# Big bust ahead for US?



## carverman (Nov 8, 2010)

The US is struggling under their massive debt load.approaching 15 trillion.
http://ca.news.yahoo.com/nearly-every-american-economic-harms-way-debt-deadlock-210103190.html

Not sure if this is just media hype, but are they seriously considering selling the gold in Ft. Knox, parklands etc? Would this be America's fire sale of fire sales?

Perhaps, they should have sold it (gold) when Goldfinger tried to break into Ft. Knox years ago...but then it wasn't worth that much ($1500 an ounce),
and Goldfinger just wanted to make Rolls Royce cars out of it...

must watch that movie again..because somehow..Hollywood fiction can become a reality...and this time 007 won't be able to help them.

<quote from online sources>
"The government is even weighing the prospect of selling off some of its assets — gold in Fort Knox, buildings, property, even some national parklands — to make ends meet, if absolutely necessary". <endquote.

reminds me of the depression era song"

"Buddy, can you spare a dime"

Once I built a space shuttle to the "sun",
(rocket to the moon),
made it run, now it's done,
Buddy..can you spare a dime?


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## ddkay (Nov 20, 2010)

If they put Medicare and Medicaid on the chopping block they would be good for another 100+ years. Is it humane? no. Will people like it? No. Tough decisions. Their long-term situation is extremely unsustainable. Rating agencies said they would downgrade the U.S. regardless if the ceiling is raised, if there aren't substantial deals made to handle long-term deficit.

"The only way out of the dilemma, absent very large entitlement cuts, is to default in one (or a combination) of four ways: 1) outright via contractual abrogation – surely unthinkable, 2) surreptitiously via accelerating and unexpectedly higher inflation – likely but not significant in its impact, 3) deceptively via a declining dollar – currently taking place right in front of our noses, and 4) stealthily via policy rates and Treasury yields far below historical levels – paying savers less on their money and hoping they won’t complain." - Bill Gross

Since I like to take an unconventional stance regarding politicians and deficits, I think option #1 will happen in my lifetime.


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## ddkay (Nov 20, 2010)

http://ftalphaville.ft.com/blog/2011/07/15/623881/the-aaa-bubble/

Risk-free sovereign debt makes up 55% of global fixed income. "That has the potential for a much larger pop, so to speak."


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## carverman (Nov 8, 2010)

ddkay said:


> If they put Medicare and Medicaid on the chopping block they would be good for another 100+ years. Is it humane? no. Will people like it? No. Tough decisions. Their long-term situation is extremely unsustainable. Rating agencies said they would downgrade the U.S. regardless if the ceiling is raised, if there aren't substantial deals made to handle long-term deficit.


I read somewhere about that (medicare/medicaid) will push that 15 trillion into "out of control" but..
isn't the US on a 3 tier medical system? Only the ones that can't afford medical insurance (unemployed) are on gov't medical assistance?

<*quote from wiki*.
The U.S. Census Bureau reported that a record 50.7 million residents (which includes 9.9 million non-citizens) or 16.7% of the population were uninsured in 2009.[1][2] *More money per person is spent on health care in the USA than in any other nation in the world,[3][4] and a greater percentage of total income in the nation is spent on health care in the USA than in any United Nations member* state except for East Timor.[4] Although not all people are insured, the USA has the third highest public healthcare expenditure per capita, because of the high cost of medical care in the country.[clarification needed][5][6] A 2001 study in five states found that medical debt contributed to 46.2% of all personal bankruptcies and in 2007, 62.1% of filers for bankruptcies claimed high medical expenses.[7] Since then, health costs and the numbers of uninsured and underinsured have increased.[8]

Please excuse my fuzzy math...I'm just pulling numbers out of my head here but...
If the current population figures (307+ million ) is accurate, and 51 million residents rely on gov't health care, what is the rest of the population... (_256 million)..let's say half of those are kids, 10% are unemployed of the 125 million (12million), so
that still leaves well over a 112million to "pay the bill") _doing? Why can't they make medicare work financially for them? Is it because the 1% of
the population (3 million) are so rich that they hardly pay any taxes?
(The industrialists, the wall street bankers..etc.)



> "The only way out of the dilemma, absent very large entitlement cuts, is to default in one (or a combination) of four ways:
> 1) outright via contractual abrogation – surely unthinkable,


You mean default on their loans?



> 2) surreptitiously via accelerating and unexpectedly higher inflation – likely but not significant in its impact


Inflation is already happening, how would the US Gov't accelerate to higher inflation..print more money like the Nazis did in WWII?



> 3) deceptively via a declining dollar – currently taking place right in front of our noses,


Their dollar is declining against other world currencies because they have become consumers rather than producers (war machine military-industrial complex excluded). In a world based economy, if you have no raw material resources (oil or other vital natural resources that other countries need in trade),
you are an importer/consumer. The strength they
once had in WWII, and post war years where they still manufactured goods for their own use, and exported
to other countries, is gone by the wayside. 

Everything is driven by profit now..a concept that satisfies the immediate demand of investors but in
the end, will be their downfall...because that profit now is based on the productivity of the asian worker and not their own. "Investment in America" now basically means the labour to produce goods is done somewhere else, the US pays for these goods in inflated currency.



> and 4) stealthily via policy rates and Treasury yields far below historical levels – paying savers less on their money and hoping they won’t complain." -


Well they are now infighting (Democrats vs Republicans), and scratching their heads on how to ease out of this conundrum. Those in gov't must now deal with the massive debt they have accumulated, through wars and other frivolous spending like the space program, medicare, the housing bust, the decline of their auto industry and other consumer products.

So it's not easy to come up with a solution, when the gov't is already broke and trying to pay all those with their hands stretched out, when (let's say as a point of 
argument here), half of the country that holds the wealth says ...."not off me, you don't!..find your own solution, but it isn't going to be by touching mine" 

If the US gov't was an individual, they would be running off to a bankruptcy trustee back in 2008. 



