Monday, January 4, 2010

Robert Rubin: All Hell Could Break Loose Because of the Huge Government Debt

The ultimate insider, Robert Rubin, who is a former secretary of the Treasury (1995–99) and now serves as co-chairman of the Council on Foreign Relations and is a fellow of the Harvard Corporation, in a Newseek opinion piece had this to say:
The United States faces projected 10-year federal budget deficits that seriously threaten its bond market, exchange rate, economy, and the economic future of every American worker and family. Those risks are exacerbated by the context of those deficits: a low household-savings rate, even after recent increases; large funding requirements for federal debt maturities every year; heavy overweighting of dollar-denominated assets in foreign portfolios; worsened fiscal prospects in the decades after the current 10-year budget period; and competing claims for capital to fund deficits in other countries.

The conventional concern here is that private investment will be crowded out, which would result in a reduction of productivity, competitiveness, and growth. In addition, the very early 1990s showed that unsound fiscal conditions can have a symbolic effect that broadly undermines business and consumer confidence. But finally, and far more dangerously, our bond and currency markets could react with severe distress to fears about imbalances in the supply and demand for capital in the years ahead or about the possibilities of inflation. Those effects have been averted so far by a number of factors: large inflows of capital from abroad into Treasury securities; concerns about other major currencies; the low level of private demand for capital; and the psychological state of the market. But this cannot continue indefinitely, and change can occur with great force—and unpredictable timing.
Of course, he is correct. However, this isn't the first time an insider has warned about the debt. Obama, himself, has done so.

What I am waiting for is the other foot to drop, i.e., what solutions will be proposed to resolve the debt situation. I doubt it will be any serious attempt at cutting back government spending. It will more than likely, in a panic state, be a dramatic hike in taxes, including possibly a national sales tax or VAT.

29 comments:

  1. For once I agree with Rubin... Here's what I see:
    1. Huge increases in taxes coming. Even if Obama care and Cap n Tax don't pass, we have the end of the "Bush" tax cuts, the reinstatement of Estate Taxes and States are raising taxes just to meet day to day expenses.
    2. Banks are pretty much out of the commercial lending business. Commercial (non-real estate loans) are dropping and no bank is interested in putting more on their books.
    3. Toxic assets (pretty much real estate) is still on bank's balance sheets at 100 cents on the dollar. The Fed hasn't the stomach to mark these assets to market. Forget about all the Federal programs to "help" borrowers.
    4. Congress is at it again, telling banks to lend to those that don't qualify.
    5. We've given Fannie and Freddie a blank check.
    6. Banks can make money borrowing from the Fed and then lending it back to the government in the Treasury market.

    So tell me how 2010 and beyond won't be a mess?

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  2. Here is an article from zerohedge.com detailing how new proposed regulations on money market accounts will render them frozen should a "banking collapse / mass run on banks" begin. As intimated in the article, they seek to prevent a run by preventing patrons from extracting their investments (money market accounts).

    From the actions of the central banking elite and the U.S. administration, it is obvious they are preparing for an imminent financial collapse. By the end of 2010, this will most likely become very evident, as all small-medium size banks begin to die like flies.

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  3. Assuming liquidation of 30-Year Treasuries issued between 1980-1985 with their 10%+yields, and instead issuing of short term Treasuries with much lower yields, wouldn't the government be able to mask the (interest) cost of some of our debt for another 5 years?

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  4. You NEED to listen to this:

    http://survive2thrive.gsradio.net:8080/120309.mp3

    If you don't like the prayer at the beginning, skip forward about 8 minutes (but after listening for a few minutes, you might feel like going back and joining in with the prayer - just sayin')

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  5. And Rubin's solution will undoubtedly be that entitlement programs that people have been forced into paying for for decades will have to be cut wile the wars of aggression budget- which, by the way, will cost every last cent collected in income taxes this year, must continue.

