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graeme's picture

graeme

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US debt compromise

The US debt compromise is a disaster for everybody but the very rich. Obama, if he ever had any principles (and I never thought he did), has abandoned them.

 Most of the American population is going to suffer severely - and for a long time. But corporate returns will probably remain solid - so it technically won't be a depression - just a lot of very poor and desperate people.

 

American democracy ceased to exist a long time ago. I suspect that soon we won't see even the pretence of it. The US is now openly run by the greedy and unscrupulous with the support of an hysterical and ignorant mob.

That debt deal turned the corner. There's not even a pretence that this will revive the economy or help anybody except the very rich.

But don't worry about it.. Church services will continue to be an abstract discussions to take us away from the real world. I got the message today from a radio preacher. This is a time of famine. So we have to tithe more so God will bless us.

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Alex's picture

Alex

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I do not belive the compromised is assured of passing. Either way those who are planning to buy a car soon, should put off the purchases until the US economy tanks,  forcing the auto industry to drop there prices.

 

 

If the US defaults they will send the economy into a tails spin, if they cut spending the results  will bne the same.

 

graeme's picture

graeme

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Nothing has actually been done  yet - except to avoid a default for now. Because that is all that has been agreed to, and because unemployment and income problems are going to worsen - and the present Congress will not under any circumstances approve raising taxes on the very rich, the situation will worsen.

That will be true until the next election. If the Republicans win, then any realistic dealing with the debt is out of the question. If the Democrats win, it will probably be too late to do anything. I suspect it is already too late.

 

At best, Americans can expect things only to worsen until the election - and with things already bad, worsening means very bad indeed.

GeoFee's picture

GeoFee

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Listening to CBC on topic, Monday just past supper time; west coast.

 

They are talking about ideas, seeming unaware that our social order is rapidly shifting. The language indicates crisis of historic implications, with no tone of concern specific to the lived experience of the multiplied thousands who will be directly affected in a strong negative sense.

 

As it was in the day of Noah.

 

While the lived world comes undone... children wait in line to purchase on credit the very latest, newest, most special device of all. Blissfully unaware that the device serves well the watchful eye of those who manage the economy.

 

As shepherds manage sheep; some for the wool and some for the slaughter.

 

So is it in our present moment.

 

 

Kimmio's picture

Kimmio

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here is a very interesting article and blog site I came across...

http://www.thepeoplesview.net/2011/08/paul-krugman-is-political-rookie-or-how.html

I'm hoping that we don't need to get our knickers in a knot over this just yet anyway. Once again, it seems that the media is spinning this in a different direction to provoke tensions and get everyone's adrenaline to hit the roof...because that's what gets ratings.

Apparently the markets are doing badly already because of this, but I think that's largely because of the media hype created leading up to the last minute. I think the market will settle down when, unfortunately, the next distraction is created to try to impede Obama in doing the right thing. Obama is smart and level headed, and he might just have pulled one over on his reactionary political foes this time. Politics is nasty business as it is, and unfortunately, when trying to be fair, he's had to fight an uphill battle every step of the way since he got elected. I'd, however, like to stay optimistic on this issue. Hope springs eternal.

MikePaterson's picture

MikePaterson

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The "debt compromise" is just a further step from reality.

Kimmio's picture

Kimmio

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This is yet another reminder to me not to buy into the mainstream media hook line and sinker...read the blogs and find out what real people have to say. Huffington Post, which I read and used to respect more, is becoming just as hyped and skewed as the rest of the mainstream media.

MikePaterson's picture

MikePaterson

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From The Scotsman today:

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US out of the frying pan - and straight into the fiscal fire

Published: 02 August 2011

By Bill Jamieson

Executive Editor

IF IT was sunshine and happiness Washington expected after backing down from a debt precipice, it had to be up early before the skies darkened and a new storm broke.

America's step back from the abyss - culminating in the House of Representatives voting 269-161 in the early hours of this morning to keep the government from defaulting on its debts - should have brought cheers of relief around the world's financial capitals yesterday. 

It did, for a while. But another dark abyss quickly appeared: the prospect of a plunge back into recession.

Barely had markets opened in New York in a mood to join in a relief rally, than fresh evidence appeared that America's economy is slowing to a halt.

News of a last-minute agreement between Republican and Democrat leaders came just two days ahead of today's deadline for lifting the ceiling on the $14.3 trillion debt mountain. 

Relief that an agreement was reached cheered investors in Asia and Europe. In London, the FTSE 100 Index was up more than 1 per cent. Markets in Frankfurt and Paris also rose.

But it all proved short-lived. A damning report on the state of the US manufacturing sector sent shares tumbling in New York, snuffing out the debt deal relief rally. 

On Wall Street, the Dow Jones went into sudden reverse. The FTSE 100, having been up almost 60 points at one stage, spun round to plunge 140 points, closing down 40.76 at 5774.43. 