> Since I like to take an unconventional stance regarding politicians and deficits, I think option #1 will happen in my lifetime.


You would think they have somebody with economic smarts to find their way out of this maze. 
I watched the CBC show "Meltdown" on the last
US created recession and they pulled some investment guy out of Wall street to set fiscal policy for the US gov't..using take it or leave it at your own
peril" tactics.


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## the-royal-mail (Dec 11, 2009)

So, should I sell my US Index fund at this time, before it goes bust? If the US defaults, won't that mean a drop in the fund's value?


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## Toronto.gal (Jan 8, 2010)

The US has never defaulted and I doubt it will do so now, however, as so many things are unpredictable these days, I have for the last couple of weeks been selling a % of my stocks to increase my cash position. 

Also, the statutory debt limit has always been increased since early 1900's [5x since 2001], so not sure why they don't eliminate it altogether given that it does not appear to solve anything, but in fact, it does the opposite. Anyway, I hardly think that the Congress won't pass a debt limit increase yet again, so I'm not too worried, just cautious.

A good bit of news is that Italy passed austerity measures after market closing on Friday and all Irish banks passed stress tests; the latter was surprising!. 

Interesting article I read some months ago:
http://www.economist.com/blogs/freeexchange/2011/01/americas_debt

*Carverman said: and this time 007 won't be able to help them* - LOL, you always make me laugh!


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## the-royal-mail (Dec 11, 2009)

Toronto.gal said:


> LOL, you always make me laugh!


I'm jealous!


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## ddkay (Nov 20, 2010)

It's the same reason pretty much every pension fund in the developed world is in trouble: http://en.wikipedia.org/wiki/Population_pyramid

http://www.fms.treas.gov/frsummary/frsummary2010.pdf

"Persistent growth of health care costs and 
the aging of the population due to the retirement of the “baby boom” generation and increasing longevity 
will make it increasingly difficult to fund critical social programs, including notably Medicare, Medicaid, 
and Social Security. Chart 2 shows this growing gap between receipts and total spending, indicating that, 
as currently structured, the Government's fiscal path cannot be sustained indefinitely (see Chart 2)."

"It is estimated that preventing the debt-to-GDP ratio from rising over the next 75 years would require running 
primary surpluses over the period that average 0.5 percent of GDP. This compares with an average primary deficit 
of 1.9 percent of GDP under current policy. The difference, the “75-year fiscal gap,” is 2.4 percent of GDP. "


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## ddkay (Nov 20, 2010)

P.S. the reason our economy is screwed up is because GDP, our "economic health", is only measured by consumption.

GDP = C + I + G + (X - M)

C = private consumption
I = gross private investment
G = government spending
X = exports
M = imports

Sorry, I only spent $99.25 on my credit card last month. If Canada's economy falls apart, us frugal people are to blame.

It only measures what we want to measure, so why don't we measure something else besides consumption? Why don't we measure savings? Capital accumulation? Quality of life and well being? Value-added activities (i.e human ingenuity)? This is the root of the problem IMO, until that's fixed, there will always be a limit to growth.

Right now the worst case scenarios:
We hit a man-made limitation like extreme depletion of wealth (monetary deficit). Simple solution: default on the debt and start over. Economic reset.

We hit a natural limitation like depletion of earth's vital resources - hydrocarbons, clean water. Simple solution: There is none, it's the death knell for our species.

The Anthropocene has already shown its destructive impact: Fishing yield


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## carverman (Nov 8, 2010)

Toronto.gal said:


> *The US has never defaulted *and I doubt it will do so now, however, as so many things are unpredictable these days, I have for the last couple of weeks been selling a % of my stocks to increase my cash position.


I beg your pardon T.G..but if this blog has any truth to it..then it might have
back in the dirty 30s when FDR took over. 
http://beforeitsnews.com/story/0/204/Has_the_U.S._Ever_Defaulted_on_its_Debt.html

But then, so did Germany with their reparations from the damages they caused in WWI. That led to severe unemployment in Germany and of course a chance for der feuhrer to step in and..we ended up in a far worse mess afterwards.


Here's my .02cs (not worth anything these days)..but if the US does decide on selling their vast reserves of gold in Ft Knox..watch the price of gold tumble! Harold the jewelry buyers and others won't be screaming on tv for
you to send in your jewelry..because even if it's worth some "questionable" value right now at $1500 a troy ounce, it isn't going to worth that much
when a huge amount of stockpiled gold becomes available for anyone to buiy.

This happened in the 80s with gold and silver. I bought some thinking I would get "rich" by holding on to it. 
In the end, the Hunt Bros tried to corner the
market on silver and the whole precious metals market fell apart.
http://en.wikipedia.org/wiki/Silver_Thursday
Another fine example of US greed.
(I lost on the silver and just broke even on the gold,
and swore to myself never to taken in by speculation again. )



> *Carverman said: and this time 007 won't be able to help them* - LOL, you always make me laugh!


Thanks, "I got a million of them"...as Henny Youngman (comedian) once mentioned.


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## carverman (Nov 8, 2010)

ddkay said:


> It's the same reason pretty much every pension fund in the developed world is in trouble: http://en.wikipedia.org/wiki/Population_pyramid


Yes. Stop the breeding like flies. 
I think China may have had some ideas on curbing the population growth, but in Canada, it's too much immigration in the past few years, and the fact that pretty much all of the immigration is packing into the major cities. We used to be more of an agricultural society, now its an urban society with its own set of problems. Toronto is going broke because of the high influx of immigration and the services necessary to
support the population. These people who have never worked in this country come over for free medical care and welfare. Sooner or later, if this bubble
continues unchecked, it will burst.

