"We are out of money." Barack Obama May 23, 2009
Obama openly says what anyone with common sense has known for quite some time: the US is broke, and will not be able to honor its financial and fiduciary obligations.
The question remains how the US restructures that debt and how big a haircut the debt holders will take.
20%? 30%? More like upwards of 50% at least in real terms.
And who are these debt holders?
Anyone who hold Treasury debt obligations and financial assets, from the Long Bond to the US Dollar, and assets guaranteed by the Federal Reserve and the Treasury.
Technically the debt will be serviced and the interest paid according to the terms of the agreements, with devalued US dollars.
The process will continue until the debt is restructured and the dollar is replaced with a new dollar. This may take some years.
The Incontrovertible Truth About Debt, Deleveraging, Devaluation and Recovery
Why the US Has Gone Broke: Chalmers Johnson
Marc Faber Sees Bankruptcy for the US
In 2009 the US Will Be Forced to Selectively Default and Devalue Its Debt
A Credit Bubble of Historic Proportion
Shhhhhh.... Here is a Secret Worth Remembering
Didn't you just know they would spill it over a long holiday weekend?
Don't be too concerned, there will be more spin and denials after this trial balloon has been floated, and life will go on.
"Oh, that's not what Obama meant. He means we have a problem but there are the means and the time to address and repair it before it becomes too great."
People have an enormous capacity for delusion bordering on selective amnesia. Go back and read the posts on this blog starting in September 2008. Then reflect on what has been said recently on Wall Street and you will see what we mean.
We are now in the endgame of an historic credit bubble that will result in a currency crisis of epic proportions.
DrudgeReport
'WE'RE OUT OF MONEY'
Sat May 23 2009 10:32:18 ET
In a sobering holiday interview with C-SPAN, President Obama boldly told Americans: "We are out of money."
C-SPAN host Steve Scully broke from a meek Washington press corps with probing questions for the new president.
SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?
OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we've made on health care so far. This is a consequence of the crisis that we've seen and in fact our failure to make some good decisions on health care over the last several decades.
So we've got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it's putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.
So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don't reduce long-term health care inflation substantially, we can't get control of the deficit.
So, one option is just to do nothing. We say, well, it's too expensive for us to make some short-term investments in health care. We can't afford it. We've got this big deficit. Let's just keep the health care system that we've got now.
Along that trajectory, we will see health care cost as an overall share of our federal spending grow and grow and grow and grow until essentially it consumes everything"...