America's political and business elites, far from enjoying a bout of back-slapping congratulation, are now on red alert.

Agreement to slash $2.4tr off US government spending over the next decade is one thing. Whether the economy is in any state to absorb this without falling back into recession is quite another.

What caused the sudden reversal of fortune was news that a closely watched barometer of America's manufacturing sector had dropped sharply in July, far worse than economists had been expecting. A related employment index showed a fall to its lowest since December 2009. 

On its own, this would hardly have justified such a sharp reaction. But it followed figures last Friday showing the US economy grew by just 1.3 per cent in the second quarter – far less than expected. The bigger shock was a downward revision of growth in the first three months of the year – from 1.9 per cent to a mere 0.4 per cent. Growth so far this year is the weakest since the recession ended. 

It is as if the debt deal has papered over one yawning hole, only to expose another one at the heart of America. And it is one manifest in a mood of deep pessimism about its prospects that is now gripping the country.

 

Kimmio's picture

Kimmio

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I really don't understand the intricacies of the stock market. The daily ups and downs often seem so arbitrary and have a lot to do with perception rather than facts which are too soon to predict.. The issues like the  overall performance of sectors analysed over a longer period of time, I understand. 

That said, in terms of the debt deal, I  hope there is  truth to the article I posted above.

graeme's picture

graeme

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The truth is the US economy has nowhere to grow. Manufacturing has largely moved out. In the huge field of computing, for example, there is almost no computer industry to revive. It's in Japan and China and  Korea. So is a good deal of car manufacturing. Clothing was moved out decades ago to places like Haiti where wages are three dollars a day.

Most important, there is no debt deal.The only agreement is to borrow more. There is no plan on hwo to reduce the debt. If you know of one, I would love to hear it.

The very rich have not been toucned by this. In fact, their incomes have risen, as have their portion of total American wealth. They have no intention of paying taxes - certainly not to revive the American economy because their money is going where labour is cheap and regulations don't exist.

Obama didn't outsmart anybody. At the best, he has gained time , he hopes to get through his term to the next election - after which he will again cave in. Obama is himself a disaster much like Bush. He has not honoured a single promise of his election ocampaign. (That includes his medicare legsilation which is really not medicare at all.) His financial backing is from Wall St. This is not a man who is going to change anything. Nor is that corrupt congress.

The media have, if anything, played down the seriousness of what is happening.

Kimmio's picture

Kimmio

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I don't know if I agree, Greame, but then again, I don't know much about world economy and world political mechanisms...I struggle to understand it. It seems to me like Obama came into an already burgeoning disaster on so many levels--yet with the right intentions-- and got ambushed by the republicans and has been in quicksand ever since. I would like to believe that he is trying to get it right, unlike Bush, who was blatantly reckless. 

graeme's picture

graeme

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If he were trying to get it right,  he would not be getting massive financial support from so many of the same people he paid off Bush. Nor would be have needed  Rebublican support to  end torture, to stop the drone bombing in Pakistan and various African countries. On the other hand, he attacked Libya all on  his own, has illegally given the rebels support - and all still without telling us what this is all about. If you check it out, you find that Obama has initiated more wars than Bush did. And he has never sent the aid to Haiti that he promised. He also has the power to prevent a boy soldier from being held in Guantanamo Bay, to stop him from being tortured, to prevent a military court from trying him, and allowing any court to do so with evidence gained from torture.

Except for nice speeches early on, Obama has never shown himself to be a man of either substance or principle. He and the whole American political system are awash in corruption.

I wish we weren't. but we really are watching a major event in history.

And remember, nothing has been agreed. They are going to raise the debt ceiling  (borrow more). That's it. There is no plan, certainly none in political discourse to suggest that there is ever the shred of plan to deal with the real crisis.

The US ceased to be a democracy a long time ago. It is, in fact, ruled by the new aristocracy of the super rich. They are the barbarians who are now quite obviously at the gates.

Kimmio's picture

Kimmio

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It was a collective UN decision to attack Libya. I remember Obama saying he didn't want to appear to be at the helm, because it was a collective move...I know that was posturing, largely...and I wish wars were not happening. I pray every day that the world leaders will come to their senses but the wars keep getting worse...

The economy is so complex that, like I said, I really struggle to get my head around it...it is it's own beast running wild that noone can get a handle on. The GDP, from my limited understanding is measured based on production, not on real wealth or the absence of need...so a country is as wealthy as the value of the goods and services it produces...regardless of waste or whether or not people (in other nations) can afford to buy what is produced. So maybe it is time to re-evalute and re-calibrate how a nation's wealth is measured in order to see the real truth and get things on track. Like measuring wealth based on wether or not a nation has education, healthcare, social programs and opportunities for people to earn a living...

InannaWhimsey's picture

InannaWhimsey

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It looks like the witty dramedy "West Wing" has already dealt with this issue

 

graeme's picture

graeme

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The attack on Libya was NOT a collective UN decision. And Obama didn't WANT to be seen as the major figure in it.