As far as the pension funds..I can only comment on mine. DB Pension funds can a big liability these days to any company. GM/Chrysler/Ford /Air Canada etc. 
Most of the retired population in NA live longer as a rule because of better health care. So instead of "departing" in their 60s/70s like they used to, medical science 
(and our "free" health care system), keeps them going into their 80s. 
Survivor benefits also also make a big drain in these pension plans. Even if the pensioner succumbs to some disease before the life expectancy for the country he lives in, his spouse will still (in most cases), collect from the survivor income benefit to the end of her life.

http://en.wikipedia.org/wiki/Life_expectancy



> "It is estimated that preventing the debt-to-GDP ratio from rising over the next 75 years would require running
> primary surpluses over the period that average 0.5 percent of GDP. This compares with an average primary deficit
> of 1.9 percent of GDP under current policy. "


Statistical analysis is fine, but politicians are not statisticians or economists and don't follow keynesian economic principles.. 
http://en.wikipedia.org/wiki/Keynesian_economics
so..we are slowly starting to accumulate debt load and deficits. which will only lead to more fiscal pain later and result in gov't program cuts, austerity measures and more problems for the future. 

The Ont election promises, to cut the deficit and balance the budget by 2014 or 2016 in Ontario is a nice technicolour dream. Good luck with that!


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## slacker (Mar 8, 2010)

They are considering cash4gold.com

http://www.youtube.com/watch?v=6JPcimrnXGA


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## ddkay (Nov 20, 2010)

Default Panic Worse Than Lehman: Summers


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## slacker (Mar 8, 2010)

carverman said:


> Yes. Stop the breeding like flies.
> I think China may have had some ideas on curbing the population growth, but in Canada, it's too much immigration in the past few years, and the fact that pretty much all of the immigration is packing into the major cities. We used to be more of an agricultural society, now its an urban society with its own set of problems. Toronto is going broke because of the high influx of immigration and the services necessary to
> support the population. These people who have never worked in this country come over for free medical care and welfare. Sooner or later, if this bubble
> continues unchecked, it will burst.


Really? When things go bad, we start to blame the jews and homosexuals? What's next? blaming them for taking jobs away from honest hard working white Canadians?

I find your gay bashing anti-semitism distasteful.


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## carverman (Nov 8, 2010)

slacker said:


> They are considering cash4gold.com


LOL! I like that 747-200 "Air Force One" presidential jet for $4200!

Caution: burns jet fuel at alarming rate of 20 gallons per second on takeoff.
Wing tanks hold 10,000 gallons each! Cheap transportation for oil rich third world country dictators. 
2 million free petro points with each fillup included.


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## carverman (Nov 8, 2010)

slacker said:


> Really? When things go bad, we start to blame the jews and homosexuals? What's next? blaming them for taking jobs away from honest hard working white Canadians?
> 
> I find your gay bashing anti-semitism distasteful.


I am not gay bashing nor am I making any anti semitical comments. 
I'm just stating my opinion that is all. Don't try to insert words in my comments. These are generalized statements, no single minority is mentioned..so relax!


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## slacker (Mar 8, 2010)

You know who else hates gays and jews?

Hitler and Osama bin Laden. If you hate on gays and jews, the terrorist would win !!


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## ddkay (Nov 20, 2010)

It has nothing to do with immigrants or gays or jews. It's demographic transition: http://en.wikipedia.org/wiki/Demographic_transition



> In stage one, pre-industrial society, death rates and birth rates are high and roughly in balance. All human populations are believed to have had this balance until the late 1700's when this balance ended in Western Europe.[5] In fact, growth rates were less than 0.05% at least since the Agricultural Revolution over 10,0000 years ago.[6]Birth and death rates both tend to be very high in this stage.[7] Because both rates are approximately in balance, population growth is typically very slow in stage one.[8]
> 
> In stage two, that of a developing country, the death rates drop rapidly due to improvements in food supply and sanitation, which increase life spans and reduce disease. The improvements specific to food supply typically include selective breeding and crop rotation and farming techniques.[9] Other improvements generally include access to technology, basic healthcare, and education. In Europe, the death rate decline started in the late 1700's in northwestern Europe and spread to the south end east over approximately the next 100 years.[10] Without a corresponding fall in birth rates this produces an imbalance, and the countries in this stage experience a large increase in population.
> 
> ...


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## slacker (Mar 8, 2010)

I for one welcome more homosexual jewish immigrants.


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## ddkay (Nov 20, 2010)

Wall Street analysts and economists have this recession recovery wrong



> Not a single forecaster in Bloomberg’s monthly survey of 85 Wall Street economists got it anywhere close to right. The most common reaction was “surprise.” That any professional can sincerely claim to be surprised by continued weakness — in employment, GDP or retail sales — was the only revelation.
> 
> Let’s put the number into context: In a nation of 307 million people with about 145 million workers, we have to gain about 150,000 new hires a month to maintain steady employment rates. So 18,000 new monthly jobs misses the mark by a wide margin.
> 
> ...


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## carverman (Nov 8, 2010)

slacker said:


> I for one welcome more homosexual jewish immigrants.


Fine. and if you are kidding, how about inserting a smiley so we know that you are. 

Ok, lets put the controversial ethnic minorities and gender preferences aside..
Mr. "slacker", and discuss the real issues at hand...should we take our savings out of the banks and put them in a shoebox under the mattress?

Or..maybe buy some gold if the US are going to sell off theirs from Ft. Knox and the speculation frenzy will drive the gold prices up to $1600 or even $2000 an ounce.

Hmmm..if I take my entire savings out of the bank right
now ($10,000) and buy 6 oz of gold..real gold!..and wait until the fools rush in to buy their share and drive up prices..then sell at $2,000 an oz..I could make
$3000 just like that..and then buy some more at $2000?

