Spinal Tap, the Schmenge Brothers, and now … The Great Debt Ceiling Debate

Wow. Talk about alienating your base.

Did you see where the AARP disowned Barack Obama, vowing to support his 2012 Republican challenger (whoever that may be), after the president called for bumping the Social Security and Medicare retirement ages to 70, and then “means testing” both programs, cutting off benefits to anyone whose home and retirement accounts together add up to more than $750,000?

Did you see how the Center for Biological Diversity, the Sierra Club and the Natural Resources Defense Council similarly ripped Mr. Obama a new one when he offered to close the Environmental Protection Agency, entirely? And how about the practically unprintable response of the National Education Association when the president offered, in exchange for sufficient GOP “raise-the-debt-ceiling” votes, to similarly shut down the 34-year-old federal Department of Education?

No? You didn’t see any news coverage of those loud, angry defections from the president’s Democratic base?

That’s probably because none of those things has happened.

Yet back in April — and ever since — multiple news sources have insisted President Obama offered the GOP “$4 trillion in spending cuts, even including cuts to Medicare and Social Security, daring to take on elements within his own party” — if only the obstructionist Republicans would agree to raise the debt ceiling.

So why have we heard no loud squawking from the Left, as envisioned above, in response to Mr. Obama’s proposed cuts?

Because Mr. Obama actually proposed no specific cuts, of course. While the mainstream press plays along, pretending the recalcitrant party here is the Republicans who “refuse to accept” the president’s incredibly generous offer, it turns out this “offer” is nothing but an oral promise that some distant future president and Congress — long after Mr. Obama will be constitutionally required to quit the scene — will make UNSPECIFIED spending cuts, supposedly sufficient to protect out Moody’s bond rating, in the years 2018 through 2023.

I mean, if a used car salesman tells you “I absolutely guarantee this car will be running great in seven years; if not you can bring it right back here and ask for Charlie,” anyone who hasn’t just fallen off the turnip truck will probably immediately think: 1) This guy has no intention whatsoever of being here in seven years; 2) Such a promise is worth nothing if it’s not in writing; 3) For that matter, what did he just promise me? He said I could “bring the car back,” not that he’d return my money; and 4) How do I even know this guy’s name is “Charlie”?

Yet a professional politician — who now turns out to have lied, in his most definitive and oft-repeated campaign anecdote, about his own mother’s insurance company refusing to cover her cancer treatment because it was “a pre-existing condition” (the company was Cigna; they paid for all treatments after the deductible) — promises us someone ELSE will trim federal spending long after he’s left office, while he plans to keep borrowing and spending to beat the band for years to come, and we say, “Oh, well, quite a handsome offer, that”?

The federal government has set a “debt ceiling” 11 times in the past decade. Each time, in effect, members of Congress promised the public, “We need to borrow some more money for a few real emergencies, but since you and your children will have to be taxed to pay interest as well as the principle, we promise we’ll never seek to borrow more than this amount.”

Eleven times they’ve hit the ceiling, and 11 times they’ve simply raised it again.

Why? What unforeseen emergency came up? A nuclear war with China? California fell into the ocean? The glaciers have reached Cleveland and are still pushing south?

Pretend you’re the guy at your local bank who’s responsible for deciding who gets issued credit cards. A long-time troublesome customer comes on — a guy who’s never listened to your stodgy, old-fashioned advice about paying down his debts, waiting till he can buy things with cash — and asks for a new credit card with a $100,000 limit.

“Wow. That’s a pretty high limit for someone who doesn’t maintain very high balances in your accounts. Why do you think you need that kind of card?” you ask.

“Because I’ve got 11 other cards with other banks that are all maxed out. If I don’t get a new card by Aug. 2 so I can pay off the balances on all those other cards I’m going to default,” he says, naming a date less than two weeks away.

Would you issue the card? Or would you tell that customer, “Sir, you don’t just have a credit problem; you’ve got a spending problem”?

As someone on the radio pointed out last week — it may have been Mark Steyn, filling in for Rush Limbaugh — this business of Congress and the president “negotiating” a new debt limit is absurd anyway, no different from “you and the missus sitting down at the kitchen table and deciding your new ‘debt ceiling’ should be 1.1 million dollars,” at which point you go to the bank and tell them you’ve “decided” they should loan you $1.1 million.

Both Congress and the president are the BORROWERS. Debt limits aren’t negotiated by two borrowers talking among themselves; they’re negotiated between the would-be borrower and a LENDER, who has some incentive to look into the likelihood that said borrowers have both the ability and the inclination to pay it all back with interest.