The UN authorized NATO to create a no fly zone over Libya. It was NOT authorized to take sides. (In fact, nobody seems to know just who the rebels are - but there is considerable evidence they were in touch with the US long before the rebellion.)

Nor did UN just "decide" to ask NATO to play a role. The request to the UN came from the US.

 

Human rights observers now report that NATO is routinely killing large numbers of civilians, that the rebels have been killing, looting and raping on a large scale.. It is also confirmed that they expelled all blacks from a city they captured.

NATO has gone far beyond any limits set by the UN. It has also recognized the rebels as the official government, enabling NATO countries to hand over Libyan bank accounts to the rebels. Obama says they are the official government - with no sign of elections, no sign they intend to have any, and not even much sign of who, exactly, they are.

We are almost certainly in violation of international law for our killing of civilians.  That may explain why Norway has just refused to continue as a part of the operation.

So what's going on?  Could it have something to do with the fact that Ghadaffi was going to refuse oil payments in American dollars - because of the dwindling value of the dollar?

Libya is a war. It is a war started by Obama. He is also sending drones into Yemen, Pakistan and, possibly, Somalia.

He's a very busy warrior for a winner of the Nobel prize for Peace.
 

Kimmio's picture

Kimmio

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....when was the last time a US president didn't go to war or attack anyone (I'm not condoning it just curious)? Jimmy Carter?

Kimmio's picture

Kimmio

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What concerns me also is that Canada has always been seen as a peacekeeping nation, and now we're participants.

graeme's picture

graeme

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Figures vary. But the US has attacked other countries (with or without calling it war) at least 200 times since 1776.  And that doesn't count the Indian wars or the use of drone bombers or special ops - or the sponsorship of revolutions to put dictators in power.


Peacekeeping has been dead for quite a while. The army brass never liked it. Not enough glory and hi tech equipment.

GordW's picture

GordW

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Wrong Kimmio.  For one thing, I am not sure how 50 years or so equals "always">  But more to the point, in WW1 WW2 and Korea Canada built a reputation as a warrior nation.  It was that reputation that gave Canadian forces a degree of respect to enable them to be peacekeepers.

LBmuskoka's picture

LBmuskoka

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The world never ceases to amaze, particularly the so called “developed” world.  Why, I ask myself almost daily, do we, that is the royal we, constantly repeat the same mistakes over and over again.  Why do we not repeat the good lessons from our histories?  Take this current US crisis.  This is not the first time it has occurred.  The last time the US dollar was so low it was embroiled in another hopeless war – Viet Nam.  Yet, history repeats itself….

 

Meanwhile back in Washington -- not, mind you, the Washington of the debt-ceiling crisis, but the war capital on the banks of the Potomac -- national security spending still seems to be on an upward trajectory.  At $526 billion (without the costs of the Afghan and Iraq wars added in), the 2011 Pentagon budget is, as Lawrence Korb, former assistant secretary of defense under President Ronald Reagan, has written, “in real or inflation adjusted dollars… higher than at any time since World War II, including the Korean and Vietnam Wars and the height of the Reagan buildup.”  The 2012 Pentagon budget is presently slated to go even higher.
Imperial Psychosis: We Pour Trillions into Empire While Gutting Programs Americans Depend On

 

Psychosis is an apt word.  The Americans are debating cuts to its most vulnerable citizens, the elderly and the youth.  Cut old age security! Cut health care!  Cut education!  But don’t touch our bombs and fighter jets!  It is truly insane…

 

If you really believe shrinking the debt is an imperative, then there are easier ways to do it then stealing grandma’s meds. The Bush wars and tax cuts – which are still going – cost $3.3 trillion from 2002 to 2009. Cutting the trillion-dollar war budget in half, ending the Bush tax cuts (which Obama could have done with no sweat when he was bursting with political capital in early 2009 or by calling the GOP bluff before or after the 2010 midterm elections) and raising tax rates on corporations would pretty much wipe out the deficit over the next decade. In the case of corporate taxes, during the last decade it averaged only 10.7 percent of federal revenues – and since 2008 it’s shrunk to barely 5 percent – versus 29.8 percent in the 1950s.
The 6 Biggest Lies About the U.S. Debt

 

The 1950s were boom years for the North American economy.  It was a time of peace and prosperity.  It was a time when great things were not only thought but executed.  It birthed all that became good about our democracies particularly the idea of equality.  What are we giving birth to now?

 

As long as everyone, the government and the public, keep ignoring that elephant in the room there will be no resolution.  That elephant is the insatiable war mentality that not only feeds armies but permeates into corporate and social structures creating a ‘dog eat dog’ society where the vulnerable are considered “collateral damage”.  

 

 

 

 

LB

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It'll be a great day when education gets all the money it wants and the Air Force has to hold a bake sale to buy bombers. 