Very tempting..what duz ya say "gals with da money"?

"carver", looking for some gold himself.


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## carverman (Nov 8, 2010)

ddkay said:


> Default Panic Worse Than Lehman: Summers


Well this is starting to look like the US has the "ostrich syndrome", put their collective financial heads under their desks and hope that the impending financial meltdown goes away somehow.

Raising the debt ceiling from $15trillion to ..$20trillion is not going to solve the problem for very long..in a couple of years, it will climb to ..$19.5 trillion...
and then what are they going to do? 
All the Ft. Knox gold will be sold off to the highest bidder by then, so will the white house, presidential jet,
national parks, gov't buildings, the Fed Reserve money presses (maybe).....

What the US needs right now is a firm hand. Stop yer bellyaching and help pay off the national debt!
Each person that can afford it, will pay a DRC
debt reduction charge, like Ontario's hydro scheme. 
Those with more financial resources, like hydro users
that use more electricity will pay more..simple as that!
John Paul Getty/Bill Gates..you have to pay more. You
made your fortune in America, so you should give more.

In a "few" years, the huge debt will be paid off, and everyone can go about their business and personal
fortunes.

I would also suggest that they get Donald Trump (who has gone bankrupt and recovered quite nicely) to run the Fed. Then he can go around and tell all the investment bankers/wall street financiers.."your fired!..and
your fired! 
Simple problem can be solved with a simple solution.


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## ddkay (Nov 20, 2010)

Larry Summers is a clueless economist. His only solution is that it's consumers patriotic duty to start spending again, even if it means consumers put themselves underwater in deficit. Solely because consumers make 2/3 of US GDP has government tinkered with interest rates and brought them to unsustainable levels.

Meanwhile Obama is saying this about the federal government "I'm willing to do what it takes to solve this problem, even if it's not politically popular. And I expect leaders in Congress to show that same willingness to compromise. The truth is, *you can't solve our deficit without cutting spending*."

Thanks Mr. President.

Guess what, the GDP still continues to fall. Remember the GDP formula? GDP = C + I + G + (X - M). G = Government spending.

At some point the whole thing collapses upon itself.

A US default may be worse than Lehman. Summers is probably right about that. If you could put the US on this chart of the CDS solar system, the US would be the Sun.


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## carverman (Nov 8, 2010)

GDP..could also stand for Grand Deception Politics these days. 

<from ddkay's earlier post>
GDP = C + I + G + (X - M)

C = private consumption
I = gross private investment
G = government spending

X = exports
M = imports


X & M equate to balance of trade. If the US imports more than it
exports, thats a trade deficit (over 50 billion for May 2011 alone)
http://www.tradingeconomics.com/united-states/balance-of-trade

Now if we project that over 12 months to next year, keeping the same numbers that deficit in just 12 months
would be 600 billion (9 zeros) ( 1 trillion has 12 zeros)
http://www.tysknews.com/Depts/Taxes/million.htm

I didn't quite catch the drift of the formula *ddkay* posted earlier, but the big bubbles of national debt on the graph of are certainly showing where each country is poised on the brink of (possible) default, certainly drives the message home. 

Also, until *ddkay* posted the above bubble graph, I
didn't know too much about how complicated world 
economics/finance are these days...and the term CDS (credit default swap). 
Gone are the old days of cash over the barrel for goods received.
http://en.wikipedia.org/wiki/Credit_default_swap

The US simply cannot default..if they do, it will be a castrophe of "Biblic proportions" rippling through the entire world that has their currency and trade tied to US dollars.

Where does Canada stand in relation to our own debt ratio vs GDP?


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## sags (May 15, 2010)

With credit to Peter Schiff in a recent interview,

All this bickering in Washington is over raising "their" debt limit, which is the amount of money the US is "willing to borrow" to cover the shortfall between expenditures and revenue. The debt limit has been raised numerous times in the past and will continue to be raised in the future, unless drastic measures are taken. 

But, this is all smoke and mirrors. The debt limit is nothing more than a self-imposed, soft cap on spending, that can and has been raised in the past.

The real test is how much others are "willing to lend" to the US, to fund the US lifestyle. The willingness to accept US debt, has already started to wane. China is buying less and less US Treasury Bonds. They are spending US dollars diversifying themselves into other currencies and buying commodities globally. The US is buying much of their own debt. Even if the US finds willing lenders...........the price will go up substantially.

The willingness to lend is a "hard" cap proposition, over which there will no negotiation between Democrats and Republicans, but will be between lender and borrower, and the lender may very well have a long list of conditions that the US will have to accept.

As the US plunges further and further into debt, at an ever accelerating pace, eventually they will reach the day of reckoning.


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## carverman (Nov 8, 2010)

sags said:


> The real test is how much others are "willing to lend" to the US, to fund the US lifestyle.


And if they still are, the US credit worthiness will be lowered with higher interest rates on table. Already there is talk of lowering the US gov't credit rating from AAA to... AAA- ?



> The willingness to lend is a "hard" cap proposition, over which there will no negotiation between Democrats and Republicans, but will be between lender and borrower, and the lender may very well have a long list of conditions that the US will have to accept.


I would think that that goes without saying. The IMF may also be involved with "brokering" future borrrowing by the US. Their economy, weak as it is these days, is still one of the largest economies in the world, next to
China and maybe one another?
but it's their per capita spending and their overall spending habits/credit crunch that will soon bring that "day of reckoning" for them and it has to come. 



> As the US plunges further and further into debt, at an ever accelerating pace, eventually they will reach the day of reckoning.


Well, going back into their history, apparently it has happened before. The big stock market crash of '29 when their economy was in such bad shape that borrowing on margin to fuel the stock market eventually began their total collapse, and plunged millions out of work. 

