Re: financial illiteracy

From the American School of Entrepreneurship

We normally don’t write about politics or economics, but the feverish comments about ‘default’ and associated topics by pundits, radio talk show hosts and other are just too much.

We’d like to inject, for our readers at least, some financial sanity into the discussion.

About the only national pundits on this topic who know what they’re talking about on the default topic are Rush Limbaugh, Dr. Charles Krauthmmer and George Will, who have all correctly used the ‘default’ term.

It’s clear that most of the national punditry never took a course in finance.

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Senate leaders race to draft debt-limit bill after House effort collapses

First, Treasury Secretary Jack Lew made up this arbitrary deadline (he felt the children in the government needed some guidelines) and second, we have PLENTY of money coming into the government to pay ALL of our obligations (including Social Security) but a default (which would be the first time in U.S. history and would be an impeachable offense for the president) would only prevent the spend-mad politicians from borrowing more money.

...it was unclear whether an agreement between Senate Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) could pass the Senate before the Treasury Department exhausts its borrowing power Thursday.

House GOP plans Tuesday night vote on latest debt ceiling plan

Situation is very "fluid" and doesn't look all that great for a solid deal at this point...

News from The Hill

Sarah Palin explains what the debt default really means

Obama’s Debt Default is on His Shoulders While We Shoulder His Impeachable Offenses

Apparently the president thinks he can furlough reality when talking about the debt limit. To suggest that raising the debt limit doesn’t incur more debt is laughably absurd. The very reason why you raise the debt limit is so that you can incur more debt. Otherwise what’s the point?

It’s also shameful to see him scaremongering the markets with his talk of default. There is no way we can default if we follow the Constitution. The Fourteenth Amendment, Section 4, requires that we service our debt first. We currently collect more than enough tax revenue to service our debt if we do that first. However, we don’t have enough money to continue to finance our ever-growing federal government (with our $17 trillion dollar national debt that has increased over 50% since Obama took office). That’s why President Obama wants to increase the debt limit. He doesn’t want to make the tough decisions to rein in government spending. So, he’s scaremongering the markets about default, just as he tries to scaremonger our senior citizens about their Social Security, which, by the way, is funded by the Social Security Trust Fund and is solvent through 2038.

It’s time for the president to be honest with the American people for a change. Defaulting on our national debt is an impeachable offense, and any attempt by President Obama to unilaterally raise the debt limit without Congress is also an impeachable offense. A default would also be a shameful lack of leadership, just as mindlessly increasing our debt without trying to rein in spending is a betrayal of our children and grandchildren who will be stuck with the bill.

- Sarah Palin

"I personally believe the month of October may be a major turning point in America's history."

The Possible Outcomes Of The Shutdown Theater

Who really owns the Long Beach Naval Base in California?

...and the REAL reason behind the Obama administration's big push for gun control:

In 2012, a Chinese Officer was arrested for trespassing. When it went to court, although he was a Chinese Citizen and Officer on American Soil, he had to be acquitted, because he was on Chinese property. There have also been sightings of Chinese Warships in 2013, which were calmly explained away as a joint effort with the Chinese Military. They are parking in the Naval Yard they now own and there is nothing Americans can do about it.

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One of the top officials at one of the top credit rating agencies in the world publicly declared on television that "Greece will default very shortly."

Moritz Kraemer, the head of S&P's European sovereign ratings unit, made the following statement on Bloomberg Television on Monday: "Greece will default very shortly. . .That should chill you to your bones.

If the EU allows Greece to default, that would be a signal to investors that the EU would allow Italy, Spain and Portugal to all default someday too.

Confidence in the bonds of those countries would disintegrate and bond yields would go through the roof.

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ALAN GREENSPAN: No chance of default...

Greenspan on Meet the Press: No Chance of Default. Really?

Quick: Someone tell the President!

Time for a little "selective default" in America?

When countries go bankrupt...

Sometimes, if a government is truly rotten – East Germany in 1989 or France in 1789 – it is a good thing if a fiscal crisis leads to political collapse. But for most normal countries, it is much better to get close to the edge of national bankruptcy than actually to go over the Niagara Falls of sovereign default. As Britain discovered in the 1970s and India found in 1991, looking over the edge can create the atmosphere of crisis that allows governments to win the arguments for economic reform. An actual sovereign default, however, can destroy confidence and trust among citizens and investors for years.

Perhaps the most memorable thing said so far by an official in Barack Obama’s administration was the remark by Rahm Emanuel, the White House chief of staff, that “you never want a serious crisis to go to waste”. Mr Emanuel was widely condemned for flippancy and cynicism. But an examination of world history over the last 30 years suggests he was definitely on to something. Those much discussed emerging powers, the Brics (Brazil, Russia, India and China) all needed a fiscal crisis to set them on the road to economic reform and national resurgence. America may one day be lucky enough to experience its very own national fiscal crisis. Let us hope it is not wasted.

Bankruptcy could be good for America

Jack Wheeler, in his 1/1/10 "Half Full Report," talked about a "selective default" and boy, as radical as it may seem, perhaps it actually is the only way to stop the one-way road to fiscal hell this country's been on for awhile:

What the US could do is a selective default that would pay off small bondholders - anyone who holds, say $10 million or less in treasuries. Everyone else - the Goldmans and giant banks playing the ripoff game of borrowing fed funds at almost zero interest and buying treasuries paying 3% while refusing to loan money commercially, the sovereign bondholders, most especially the Chicoms - they get squat.

Even the whisper of this will give apoplexy to guys running the big financial institutions: "No one will loan the US any money! It will be catastrophic!"

But that's what we want.

The goal of Default is to make the US government incapable of borrowing money for a decade or two, forcing it to live within its means. Default is really the only way to radically prune the federal bramble bush back to a constitutional level.

HALF-FULL REPORT 01/01/10