     Author unknown, quoted in You Said a Mouthful, 1996

GordW's picture

GordW

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LAst Night Jon Stewart was interviewing a columnist ab out the debt crisis.  And while he saw it as a clear reality that tax reform was needed to increase revenue, and that entitlement spending (medicare and social security) needed to be cut.  He didn't say a single thing about defense spending.  If that isn't even put on the table what does that say about priorities?

 

Over 50 years ago Gen. Dwight D. Eisenhower warned against the military-industrial complex.  Apparently the only people who listened were those who make lists of quotations...

MikePaterson's picture

MikePaterson

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Did anyone else see this the other day???

 

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It’s either a heartening sign of commerce or a pathetic commentary on the debt debate: Apple has more cash than the United States government.

Apple’s cash reserve is about $76.2 billion. And while Congress stalled over the debt debate, the nation’s total operating balance was confined to $73.8 billion.

Sure, the comparison isn’t exactly apples to apples (pun intended). The government figure represents the leeway the U.S. had before bumping into the debt ceiling, whereas Apple’s number is actual money the company has on its balance sheet.

All the same, the fact remains that the technology company is holding more cash than the entire government of the world’s largest economy.

To put that in perspective, we’ve compared the U.S. government’s debt ceiling (before it was raised) to the cash reserves of several other prominent companies. Although the government is second only to Apple, companies like Microsoft and Exxon Mobil aren’t far behind.

We’ve chosen companies that are particularly interesting, but note that this is not a comprehensive list. Here’s how it all shakes out. And below, five lessons the U.S. could learn from Apple’s example... blah, blah, blah...

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How can such catastrophic centralization of power and wealth in corporate hands be allowed in a world where "people" are supposed to count a damn????

GeoFee's picture

GeoFee

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Being a consumer is easier than being a citizen!?

SG's picture

SG

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I think that it is a meaningful conversation why neither side dared touch defense.

 

Not a solitary penny of the $38 billion in spending cuts will come out of the Pentagon's coffers.

 

In fact, defense spending will increase by $5 billion over 2010 levels, to $513 billion. And that doesn't even include the cost of ongoing "overseas contingency operations," code for the wars in Iraq and Afghanistan.

 

All told, U.S. military spending in 2011 will exceed $700 billion — the most since World War II. That amounts to more than half of all government discretionary spending. It represents 35% of total military spending on the planet.

 

The US has a military fixation, a fixation with superiority.

 

Now, I was raised in the US, educated in US schools, watched US television, heard US politicians… so did my parents….

 

I cannot even begin to tell you how many US military actions have taken place in my short lifetime.

 

Why the fixation? It is ingrained in the culture and passed on through that culture (music, movies, stories, history) it is propaganda.

 

Does it go back to a colony founded in fear? Fear of Great Britain, fear of leaders…That Great Britain would not let them just go and they must be prepared to fight? They wrote in their founding papers that they needed a citizen army, specifically talking about overthrowing their own government.

 

Did it begin with the “little guy” syndrome? A Napoleon complex?

 

They quickly went from colonial wars and rebellions to Inter-State wars, wars of Imperialism and foreign interventions.

When did it morph into a quest for global domination?

 

 

That is what is taught “America is the best, the freest, the global leader…”

 

Once that is taught, then is taught that everyone wants to topple that Empire.

 

The citizens forfeits rights, freedoms, lives…. everything for the better of the well-oiled machine.

 

The machine needs corporations and oodles of money and the citizens forfeit rights and freedoms and lives for the corporations…

 

Covert operations or overt operations to cause instability and get control over something (oil and gas pipeline corridors)? Nobody bats an eye. That is what the machine does. What it has always done.  Global domination.

"Free market reforms" and the destabilization of national economies and the impoverishment of millions of people. Global domination.

Privatization programmes enabling Western oodles of cash to acquire ownership and gain control of a large share of the economy of other  countries. Global domination.

 

With a view to ensuring economic domination of the world, while strangling any potential "rival" or any viable alternative to America's vision of a 'free market' economy"… the machine marches on.

After WWII people wanted peace, they were not galvanized in wanting war. David Rockefeller said  to the United Nations Business Council in 1994:

"We are on the verge of global transformation. All we need is the right major crisis and the nations will accept the New World Order.

PNAC said there needed to be "some catastrophic and catalyzing event, like a new Pearl Harbor," which would serve to galvanize US public opinion in support of a war agenda.

911 served as that event.

The recolonization of a vast region extending from the Balkans into Central Asia. Global domination.

 

Inside the machine nobody notices any new sounds, anything not working how it always has….

Outside the machine, people point and stare… often from inside their own machines. Who is in this race for domination? If it was one entrant, there is no race, the other entrants make it a race.