Lots of bickering then as well and history repeats itself
again..the Republicans didn't want to pitch in then either...but FDR brought in the "NEW DEAL".. 
the 3 "R"s to getting them back on their feet...
...Relief, Recovery and Reform. 

They only need to look back into their economic cycles history to find the answers on what was necessary
to be done at the time, and what probably needs to be done now..
(The New Deal '33-34 and The New Deal part 2 '34-36)...and maybe now they should be seriously thinking about a "New Deal-Part 3". 
http://en.wikipedia.org/wiki/New_Deal

But, this time it's more complicated, because unlike the US economy in the "dirty thirties", (where the debt accumulated was primarily from within), it's a lot more diverse now, when other parts of the world (like heavily industrialized nations like China) hold a great portion of it. 

In their capitalist society search for more profits, they farmed out a lot of their former manufacturing capacity from the American worker to other parts of the world, because of cheaper labour to produce those goods, which they are now importing, as well as energy (oil) which being consumed at an alarming rate. 

There are no big internal mega-projects to build, like in
the 30s, no interstate highway system like in the
Eisenhower adminstration in the 50s. 

The space program, interesting as it was, didn't bring much benefit to the average American, neither did the war in Afghan or Iraq and they finally had some sense not to get involved in Libya, because they know now they just can't afford to go sticking their nose into other countries affairs anymore. Their war machine consumes
a lot of their economic resources.


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## Toronto.gal (Jan 8, 2010)

slacker said:


> I find your gay bashing anti-semitism distasteful.


I would find such behaviour distasteful also & would report it. However, Carverman did not do that at all. 

I think he was referring to a recent article that appeared in our newspapers:

http://news.nationalpost.com/2011/05/17/immigrants-cost-23b-a-year-fraser-institute-report/


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## dogcom (May 23, 2009)

It is funny how all this stuff is predictable in a cycle that ends very badly like 1929 ending up with debt being purged from the system one way or the other and then we start again. I am not so sure there is a fix until it all washes out and this time it looks like it will be world wide but I suppose it was that way in the 30's as well.

As far as the US dollar is concerned it will be hard to crash it when there really isn't an alternative currency to run to. Also a lot of debt in the world is written in US dollars meaning we need US dollars to pay it back.

If there is a solution to the debt problem in the states then the only way to start is to declare war on it. For some reason the only way big things get done in the states is when they declare war on it.


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## dogcom (May 23, 2009)

In a way toronto.gal the hate talk no matter who it is directed at is a symptom of the end game when the house of cards fall. I am sure someone or group will be blamed to distract people as they go through the gut wrenching pain of purging the debt from the system.


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## Toronto.gal (Jan 8, 2010)

carverman said:


> I beg your pardon T.G..but if this blog has any truth to it..then it might have
> back in the dirty 30s...


The currency devaluation of 1933 is not technically considered a default, so the US appears to still be *"default virgin".*  
The reason is because it has never failed to meet their debt repayment.

1933 was quite a year.
http://www.indiana.edu/~league/1933.htm


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## Toronto.gal (Jan 8, 2010)

dogcom said:


> I am sure someone or group will be blamed to distract people as they go through the gut wrenching pain of purging the debt from the system.


You're right dogcom.


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## ddkay (Nov 20, 2010)

@carverman, the last figure I saw for Canada debt-to-GDP was 77%. We've done better than most other economies because we're heavy on resources. Which is great if you have hundreds of other countries trying to achieve the lifestyle of today's American middle class. There's still unbelievable demand for Alberta sour crude. The question we should be addressing is, is it realistically possible for every country in the world to be equally prosperous the way we measure wealth today (consumption)?

America is losing manufacturing jobs because long ago it transitioned to a mostly service based economy (e.g. accounting, financial services, phone support, design, engineering, consulting, marketing, software programming, journalism etc). American corporations discovered these too can and have been outsourced to other places around the world, it also recently makes most sense to target customers in these countries abroad, because the local currency is worth more against a devalued USD. That's what propped up corporate earnings during QE.


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## carverman (Nov 8, 2010)

Toronto.gal said:


> The currency devaluation of 1933 is not technically considered a default, so the US appears to still be *"default virgin".*
> The reason is because it has never failed to meet their debt repayment.
> 
> 1933 was quite a year.


Yes it certainly was T.G....besides political upheaval in europe almost everywhere, the US congress passes Emergency Banking Relief Act, so that the US gov't had more control over transactions related to the gold standard which their dollar up to then was propped up with in real gold in Ft. Knox.
In April, 1933, the Canadian Dollar was withdrawn from
being pegged to the gold standard and the US gov't
did that as well. 

I read somewhere, that although they didn't technically default, they only paid .86c on the dollar to investors to fix the fiscal economic mess they were in at the time. Must find that info again. 

(that is why archvillain Goldfinger in that James Bond movie was concocting
his devious and diabolical plot..

<description of movie plot.
They listen to Goldfinger’s plan to knock over Fort Knox using the materials that each of them had brought: spraying Delta Nine gas over the area, rendering everyone unconscious for 24 hours before proceeding to the Fort and breaking in to the vault.

Bond is recaptured after hearing the details of the operation and tells Goldfinger the reasons why such a plan won't work. However, Bond soon learns from Goldfinger that he has no intention of 'removing' any of the gold from Fort Knox, but to place an atomic device containing cobalt and iodine, *which would render the gold useless for 58 years, increasing the value of Goldfinger's own gold and giving the Chinese an advantage resulting from economic chaos."*
<end of movie plot.

now this is a 47 year old movie based on a book, but
isn't it funny how Hollywood fiction can become reality
sometimes?