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  6. The solution is using debt free money, issued by the state, not the bloodsucker banks. This is what Lincoln did 145+ years ago, issuing the own means of exchange, and which draw this fourious commentary in the London Times:
    "If that mischievous financial policy, which had its origin in the North American Republic, should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed, or it will destroy every monarchy on the globe."
    http://www.trosch.org/law/fed-paper-money.html

    And, as you maybe guess, destroy they did.

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  7. Rubin is shilling for higher taxes. I have it on a second hand basis that he is telling friends the top U.S. income tax bracket will go up 10 percentage points to 49.6% in 2011. If you can realize income in 2010, do it.

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  8. Blah, blah, blah. People have been predicting a collapse in the U.S. bond market and currency market for decades. Guess what? It has never happened. And it never will. Japan is in much worse shape than the U.S. and their debt markets have been strong for years. Don't believe the "doom & gloom."

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  9. This narcissistic self-serving fraud helped set up this collapse in 1999 as Treasury Sec. under Clinton when he shilled for Sanford Weill at Citigroup to overturn the Glass-Stegall Banking Act of 1933 and allow the banking industry to begin selling investment "vehicles" like MBS's and CDS's. Clinton signed the Financial Modernization Act of 1999, and the rest is history. May they all rot in hell for what they have done to this nation!

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  10. Once the market crashes...then we will do it all again! Hopefully not in the same stupid manner!

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  11. I've written extensively over the last few months about what 2010 is going to bring to this country. The 3Fs of Food, Fuel and Finance are already converging in a near fatal combination.

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  12. As Glenn Beck documented tonight, the liberal agenda is guided by destroying the US economy so that socialism can become the salvation. He named names of the Columbia University 'think tank' authors of the strategy, placed them in Clinton Administration functions and shows the tie ins with the Obama Administration. Hey, it's a done deal. The war is already over and freedom lost. Its either slavery to debt or default and chaos. And Rubin was a big big part of it.

    VJ

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  13. Anyone that believes Glenn Beck is a fool. Obama is as much a socialist as Hitler or Mussolini were- he practices state socialism or fascism where the federal government is in bed with big corporations and the military is bloated and the country is invading its neighbors. Obama is anything but a true socialist that wants to help the people.

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  14. There needs to be money created not buy private banks for profit but by the people's government for distribution to the people, specifically those with sound business plans or extant sound business that needs cash for expansion. The wealth and talent of plain folk needs to be unlocked by capital, not imprisoned by lack of it.

    BB

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  15. During the Clinton puppetry, as Treasury Secretary, Robert Rubin was instrumental in the removal of the regulatory safeguard, "Glass-Stegall Act of 1933, and the march was on for all that the greedy could get. Now Rubin PRETENDS that he is on the side of the common man so as to attempt to cloak his CRIME. Thanks to the INTERNET, that CRIMINAL can't RE-WRITE HISTORY!

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  16. Rubin?! He's one of the fools principally responsible for where we are... Repeal of Glass-Steagall anyone??? Research Brooksley Born. He is an enemy of the people and anything he says has to be taken in context with what he has done/ allowed to occur.

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  17. @Duke

    You need to do a bit more research on Brooksley Born:

    http://tinyurl.com/yk8l6vh

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  18. The U.S. economy will never recover mainly due to our predicament with energy. Oil reserves are declining worldwide and increasing in price. Since our economy runs on oil, and with the prices once again on the rise. The second wave of economic chaos will soon be upon us. This will come in cycles until we admit that our way of life is not sustainable, and needs to be changed to a much simpler way. We are destined to become agrarians in the long term.

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  19. Uh, Don, Hitler and Mussolini were socialists. Fascism is the socialist merger of corporate and state.

    Nazism is the National Socialist Workers Party.

    Obongo is the same class of socialist as they were. He and Wall Street are joined together to control us all.

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  20. While the government debt is a huge problem, we the people are facing bigger problems. I cannot pay my current electric bill, which is how I now heat my house. Next year the cap comes off the electric company. What do I do next? Build a fire in my living room?

    My property and school taxes are going up to pay for government pay raises and pensions these guys voted themselves ten years ago! They will have to institute more taxes to balance the state budget.