Believing you are not an entrant, well… I said to my wife over a decade ago that Canadians were being led down the rabbit hole....look at how corporate/employee relations and laws have changed...  look how corporations get away with what they could never before.... look how corporate tax breaks matter more than citizens...money check your hydro smart metre and time of use charges and think about it considering how large users and companies do not have time of use rates... how money ranks over all else... look to the Tar Sands, hydrofracking,Artic Circle diamonds.... look at how the budgets come down and the poor suffer without housing and how some schools have no books, how there are no family doctors available... no money available.... but we have no shortage of bullets or bombs.

There, but for the grace of God and the fortitude of her citizens go we...

We keep pointing at the US' backside while following her down the same rabbit hole....

Pilgrims Progress's picture

Pilgrims Progress

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SG wrote:

 

 The machine needs corporations and oodles of money and the citizens forfeit rights and freedoms and lives for the corporations…

 

 

Seems to me there is a connection here with what Mike said about Apple - a corporation - having more cash that the US government.

 

We, the voters, still look to our governments for answers and yet increasingly it's corporations that have the power.

As such, governments serve the corporations - instead of the other way round.

 

Corporations grow more powerful by increasing their markets - not by assisting society's needy.

 

 

I'm pessimistic about a solution - but one thing I know for sure - it ain't gonna happen whilst we still believe, ostrich-like, that it is our governments that still have the most power.

 

We like to think so, but every year corporations grow - and demand more from our governments.

 

Debt? Cut welfare spending - we (the corporations) don't make money from that. Weapon manufacturing? Don't touch that or our taxes - or else!

 

 

Perhaps the people have to find a new voice - now that their vote is useless?

Seems to me a coalition of trade unions, churches, and welfare groups might possibly achieve more.....

SG's picture

SG

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I think we now vote with our check books and wallets.

 

If you want government (big business) to do the right thing, you demand it or they do not get your support ($). Buying elsewhere changes their tactics. Demand that companies use recycled materials, that they use less packaging, that they develop new technologies, that they give back to communities.... or shop with those who do.

Kimmio's picture

Kimmio

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GordW: When I said "always", I was mistaken. I have been alive for less than 40 yrs, so...my perspective is definately skewed because as long as I have been alive, until recently, we've been peacekeepers.

As for what came out of the 50's...from what I've learned, is a lot of it was not good at all! Nuclear energy,stockpiling of nuclear weapons, huge reliance on oil...consumerization of everything...advertising galore.. big.corporate mergers...big pharma... chemical food additives...plastics, etc. Was that the price of progress?

Kimmio's picture

Kimmio

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...and there's the implementation of the GDP as a measurement system, and then the implementation of the IMF not long prior to the 50's...which all subsequently led us to globalization of the economy. The first bank issued credit card was in 1946, the others followed in the 50's... what a disaster!

Berserk's picture

Berserk

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The Republican strategy is ingenious, if perhaps misguided. 

(1) First, the Tea Party exploited the massive outrage over the  Dems' absurdly wasteful bailouts and cruised into power in the House with 89 new representatives.  The Republicans are widely perceived as more fiscally responsible, despite their neglect of the poor. 

 

(2) Then the Tea Party  recognised the role of apparent intransigence in the art of political negotiation, recognizing that Obama lacks the guts to leverage his veto threat.  They knew this because Obama is caught in a dreadful inconsistency: he voted agiainst raising the debt ceiling in 2006. 

 

(3) The Republicans know they can deadlock the new Super Committee and prevent it from recommending new taxes, but cannot tolerate the defense cuts that would kick in through the trigger mechanism.  So they will leverage entitlement and tax reform to downgrade the amount of defense cuts proposed.

 

(4) The Republicans anticipate Obama's inevitable veto of future Republican legislation to renew the Bush tax cuts.    The Dems will propose that the tax cuts be renewed for all but the very wealthy, but that is a nonstarter for current Republican principles.  So the Bush tax cuts will die and the middle class will join the rich in paying higher taxes.  Most economists agree that tax increases for the rich alone cannot generate the needed revenue, but higher taxes on the middle class would be political suicide.  Republicans are rightly banking on the assumption that Obama's veto will be blamed for these tax hikes on the middle class.  A Republican president will be elected and will gain the needed revenues, while the Dems take the blame. That's my prediction, and I'll be interested to see if my assumptions prove correct. 

 

Azdgari's picture

Azdgari

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Seems like a reasonable prediction, Berserk.

GordW's picture

GordW

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I think the prediction is right.  But I think people are alos banking on the short memories of the populace---the wasteful bailout packages were started before the 2008 elections and are therfore as much Bush's legacy as Obama'a.

 

Strange how quickly such things get forgotten....but that sword has been known to cut both ways

MikePaterson's picture

MikePaterson

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BB, Saturday 6 August:

 

 

One of the world's leading credit rating agencies, Standard & Poor's, has downgraded the United States' top-notch AAA rating for the first time ever.