Now here's a blog that tells us that the sky is (indeed)
going to fall..

http://www.munknee.com/2011/04/a-hy...ssion-is-coming-to-america-by-2014-heres-why/


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## ddkay (Nov 20, 2010)




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## financialnoob (Feb 26, 2011)

ddkay: I just spent like an hour on that site. So hilarious and so depressing at the exact same time.


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## Toronto.gal (Jan 8, 2010)

carverman said:


> 1. I read somewhere, that although they didn't technically default, they only paid .86c on the dollar to investors... Must find that info again.
> 
> 2. (that is why archvillain Goldfinger in that James Bond movie was concocting his devious and diabolical plot..


1. I read that too, on Wikipedia; there, I found it for you. 

US National Debt

*1933:* $22,538,672,560.15
*2011:*$14,025,215,218,708.52

2. You and your plots.  [Have you thought about writing a movie perhaps?]

Get ready for more political circus this week!


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## carverman (Nov 8, 2010)

Toronto.gal said:


> 1.US National Debt
> 
> *1933:* $22,538,672,560.15
> *2011:*$14,025,215,218,708.*52 *


after all those three digit figures and commas, they even have nerve to charge .52c! 



> 2. You and your plots.  [*Have you thought about writing a movie perhaps*?]
> 
> Get ready for more political circus this week!


Well. yes..there's an idea..it could make up for the losses on the Nortel pension and I could make a killing on the gold markets.

But first I need to write the lyrics for the song. 
Hmm??...Who's going to sing it?
Shirley Bassey isn't around anymore....Lady Gaga maybe?

First draft coming up 

GOLDSWINDLER 
He's the man, the man with the Misers touch 
A rogue traders touch 
Such icy cold fingers 
Beckons you to enter his web of (sin) swin 
But don't go in 

Golden words he will pour in your ear 
But his lies can't disguise what you fear 
For a money gal knows when he's "kissed" her 
It's the kiss of death to you and your investment sisters... 
..From Mister Goldswindler 
Investment gal, beware of his heart of gold 
This heart is cold..and it's so damn old! 

He loves only gold, and hates to buy and hold... 
Only gold ...Ft Knox gold..any gold!
He loves only gold 

<all of your gold just sent it in his prepaid paks.

Only gold, and maybe diamonds too..
and Mercedes Benz, and Miss Money Penny too..

<talking fadeout of song>
James Bond 007: "Goldswindler, you cannot have that one..she is not for sale...I saw her first!"

Goldswindler: "first I take Manhattan, then I take Berlin!" Move aside US Treasury..you have had your
day..now it's my turn to rule the world and it's econonics!
<evil laugh>
(song continues)
He loves all things made of gold ..$1500 an ounce pure gold..and he wants all YOUR GOLD!



ok, so the song is finished. Now I will start the movie plot..
Toronto Gal: do you want a small part in this Bollywood script?

What part" M? Money Penny? or <the other part that I can't mention
her name here..but she flew James Bond plane> 

Now I need actors to fill the parts of "Q"..who's an alchemic genius who has found a way to turn lead into gold?


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## Toronto.gal (Jan 8, 2010)

carverman said:


> 1. after all those three digit figures and commas, they even have nerve to charge .52c!
> 
> 2. Toronto Gal: do you want a small part in this Bollywood script?
> What part" M? Money Penny? or <the other part that I can't mention
> her name here..but she flew James Bond plane.


1. Good observation! ROFL. 

2. Lol, like I would turn down a once in a lifetime offer like that.  I'll take the money part please. 

Still catching up on some good reading from last week.

"The Theory of Inevitable Compromise, and why it is probably wrong"

What do you think?

http://www.economist.com/node/18958711


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## carverman (Nov 8, 2010)

Toronto.gal said:


> 1. Good observation! ROFL.
> 
> "The Theory of Inevitable Compromise, and why it is probably wrong"
> 
> ...


Well I'm not an economist..but I would like to play one on tv someday. 
If I were a betting man, I would say that they are going to paint themselves into a corner in any case, even with the "Inevitable comprimise".

For a normal person, borrowing heavily means that you must have the income at your disposal to make payments on the debt. If you don't, for whatever reason and your loans get called by the bank, 
any assets procured by the unpaid loans are repossessed by the lender, because of the default. This doesn't
happen with countries, but if that happens the cost
of borrowing increases significantly and collateral
needs to be available. 

The housing crisis in the US was/is a prime example. People bought homes "on margin" with zero down in most cases, based on current income and future earnings,
not money in the bank,like they should have. This "going for broke" kind of spending catches up sooner or later, as we all know in 2008/2009, and it's still going on today.

The US gov't, "of the people, by the people and for the people" is no different because it has always been divided by different points of view on what should be done. This results in a lot of filibuster and nobody really understands the problem well enough to provide the proper solution.

Getting involved in wars at several billion dollars a day (or week?) doesn't help things because the money spent doesn't really benefit the average American, other than providing jobs in the military. (WWII lasted 4 years
for the Americans, Dec 1941 - April 1945 and it took a big toll on their budget then, but the goods produced were produced in the US, so that created jobs.)
Britain was technically bankrupt from WWII debt.

A gov't just can't print more money to solve the problem as that catches up very quickly. Nazis tried that in Germany in their shattered economy and it only led to hyper-inflation.

So they have to slash spending and raise taxes..that is something that the American people have to realize
and accept to get the debt monster under control.
They import pretty much most of their oil, between the military consumption and their commercial thirst for oil and oil products, they consume more petroleum than
any other nation on the planet. 90% of that is imported from OPEC.

Their capitalist society and access to easy credit (buy now-pay later) has created a huge imbalance. 
Somebody will have to bear that pain.

Lastly, the US dollar is based (I believe) on their GDP,
and in the last few years, that has been down, because
of the recession, loss of jobs and farming manufacturing
jobs to countries like China and Asia. The US dollar
once was linked to the strength of the American worker
and goods produced in the US..that is no longer the case. 

