Thursday, May 14, 2009

The Road to Weimar America

Saw this yesterday and didn't blog about it, but what if Treasury notes become junk bonds?
The US government has had a triple A credit rating since 1917, but it is unclear how long this will continue to be the case.
Hat tip to Ed Morrissey via Ace of Spades, who has a very good round-up of the harbingers of a fiscal/monetary apocalypse. I've been warning about this for months, as in February:
Go talk to some people who know a bit about the bond market, and see how they think the global investor class -- U.S. debt is a commodity traded globally -- will react to the prospect of still more deficit spending piled on top of all the deficit spending for the $152 billion "stimulus" in May, $350 billion for TARP I, and now $789 billion for more "stimulus." Another $350 billion for TARP II? Oh, they're going to love that.
If the world's investor class believes that your Keynesian pump-priming will work, they'll be happy to buy up all those Treasury notes, just like they'll be happy to buy stock in U.S.-based corporations. Do you think those people are stupid, sir?
It Won't Work, The Fundamentals Still Suck, and Economics Is Not a Popularity Contest.

Back in 2007, I was talking to economists who were worried about the impact that the housing bubble collapse (which began in 2006) would have on the economy. And the same economists are now muttering dark forebodings about the impact of this multi-trillion-dollar deficit spending spree.

Well, when the Dow Jones bounced up above 8,000 -- after falling below 6,700 in March -- some people were saying the worst was over. We had hit the bottom, and now the recovery would begin. Two words: "Sucker's rally." The Dow hit 8,575 on Friday and, though I'm no financial guru. my hunch is we're now beginning another slide downward. Pessimists tell me they don't think we'll hit bottom above 4,000.

Why? Well, how about the idiotic noises about health care emerging from Washington? The liberal suggestion that we will actually save money by implementing universal health care is, as Megan McArdle says, "gibberish in a prom dress."

Unemployment is surging. The Obama administration is meddling with mortage rates and Treasury wants to take over the derivatives market. Liberals are pushing for a "global warming tax." Government is ripping off investors. The rule of law is trampled underfoot. All the signals from government now point toward more deficits, more taxes, more inflation, more regulatory restrictions to impede the private sector.

Hello, Weimar America.

(Cross-posted at Hot Air Green Room.)

UPDATE: Linked at Kuru Lounge and Creative Minority Report. Meanwhile, Mary Katharine Ham observes:
With utterly unprecedented spending and build-ups in deficits with utterly no attempt to control either, despite promises to do so from Obama on the trail, the American people may be looking for anti-establishment comfort in 2010. By then, it won't be about being Republican, but about being responsible. Democrats have been so deliberately, demonstrably irresponsible in just four months, that making the argument for Republicans (fiscally conservative ones) becomes easier and easier by the day.
"Fiscally responsible Republicans" = Not Charlie Crist. More like Jim DeMint and Tom Coburn.

Tigerhawk wonders if Team Obama believes they'll be able to blame Bush forever. But how will they blame Bush for Obama's job-killing tax plans?

(Graphic by Heritage Foundation.) More commentary at Memeorandum.

The New York Times is trying to cover up Democrats' blame for the mortgage crisis.

UPDATE II: Obama demagogues credit cards:
People are "getting ripped off by anytime, any reason rate hikes... all kinds of harsh penalties and fees that you never knew about,'' Obama said. "Enough is enough, it's time for strong protections for our consumers.''
And his audience cheered.
Good God. If you don't like the rate, don't use the card. How simple is that? Caveat emptor. But by limiting rates, you would necessarily limit the availability of credit, since banks have to calculate the likelihood of default into their rates.

Ergo, limiting rates means less credit for the poor, which is certainly going to hinder economic recovery. And yet Obama's audience cheered his nonsense!


  1. I just finished reading Adam Fergusson's book, "When Money Dies: The Nightmare of the Weimar Collapse". Frankly, it scared the hell out of me. It reads like the plan our Democrats are using today. The hard copy of the book is extremely scarce but the book is available as an e-book.
    Jerry In Detroit

  2. ""Fiscally responsible Republicans" = Not Charlie Crist. More like Jim DeMint and Tom Coburn."

    And Pat Toomey ... and Marco Rubio.

    Fuck you, John Cornyn, I regret voting for your sorry ass.

  3. But..but..but....Joe Biden said that the stimulus has created and/or "saved" 150,000 jobs since it was signed into law!


  4. Treasury's move to control the derivatives market continues the Obama economic putsch. The Powerline guys got the news out that Paulson, Bernanke and Geithner, et al., called the banks in and told them they could not refuse to accept the TARP money and the government assumption of stock. Geithner's comments are still hidden, which seems strange.

    The weird thing is how so much of this comes back to the Fed in New York and Goldman Sachs.

    Like, weird.

  5. There is NO QUESTION that Ham's theory is correct. Bush was bad, but Obama is horrific on the spending.

    A (R) with half a brain can very easily link the spending with the debt and then link that with anyone's home mortgage.

    Mortgages!! Long-term debt!!! Overspending!!!

    Now let us find a (R) with half a brain before 2012!

  6. The only way that I know that you can save money by spending money is to spend on capital expenses in order to reduce operational expenses.

    I.E.: An Olympic class liner had an engine room crew of about 350 when the liner was coal-fired. Changing over to oil fuel (a capital expense) reduced the engine room crew to abobut 60 (an operating expense).

    But there is a limit to how much that can be done at any point in time.


    Mikey NTH

  7. If this is Weimar America...can we have more Rule 5 babes in Sally Bowles gear?

  8. There will be no credit available anyway, so what's the diff from the Won's perspective.

  9. "all kinds of harsh penalties and fees that you never knew about"

    Am I the only person on the planet that read my Terms and Conditions before signing them?
    Know what I did when a credit card pulled this B.S. on me and I didn't have the cash on hand to pay it off immediately?
    I went to a different creditor, let them look up that I'd never missed a payment on anything ever, transferred the balance to a lower APR, and even got them to waive any kind of transfer fee.

    Yes, I made two companies compete for my business, and by trying to nickel and dime me, the first card company ended up missing out on potential interest earnings which I gladly paid to the second.

    Free markets... whuda-thunk it?

  10. They cheered over O's credit card plan because they think they can charge to their heart's content with very little punishment (no more late fees, etc)...they will be in for a surprise when they CAN'T get credit cards and have to rely on payday loans...:) Couldn't happen to a nicer bunch ... and I'm guilty of abusing credit and paid for it.

  11. My bank tried to knife me, and I went to a credit card, and got a better rate.

    There are those who have some minimal degree of financial skill and strength, and there are the clueless and the weak. And there are those, like many credit card companies who want to prey on the weak.

    Usury laws are a good idea. If your business is built onthe necessity of destroying idiots, I have little sympathy for you. And yeah, I'm yay for free enterprise, but there are limits