S&P cut the long-term US rating by one notch to AA+ with a negative outlook, citing concerns about budget deficits.

The agency said the deficit reduction plan passed by the US Congress on Tuesday did not go far enough.

Correspondents say the downgrade could erode investors' confidence in the world's largest economy.

It is already struggling with huge debts, unemployment of 9.1% and fears of a possible double-dip recession.

LBmuskoka's picture

LBmuskoka

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Mike P, we are on the same wave length I was just about to post this.  This quote in today's Globe and Mail is very telling...

 

The credit rating agency, which suggested another downgrade was possible within two years, was scathing in its rebuke of the U.S. political class after Sunday’s $2.4-trillion (U.S.) deficit reduction deal. It stated that that the “brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective and less predictable.”

 

This is the very real fallout of political rhetoric and partisanship. Sadly I have little optimism that the players in this tragicomedy will see their role in the demise of the US's economic dominance.

 

 

LB

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Livius, if you listen very carefully, you can hear the gods laughing!
     Fall of the Roman Empire

Kimmio's picture

Kimmio

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It doesn't matter what Standards and Poors says really, it's all smoke and mirrors... the economy  will go up, it will go down, and people everywhere will be confused and freaked out and argue and fight..and the media will play it up and make it worse....and the common folk will never be able to figure out what's going on so we can speak truth to power. We don't really know who the power is anymore anyway when it comes to economy. I'm beginning to think the state of the economy is an illusion to keep us enslaved to Money and if we had a different measurement system things would look a lot different...and if we focused on the positive task of working towards a newer fairer economic system (which seems totally impossible given we're so globally ingrained in it) the people in the world would be a lot better off. Under the current system, we will always be walking on egg shells and dependent on elusive markets.

Alex's picture

Alex

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What is scary about the lower rating is that after the gold standard was abandoned, the US dollar became the defacto new standard for currency.

 

The US dollar thus was kept artificially high.  Due to it's poor education system, the US depends on immigrants to fill the medical field, high tech companies, and many other highly trained fields. 

 

The downgrading will lead to the US dollar being removed as the standard for which  other currencies are measured. this will lead to a collapse of the value of the US dollar. This will lead to it being no longer able to afford to attracted highly skilled labour, which will cause a further decline in the US. This will lead to an exodus of it's trained labour, both foreign born and native born. 

 

Imagine a world where it takes 2, 3 or 4 US dollars to buy a Canadian dollar.

Pilgrims Progress's picture

Pilgrims Progress

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The world is inter-connected - America is sneezing and we'll all get a cold.

 

The_Omnissiah's picture

The_Omnissiah

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This​ my friends, is why modern economics is total bullshit.

 

As-salaamu alaikum

-Omni

Kimmio's picture

Kimmio

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Even if the "super-rich" were taxed heavily, it would likely not make a difference in their standard of living. Whereas, for the middle class and low income, would be painful.

RevMatt's picture

RevMatt

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http://www.theonion.com/articles/obama-debt-ceiling-deal-required-tough-concessions,21067/

 

That pretty much sums up my response to the deal.

 

As to the actions of credit rating agencies, yes, it is clearly the result reaped by political games.  But at the same time, it is all a game of pretend numbers and deliberately manipulated emotions.  Try and imagine this same game, but with a Republican as a President.  Would the downgrade still have happened?

LBmuskoka's picture

LBmuskoka

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RevMatt, this might give you some hope

 

“We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.”

This quote is from the S&P report - its not getting a lot of media attention for obvious reasons.

 

Here's the link to the story Mainstream Media Ignores S&P Attack On Republicans
 

 

And Kimmio these ratings are important.  If the other rating agencies follow suit, it means the interest on that huge American debt rises with obvious consequences.  Think of it like personal credit card debt, if the individual defaults the Credit Card Companies raises the interest making it harder and harder to pay off the original amount.  It becomes a spiraling cycle of debt.

 

The downgrading is historically significant.  The US has not faced this for 100 years and they appear to be ill equipped to cope with the consequences.  Their politicians, the people responsible, are ignoring the very clear warning signs that their actions are leading the nation to disaster.
 

The American economy, like it or not, is intertwined with the global economy.  What happens in the US does not stay in the US.  It will have a direct and immediate impact on our own.  Further, instability in the US makes the stock market jittery and as more and more pensions have moved away from fixed to market based plans the impact is felt on the average person who doesn't even dabble in the markets.

 

 

 

LB

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I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. . . . Corporations have been enthroned, an era of corruption in high places will follow, and the money-power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic is destroyed.

     Abraham Lincoln [1864]

Neo's picture

Neo

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I know that most will think I'm totally nuts here but perhaps this debt crises will be a good thing, in the long run. Our economy is bases on a huge gambling system called the stock market. The western world is living far beyond it's means and 70 or 80 percent of the world is living in poverty while 20 or 30 percent of the world uses most of the resources. How can we justify an economic system where children are dying of starvation everyday?