The US (like the author mentions) will have to keep paying that foreign debt, slash spending and raise taxes. Raising the debt ceiling only buys them
a certain amount of time until the wolf is at the door again.


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## ddkay (Nov 20, 2010)

Debt deal reached? Obama's supposed to speak in a few minutes


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## carverman (Nov 8, 2010)

ddkay said:


> Debt deal reached? Obama's supposed to speak in a few minutes


No not really. Some interesting proposals, but there is no unanimous agreement from both sides. Gang of 6 senators, still working on a proposal
to meet the deadline. 

<quote from online sources: 
"Some progress was made, in some of the discussions. Some narrowing of the issues," the president told journalists as Democrats and Republicans sought to forge a deal to raise the US debt ceiling and agree tough spending cuts.
"The good news is that today, a group of senators, the gang of six, Democrats and Republicans... put forward a proposal that is broadly consistent with the approach that I've urged," Obama told reporters at the White House."
end quote>

What they need right now is a FST on all goods produced/sold in the US.
Even 5% like we have in Canada, will help to bring in revenue to whittle down the debt. The big problem is that the US is unaccustomed to taxation
at the federal level for consumer goods and only on a state/local level.
While cutting spending is good, cutting it in medicaid/medicare only hurts the poor, not the 1-2% 
of population (the very rich), who have their own private
insured health care system.

or..OTOH..just starve "the beast"
http://en.wikipedia.org/wiki/Starve_the_beast


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## sags (May 15, 2010)

The stock markets were up on news there might be a deal to raise the debt limit.

Funny world we live in.

Debt limit raised, more borrowing, higher national debt......

Happy days are here again.


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## ddkay (Nov 20, 2010)

http://www.bloomberg.com/news/2011-...-s-s-aaa-becomes-laughable-william-pesek.html



> China is trapped and struggling to find exits that don’t exist


It's good to know we're not going down alone


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## carverman (Nov 8, 2010)

ddkay said:


> It's good to know we're not going...down and tax revolution
> don't worry, be happy


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## ddkay (Nov 20, 2010)

Haha nice lyrics, I read that to the tune of Bobby McFerrin's song. CMF just got its own karaoke bar.

I kinda want to mute financial news for the next few days, but it's like an accident you can't look away from..


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## carverman (Nov 8, 2010)

Just heard on the news. 
The "gang of six" (senators) have come up with a
comprimise solution-proposal. 
They don't want to just keep raising the debt ceiling as the fallout will eventually be a lot worse than it already is.
So the think tank has come up with debt reduction of (apparently) 4 trillion.
Not sure what it all entails, but gov't spending cuts are #1 on the list. 

Maybe they have some war bonds they will issue to the general public like in WWII to finance the debt reduction.

dont worry be happy.. continued..

the gang of six have come up with a 1% solution
to save the US dollar from more dilution 
so dont worry, be happy


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## Toronto.gal (Jan 8, 2010)

carverman said:


> 1. The "gang of six" (senators) have come up with a
> comprimise solution-proposal.
> 
> 2. dont worry be happy..


1. Catchy name eh? rolleyes:

2. I see you've been visiting the music thread. 

Thanks for the update..........


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## ddkay (Nov 20, 2010)

Bohener walked away from negotiations with Obama. Apparently there's members in Boehner's caucus that believe it would be okay to default.

Here's the letter he wrote: http://www.scribd.com/doc/60673572/boehner-07-22-2011

Today was the legislative deadline.. tick tock tick tock. The suspense is killing me. Obama is upset the way negotiations keep breaking down, but still has a speck of gleaming confidence left.


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## carverman (Nov 8, 2010)

ddkay said:


> Bohener walked away from negotiations with Obama. Apparently there's members in Boehner's caucus that believe it would be okay to default.


Read his letter. From my perspective, there is too much churn and indecision on what needs to be done. 
Unlike 1776 and the yell to unite on a common front to fight the enemy..."the British are coming, the British are coming" (and Paul Revere's ride (that Ms. Palin got a bit screwed up in her interpretation of history ), the Boston "Tea Party" etc..it appears to be in their fundamental nature to "bear arms and fight taxation where possible".

From Bohner's perspective on things...
"tax code..stiffling job creation.....White House not serious about ending the spending binge..destroying jobs....endangering our children's future"

It seems to me that they have painted themselves into a corner in how to deal with the current debt crisis without:
a) increased taxation ....(as we are well aware of in Canada and Ontario)
b) cutting gov't services
c) finding ways to change the trade imbalance
d) put average Americans back to work **

this last one is a real challenge, because there are so many unskilled workers in the US now, that used to depend on assembly work which has gradually
been farmed out to the Asian countries.

Ok, there still is a "skill set" there, but these are a small percentage of the work force, and other than general public services offered by small business and the construction industry, there is a huge gap now with those that are still employed and those that can't find work, because, there are no jobs to match what little skills they have.

Some can possibly be retrained for other types of jobs, but this involves yet another huge federal/state
gov't investment that they simply can't afford right now...because the workers they retrain may still may not be able to find jobs in the fields they were trained for.

It also means cutting their military spending..which is a huge drain on their GDP, but then they have to find employment for those that are trained by the army/navy and do not possess other skills to get into the
civilian work force..without..you guessed it..retraining.



> Today was the legislative deadline.. tick tock tick tock. The suspense is killing me. Obama is upset the way negotiations keep breaking down, but still has a speck of gleaming confidence left.


Well as President of the US, he has no choice but to put on a "happy face" publicly in spite of the gathering clouds of economic doom. 
I don't know the US gov't well enough (power of the people) to know if he has any executive powers left to consult a "think thank" of economists, consider a strategy
out of this economic mess, (that they seem to be digging a hole in deeper and deeper),

and say to the American people.."this is the new deal 2011, we are going to implement it to protect America's future. Yes, we are going to feel the pain in the next few months, (blah-blah-blah) but in the long run, I believe that this is the best way we need to go".

