simply borrowed and borrowed and spent and spent and now are so far underwater in debt they have *no prospect* of paying things back.

Here’s a site with great debt detail:

Oh, and if you want to get in your two cents and make a $.02 contribution to reduce our national debt there’s a place for that too, it is called “Dept G” in West Virginia.

The cool thing would be that if your $.02  reduced the 11,500,000,000,000.00 to 11,499,999,999,999.98   you would have changed a whole lot of numbers for a buck.     Printing costs alone would more than wash it away though, and you’d have kept the spiral going.   But that’s OK becuase that is how we roll now here in America – we spend like there is no tomorrow.   And then we spend the money that was supposed to be for tomorrow.   And when the spending gets out of hand we …. spend much, much more.

Countrywide v. Congress and the China Connection

Today CSPAN had the congressional hearings with Mozilo, who has a 40 year tenure with Countrywide as founder and CEO.  He presided over Countrywide’s meteoric rise and much of the meteoric fall.    I hope people hurry up and wake up to the significance of the events underway in housing right now.    The mortgage meltdown is likely to become the greatest loss of wealth in human history.    CEO pay is a mostly trivial aspect of this situation.I think we’ll see another 10-20% loss from current values and I think we are already down some 4 *trillion*  2+ trillion  in housing value (need to check this, but the number is staggering).    A discussion of the amount is HERE.   Housing is a major depository of American wealth and prosperity, and the recent boom in values has led to various forms of reckless spending by individuals as well as the usual wild, stupid, and reckless spending suspect: the Government.   This is especially true of our unconscionable  and totally indefensible levels of mililtary spending.  Note that you *cannot* be a fiscal conservative and support the current military budget.     $550,000,000,000 to the military and fiscal conservatism are mutually exclusive positions.The impact of the meltdown and the reckless spending will be felt forever because in addition to direct housing problems that we are only starting to feel, I think all this will to depress our economy for several years and thus accelerate the shift of business to China.     This last notion is speculative, but I think it is now pretty clear that the Fed will keep rates low for many years in an effort to fend off an even more disastrous housing and credit situation.    This means China will be buying less of our debt, but I think will switch to investing more*directly* in US companies, and thus owning more and more of the American empire.      Russia’s leader and architect of communism Vladimir Lenin is famous for saying  “The Capitalists will sell us the rope with which we will hang them.”  But he was dead wrong.     The “Communists”, to the extent that term has meaning anymore, have no intention of destroying the USA.   In fact they want to keep us in good shape for as long as needed.  Now it is China who is making the rope, buying the rope, and learning the capitalistic ropes so they can slowly and gradually replace us as the empire of choice on the global landscape. A few things I noted during the Countrywide questions and testimony:

 * Probably Mozilo was just a high powered opportunistic guy and probably was pretty much within the law with his trades and pay, however he must have known things were poised to melt down to some degree.      

* Our congressional system is failing to produce people who are worthy of ruling the amazing American empire.      I don’t think there is much corruption but these guys sure are uninspired.  The congress-as-corrupt view is a “naivety of the skeptic” idea that is not based on a study of the money flow, personalities, and history of public servants who for the most part are bright, helpful people.   However they are mostly lacking in the key skill sets required for innovation and smart reform.   In short:  American politics selects for the wrong skill sets. To wit:  

* Republicans can’t see past Ayn Rand’s ass.   They understand the virtues of capitalism, but simply refuse to focus any attention on the key topic of how our brilliant capitalisic experiment has *failed* in many ways to deliver enough products to the neediest folks and how many capitalists are mostly focused on the creation of opportunistic business structures that are exploitable by the clever and the wealthy to the detriment of the greater society. .

* Democratic congresspeople are overwhelmed by math and economics.  They concentrate on people, “good vs bad”, “rich vs poor”.  * People want to find bad guys rather than find the obvious.   In the case of mortgages  the system as a whole incentified unwise practicies.     Reminds one of the savings and loan debacle although I think government regulations (loan guarantees) were clearly at fault with S&Ls were the mortgage crisis cannot be blamed mostly on the government.

* Is there a simple legal remedy for all the CEO pay and stock manipulation issues?    I propose a  “Captains go down with the ship” law.    If a company you founded fails you lose everything you made from that company except some modest monthly stipend.    This would incentify stability over pump and dump strategies.   I don’t think it would inhibit founding quality companies.   What unintended consequences would this law bring to the business landscape?