There has to be a better way of running an economy where everyone, everywhere has the same opportunity to freedom, justice, healthcare and education.

Perhaps from the ashes of this crises poverty everywhere will be addressed and international sharing will be the basis of a new international economy.

No country is an island in today's world, maybe it's time for a fundamental change in our thinking.

RevMatt's picture

RevMatt

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That does help, LB.

 

There is no doubt that there will be colossal change in the long run.  There cannot help but be.  The only question is what we have to go through to get there, and what damage is done in the process, and how long the interregnum is.

 

I'm not terribly optimistic on any of those fronts.  Next major test in this part of the world is the Ontario Provincial election this fall.  We'll see.

Kimmio's picture

Kimmio

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I know the credit ratings are important to the status quo which we have all been accustomed to. I just think we are going to have to brace ourselves and suck it up, until, as Neo says, " a better way of running an economy where everyone, everywhere has the same opportunity to freedom, justice, healthcare and education". I am no economist, that's for sure.For example, I have fallen into the money trap before, like most people. I no longer have a credit card and never want to get one again (funny but not funny...the first one I got was when I was 19 and realistically should never have been granted one because I was working a minimum wage job...kind of like the housing crisis...I got lured in by a free, silly set of silver salad servers --that's a tongue twister-- with the application thinking they would never give me a credit card... it was a huge mistake!). That was my first step down a road that I should never have gone down because I have a disability and did not realistically look at how that was going to effect my ability to keep up with the status quo and maintain employment as a youth...it's been up and down ever since....I just wanted to be like my peers, or at least accepted by them, but I never did "keep up with the Jones'" which I now see, is not so bad, I don't want to be the Jones'...except for the employment part. Everyone should have, and be able to fairly maintain, an equal opportunity to be educated, work and have a livelihood...alevel playing field as per our human rights laws. Sorry, I am off on a tangent, but it is applicable to the bigger picture I think. I have had more opportunities than many, so I want to spread that word...because I think many are at risk of being thrown under the bus in this current crisis...it won`t be just about regular Jones` who have to live with less.

I am certainly no economist, I'm trying to learn about what's going on and not get panicked by the news, but a solution is beyond my comprehension, so I don't know what that change will look like, whether it will be totally new or some variation on what we have with a more balanced approach, and the transition will most likely be very difficult...but I hope some wise and fair economists, along with perhaps sociologists and historians...including academics and lay-people, who know really what they're doing rally together on this.

Neo's picture

Neo

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I've thought the same thing Kimmio, I'm no economist but I'm sure, no, I know there are smarter heads than mine who can figure this out.

 

It shouldn't be much more difficult than each country submitting what they have and what they need. Maybe what they need could be based on some sort of scale on how bad they need it. From there we would need a world wide body, likely the UN or something, to sort it all out.

 

The bottom line is, for this to work we must find and discover the true meaning of "brotherhood and sisterhood", which would in turn begin to garner "right human relations". Isn't this what the new Age is all about? This concept of real brotherhood would lead us to understand why sharing is considered a divine act, and why a love of all of humanity, as we love our own brothers and sisters, is so important for humanity at this time. I honestly believe that sharing is our only hope, the consquences of not doing so are very dire for the human race.

 

From there it's simply a matter of being honest and sincere about what each country has to offer and what each country needs. Once the world pie of resources is drawn up then the distribution could begin. Maybe instead of money we could have a system trade credits, based on how relatively rich each country is. Again, this is coming from someone who hates everything to do with economics but does have a love for our race.

 

Nothing happens by itself. I think people power will eventually bring this, or something like this, about. Where there is a will, there is a way.

 

 

 

graeme's picture

graeme

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Alas! It's not a question of smarter heads. It's question of power and manipulation. Remember the rich have not lost in this recession. In fact, they have done rather well. There is no impulse to seek out big changes.

As to this crisis leading to better things... We have had such crises for two centuries. And every time we have at last gone back to the old wy. What we will see now is the destruction of the few gains we  have made since the great depressions of ht 30s.

LBmuskoka's picture

LBmuskoka

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Kimmio, you may find this editorial helpful....

 

The Truth About Taxes

[....]

And while “no new taxes” pledges are almost always big political winners, Americans are also figuring out that the country cannot keep on this way. According to the latest New York Times/CBS News Poll, 63 percent support raising taxes on households that earn more than $250,000 a year to help address the deficit.

 

If that is not enough to energize the White House, here are a few more facts. To avoid across-the-board cuts, Congress must enact at least another $1.2 trillion in deficit reduction measures over the 10 years. For all of the talk of “big government,” there is no way to cut that much in discretionary programs without crippling basic functions. Lawmakers could eliminate the Federal Bureau of Investigation, Pell Grants, the Centers for Disease Control and Prevention, the National Institutes of Health and Head Start and still not cut $110 billion annually.