    My social security is frozen because the government claims prices went down--except that all prices went up, so I don't know what the hell they are talking about. And by the way, food prices are shooting up thanks to bad weather and ethanol.

    Bankruptcies are up, foreclosures are up, bank loans are down, bank fees are up, credit card fees are up, jobs are gone and not coming back.

    At this point complaints about the outrageous federal debt will not keep me in my house or buy me food. Get ready for riots in the street next.

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  21. Why do people automatically assume socialists want to help the people? How people have been duped! Socialism, like Capitalism and Marxism - all three are driven by materialism. Consumerism (evil) is what drives all three systems. Wake up, people. Socialism is not, and never will be your "comrade" And Obama is a socialist. And a capitalist. They are basically one in the same, as Chesterton pointed out almost 90 years ago. This may bother some people, but the only way to fix this mess is to suffer through it's implosion. Trouble is, people are not as decent as they were in the Great Depression. Why? Because of consumerism. Selfishness and the culture of "me, me, me" "now, now, now"... You reap what we sow, comrades.

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  22. I don't trust Rubin. And I certainly don't trust the wisdom of anyone who listens to Glen Beck.

    I do believe that a collapse is coming & I do fear for the future of my children.

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  23. It never ceases to amaze me that people are so afraid of tax increases that they put them at the top of their fear list. Why? I'd prefer to have a heavily taxed dollar that bought MORE than the expected rampant hyperinflationary dollars that won't buy a cup of coffee.

    Unless you want anarchy I suggest that having a government, which means paying taxes, is certainly the way to go.

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  24. tiiiiiiiiimmmmmmmber, durable items and self sustainability.....sign me up.

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  25. This is all the fault of Bill Clinton. Didn't anybody ever tell the guy that economic growth is based upon increased energy consumption? Read this article and be prepared to weep... Clinton cancelled our only hope of unlimited clean energy...

    http://www.sustainablenuclear.org/PADs/pad0509till.html

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  26. Taxes fairly applied based on whats best for society, most would support. Taxes used to destroy society should never be tolerated. Anarchy is never the solution (obviously). Nor are Socialism, Capitalism and Communism. There needs to be a new way. A way that is focused more on local living, local commerce, away from Consumerism, Materialism, and so forth. Until society chooses a path away from all the aforementioned evils... and I have my doubts, based on the popularity of Reality-TV and American Idol, not to mention Ultimate Fighting (adverts run during CNBC's "Squawk Box, so we know there's an audience there, too)... until society and Mankind become truly compassionate, and value human life over profits and commodity prices... society is doomed. Destructive Grace is what we will be living through for years to come. There is much good, albeit laced with pain, in Destructive Grace. (Excuse spelling errors. No time for spellcheck!)

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  27. Debt can be managed in simple context if people had the ability to look at it as a market endevour instead of the same old structural bullshit of top-down monetary policy.
    Debt can be replaced by debt-free gold being placed into circulation by the market ....by the market! There is no need for gov't or bank involvement when real assets are being used. Debt currency must be centralized, not so with real assets.

    Now that fully backed gold title can be digitized, by weight, as currency, one can buy a stick of Juicy Fruit with fully backed currency in the twinkling of an eye and buy it from anywhere on the globe.

    Debt-free store of value has now married with instant global liquidity. This is what gold backed payment processors do. Wake up folks. The solutions to debt belong to us, not "them".

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  28. This is the same man who ran CitiBank into the gutter. He is a liar and a thief and while his spin is true, I dont think his intentions can be trusted.

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  29. And we are listening to a CFR member why, exactly. These ghouls live for the creation of a one world government, which they see as the panacea for all the current ills of mankind. Not mentioned is these very same jokers CREATED many of those same ills, just as the Federal Reserve engineered the current "massive, sustained economic meltdown not to be referred to as depression". We are taking advice from the wolves about how best to improve security at the chicken coop. Ignore the mainstream press, and make sure you and your family have sufficient food, fuel and other basics to ride out an extended emergency. Cosnider it as tangible insurance against "come what may", and then hope you never have to use it in such circumstances.

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