Until recently, that was primarily the Chinese. But the Chinese and other Asian investors have quietly pared back the amount they’re willing to place at risk financing America’s now-pointless wars and occupations of Iraq, Afghanistan, and who knows how many other foreign mudholes — not to mention all our unsustainable and actuarially bankrupt “entitlement” programs.

Thus CNBC reports the Federal Reserve bought approximately 80 percent of the U.S. Treasury securities issued in 2009.

This is beyond incestuous. The Congress about a century ago abdicated its responsibility to mint money, turning over the job to a group of private banks that make up the Federal Reserve, who after 1933 were further freed to print notes not redeemable in gold, and after 1964 to create unlimited paper “money” not redeemable in silver, either.

At this point, when the U.S. government needs some money, they go to the Federal Reserve and ask the banksters for some more green pieces of paper called Federal Reserve Notes, on which the government pays interest to the bankers.

Normally, Uncle Sam would sell his Treasury bonds to outside investors. But as of 2009, there weren’t enough outside suckers left.

To find enough real investors, Uncle Sam would have had to raise the interest rate he was paying on those bonds, thus compensating buyers for their growing risk, which would have been a tip-off that trouble was at hand. Instead, the Fed now helps Congress and the president create the impression everything is just fine by pushing the button and printing up enough new “instant money” to buy up the bulk of these bonds — at below-market rates of return.

Try doing this in the private sector. Create a company, and have some “insiders” buy up most of your corporate bonds at artificially low rates of interest. For that matter, arrange to have them “pay” you for your bonds with “instant money” they print up in their basements, all to make your company look like a really attractive investment.

When private operators do this kind of thing, I believe it’s called “fraud.” When governments do it, no one goes to jail, but eventually something even worse happens.

The currency becomes worthless.

4 Comments to “Spinal Tap, the Schmenge Brothers, and now … The Great Debt Ceiling Debate”

  1. lee c Says:

    Hi Vin,
    Long time reader and one-time subscriber to privacy alert, as usual you’re on point with everything you’ve written above. I used to debate furiously with friends and aquaintences the merits of a much smaller and limited government, but no longer do. There is no longer any way to save this country, I wish it were so, but 60 years of totally dumbed down “education” and brain-washing have done the job. The total lawlessness of the last several administrations, especially the current one, will end this nation as we know it. Some there in washington I do believe are truly evil people, and I rarely use that word. schumer, reid, pelosi, durbin, franks, dodd, these people want the american way of life ended. unfortunatly, they’re going to win.

  2. Bruce Says:

    Bang on again, Vin. I wonder who might be on the hook for the debt of new currency sold to the federal reserve. Bankers? The politicians (when did they ever take responsibility). Of course not. It’s anyone who ever saved a penny. I always look at it this way. If the entire economy is represented as “The Pie” ( a piece of it being what we are often told we are looking for) and “The Pie” and the entire money supply is a dollar, what happens if suddenly there is another dollar printed. Is a dollar still what the price is worth? Of course not, it’s now two dollars for the pie. What happened to the original saved dollar? It’s value is cut in half by the new, second dollar placed in circulation. Who had that original dollar, why of course the person who saved it. And the second dollar? It was used to rob the original saver of half of his value. The original dollar was in the hands of the saver, the second dollar, proven to be mythological and of no true value as it was backed by no work and no saving and certainly no actual valuable commodity, was created by merely printing (or voting in) the second dollar, in effect…. raising the debt ceiling. Sure they’ll pay you back, right after they get half your pie because that second dollar isn’t really worth anything anyway and there’s nothing behind it but smoke and mirrors.

  3. Jerry A. Pipes Says:

    Great points in there, Vin. Good job.

  4. Ann Morgan Says:

    Vin: I have long held theory that fiat currency and fiat morality, are somehow intricately related. Take a good look at the so-called ‘morality’ of most people today. It is a *fiat* morality, consisting of a combination of thinking that they have a right to control other people’s money (taxes) and/or that they have a right to control other people’s bodies. (SEX BAAAAH-D!!)

    Utterly lacking not only in the finances of most countries today, but in most major religions today is the concept of *accountability*. Islam consists of little more than numerous ‘legal’ excuses for committing rape and murder. In Christianity, a person does not have to pay for their own sins, they are paid for (supposedly) by Christ. You tell me, what sort of lousy rotter goes out and commits murder, then wants someone else, some completely innocent person, to suffer the punishment for that crime.

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