Good or bad, that decision will at least set him apart as a president that can take affirmative action. If it works out as a good strategy before presidential elections next year, it could someday single him out to be a contender in the "top 10 Best President's" that the US has had over the years..
...there are enough of them in the bottom portion.


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## financialnoob (Feb 26, 2011)

I'm not trying to take sides here, but from a tactical point of view and with an election around the corner, I'm sure the Republicans would be fine with the country going into default with Obama at the wheel. You can divide up the blame 50/50, but history will always remember who was in charge at the time.

2 months ago, I would have said nooooooooooooo way. Now, flip a coin. It's unbelievable how many people are being jerked around by these idiots playing their political games.


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## Toronto.gal (Jan 8, 2010)

financialnoob said:


> idiots playing their political games.


And that's all it is, politics of destruction & little about economics. Sardonic idiots in fact. The Economist got it right, *'shame on them'.*

"The Republicans are playing a cynical political game with hugely high economic stakes."

http://www.economist.com/node/18928600


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## financialnoob (Feb 26, 2011)

That's a good article that sums things up nicely. 

Politics is always filled with hypocrisy. As this chart shows:

http://www.cbc.ca/news/interactives/debt-limit/

US debt limit under Dubya goes from $5.9B to $11.3B, a 52.1% increase when adjusted for inflation.

When compared to the Democrat before him (Clinton) and after him (Obama), we see that the bulk of the problem happened on Dubya's watch.

I'm not blaming the Republicans solely. I'm simply saying it's a bit much to take such a moral stand on this issue when you were a huge part of the problem getting out of hand in the first place. Both sides are to blame, they should fix this together, and quit with the ridiculous rhetoric.


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## ddkay (Nov 20, 2010)

From a NYT article

"The basic problem today is that the president and the House Republicans are locked in a classic bargaining game. The worst outcome for both is default on the debt, but each side holds out for a favorable deal. They will certainly go to the wire, but economists who have studied bargaining games have shown that there is always a real possibility of breakdown rather than compromise, because only by refusing to deal can each side convey the seriousness of its position. That is why labor strikes occur even though workers and managers do jointly better if they make a deal."


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## andrewf (Mar 1, 2010)

It is a classic game of chicken. I blame the Republicans for painting themselves into a corner. Demanding that the government immediately cut spending by over $1 trillion per year and ruling out tax cuts absolutely is absolutely untenable. The vast majority of Americans don't back them. The problem is that the party are slaves to the Tea Party nutjobs. The Tea Party will keep the Republicans out of the White House for many years, I suspect.


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## kcowan (Jul 1, 2010)

There is no doubt that the Teaparty is a bad development for Republicans. This is why the two party system is problematic.

If anyone really believes that their problems will be resolved without a tax increase, then they must believe in the good fairy...


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## sags (May 15, 2010)

When the Republicans take their marching orders from the extreme right......Tea Party et al............and people like Michelle Bachman have influence over party direction.....well, just have a look at the financial acumen in some of her quotes..........

*"Literally, if we took away the minimum wage—if conceivably it was gone—we could potentially virtually wipe out unemployment completely because we would be able to offer jobs at whatever level." *

_—Michele Bachmann, 1/26/05, Jobs, Energy and Community Development Committee, testifying against SF 3, a bill to raise the MN minimum wage and advocating the elimination of the minimum wage altogether.._

*"Many teenagers that come in should be paying the employer because of broken dishes or whatever occurs during that period of time. But you know what? After six months, that teenager is going to be a fabulous employee and is going to go on a trajectory where he's going to be making so much money, we'll be borrowing money from him."* 

_—Michele Bachmann, 1/26/05, explaining why teenagers should pay employers for the privilege of working instead of receiving minimum wage._

*"If we allow businesses to be prosperous and accrue capital, they’ll be giving their employees more than they can even begin to imagine. But when we continue to tie cement blocks on businesses (like the minimum wage) and constrain them, they can actually do less than their employees."*

_—Michele Bachmann, 1/26/05, testifying against SF 3, a bill to raise the MN minimum wage and explaining why it actually keeps wages and benefits lower._

*"If raising the minimum wage to $7.00 an hour is a good idea, that why dont we just raise it to $20.00 an hour, that must be even better." *

_—Michele Bachmann, 1/26/05, Jobs, Energy and Community Development Committee, testifying against SF 3, a bill to raise the MN minimum wage._

I can't help but be reminded of the lovely and talented Miss South Carolina.........

http://www.youtube.com/watch?v=lj3iNxZ8Dww


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## ddkay (Nov 20, 2010)

Don't forget Tea Party & Repubs are lobbied and funded by the Koch Brothers: The Billionaire Koch Brothers' War Against Obama (it's a long, but worthwhile read on their influence in Washington)

Koch Industries are an energy conglomerate, the second largest private company in the U.S. by revenue after Cargill.

If Koch help dethrone USD from its reserve currency status, OPEC may begin to price oil in a new currency with more value, like Euro, or some other currency to-be-invented, and they'll achieve higher profits, selling product at "inflated prices" back to Americans, Europeans, BRIC, etc.

Isn't it funny how Americans for Prosperity, a "consumer oriented grassroots political advocacy organisation" with a bunch of oil execs, former lobbyists and politicians on their board, is telling consumers that gas prices are too expensive and out of control?

Boehner is the wolf in sheeps clothing here, IMO. Corporate America has learned to churn more profits while domestic unemployment hovers under 10%. They probably don't care if the Fed defaults, or about another recession as long as they don't have to pay more taxes.


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