 

Entitlement reform is essential. But it is unlikely that lawmakers will agree on deep cuts to Medicare, Medicaid and Social Security. Finally, asserting that deficits can be tamed with spending cuts alone ignores that the Bush tax cuts — costing $1.8 trillion from 2002 to 2009 — are a big reason we got into this deep hole.

 

Here is the bottom line. There is no economically sensible or politically honest way to address the deficit without also increasing revenues and reforming the tax code.

 

 

Governments, particularly the US and our own, are spending billions, and eventually it will be trillions, on the machinery of war and punishment (ie prisons).  This has never proven a successful expenditure of government funds, but it is proving particularly devastating to the American economy where the same people demanding tax cuts are also demanding these exorbitant expenditures that add nothing to the infrastructure, and therefore future benefits, of the country and its citizens.

 

What is being proven is the old adage 'you can't eat your cake and keep it too".

 

 

LB

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To preserve our independence, we must not let our rulers load us with perpetual debt.  If we run into such debts, we must be taxed in our meat and drink, in our necessities and in our comforts, in our labor and in our amusements.

      Thomas Jefferson

Kimmio's picture

Kimmio

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Thanks for posting the article LB. I really do think that higher taxes to the wealthiest is the short term solution to off-set cuts in programs, if they could be persuaded to be more generous, because the wealthiest of the wealthy would likely hardly feel a pinch...but will it hold in the long run? Banks, still, seem to practically push people into applying for credit they can`t afford to keep up with. You don`t need anywhere close to 250,000 per year to be solicited to apply for credit or up your limit, you need less than 1/10th of that to qualify....credit which comes in handy (but is not sensible) during times of unemployment or underemployment when the social programs that do exist are hard to qualify for unless a person meets all the criteria for unemployment benefits or they are literally down to zero or less for welfare.. and which doesn't  cover the cost of even the basic nesessities of living. But is dangerous in the long run...and then, which is especially relevant to employment opportunities, there is the issue of everything being dependent on the elusive stock market and GDP as a guage...so the system itself is still quite flawed. I don`t know what the answer is...but there is a ball of worry in my stomach.

Neo's picture

Neo

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graeme wrote:

Alas! It's not a question of smarter heads. It's question of power and manipulation. Remember the rich have not lost in this recession. In fact, they have done rather well. There is no impulse to seek out big changes.

As to this crisis leading to better things... We have had such crises for two centuries. And every time we have at last gone back to the old wy. What we will see now is the destruction of the few gains we  have made since the great depressions of ht 30s.


Yea, I hope you're wrong Graeme, 'cause what I'm proposing is the end of a tyranny that's been going on for thousands of years.

 

I personally believe that this time is different and that the economic recovery is never going to happen. In fact it seems like the opposite is happening and it's beginning to wrap it's way around the world, e.g. Italy is the latest in the news this weekend.

 

"Economic recovery" means a return to the status quo, which is, as we all know, the returning to a state where the rich keep their power and the poor suffer. Things like the "Arab Spring" that started this year is just the beginning of some real people power. Where there's a will, there's a way.

 

graeme's picture

graeme

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I hope I'm wrong , too.

Neo's picture

Neo

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From LBmuskoka's NYT's quote, The Truth About Taxes :

 

Each year, the government provides $1 trillion in tax breaks. Some of the largest breaks — for itemized deductions and retirement savings — should be retained because they subsidize important goals, like home ownership and old-age security. Right now, wealthier taxpayers get the greatest benefit.

 

One trillion dollars in tax breaks! If this is true then the US could be out of debt in 20 years. Why, why, why.... ... oh yea, money, money money, the big and powerful still control the small and powerless.

 

But as Bobby Zimmerman used to say "The times, they are a -Changin". People power is going to win out in the end. We are at the threshold of a new age where revolution and popular demand has the power to take over governments and topple empires. We're are witnessing the end of an era.

 

And it's about time too.

LBmuskoka's picture

LBmuskoka

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Neo wrote:

One trillion dollars in tax breaks! If this is true then the US could be out of debt in 20 years. Why, why, why.... ... oh yea, money, money money, the big and powerful still control the small and powerless.

 

And this is the problem with the No Taxes movement.  It is peddled as protecting the "middle class" but in fact the tax breaks are not designed to favour the middle class.   Not only has this segment of the population not seen a decrease in their tax burden the programmes that are cut in order to attempt to balance the revenue losses are those that the majority of the population benefit from; thus "No Taxes" becomes a double edged sword.

 

The biggest threat to middle class income is not taxes, but wage erosion.  Taxes have not gone up but median wages have gone down while corporate profits and executive earnings have risen.

 

It is propaganda at it finest:  distraction and obfuscation.

 

 

 

LB

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The goal of modern propaganda is no longer to transform opinion but to arouse an active and mythical belief.

     Jacques Ellul

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