GOVERNMENT GONE WILD!

H/T American Perspective

GREEK DEBT WORSE THAN EXPECTED

"April 22 (Bloomberg) -- Greek bond yields surged to the highest since 1998 as the country’s worsening budget outlook put pressure on the government to accept a European Union bailout and ignore street protests against its austerity measures.

Greece’s benchmark 10-year bond yield rose to 8.564 percent, more than twice the rate on bunds. As a civil servant strike closed hospitals and shut the 2,500-year-old Parthenon temple, the EU said today that Greece’s deficit in 2009 was worse than previously forecast. EU officials lifted their estimate to 13.6 percent of gross domestic product from 12.7 percent and said it could top 14 percent.

Prime Minister George Papandreou is under fire from voters who say his budget cuts have gone too far and from investors who argue that further action is needed to reduce a deficit that is four times bigger than European Union rules allow. As Greek lawmakers meet EU and International Monetary Fund officials to negotiate loan conditions, the premium investors demand to hold Greek debt over German bonds reached 522 basis points.

“Papandreou is caught between a rock and a hard place,” said Jacques Cailloux, chief European Economist at Royal Bank of Scotland Group Plc. “The market has zero confidence in what the Greeks are saying, and any further austerity measures pushed for by the IMF could be the ones that break the camel’s back if they are deemed unfair by the population. He doesn’t have any option though.”
Bloomberg

But, I thought that everything was all worked out and the world could breathe a sigh of relief. As the civil unrest increases and Greece loses its sovereignty to the world bankers watch it carefully. Greece is a preview of things to come. Europe is unraveling and we're next. Don't let the next few months of "good" economic news here in America fool you. We're benefiting from what's happening elsewhere, for now, but that will be short lived. That, and the government, at some point, has to stop printing money.

"What does it all mean? It means the government must continue to spend or the private sector will fall back into a debt-laden slump. As we previously mentioned, the private sector is not yet ready to run with the baton and likely won’t be ready to run with it for several years. If the government cuts back on spending and stops effectively crediting private sector bank accounts the likelihood for a double dip or an all-out new recession increases substantially in 2011 and 2012:

“Discontinuation of fiscal stimulus could trigger another slump. The impact of the Obama administration’s $787 billion fiscal stimulus, unveiled last February, is now peaking. That reported improvements in economic conditions are still so modest naturally leads to concerns about what will happen when the stimulus winds down. The stimulus is scheduled to have its greatest impact in Q2 and Q3 this year, so I do not expect the economy to lurch backwards in the near future. Nevertheless, the economy could stall again once the stimulus ends unless private demand picks up in the next few months. The economy may rapidly improve in the coming months. However, the fact that the Fed is retraining bank inspectors in an effort to address the credit crunch suggests that central bank officials do not see the recovery as having firm underpinnings.”

...In March of 2009 we began referring to the rally as “the government run rally“. The rally started on government interventions and continues to this day with a massive and continuing stimulus plan that props up the economy.

In summary, enjoy the continuing appearance of an economic recovery into the back half of this year (and what will likely be higher equity prices), but don’t get your hopes up for a sustained recovery. The likelihood of spending cuts and higher taxes will put a damper on the recovery in 2011 just when things are starting to look so good. And that’s assuming that Ben Bernanke’s cattle prodding of prudent savers into risk assets doesn’t result in extreme malinvestment and destructive asset bubbles before that."
Business Insider

EUROPEAN DEBT NIGHTMARE

ANOTHER SIGN ON THE ROAD TO COLLAPSE

"The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.

Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market."
Bloomberg

This means that interest rates are going to start heading up. Couple this with all the money we've been printing and todays post from Swarm USA showing that every dollar of new debt (printing money) is taking forty five cents off the GDP, and it is becoming increasingly clear that our time before we collapse has grown short.

You see, as Karl Denninger at Market ticker explains, we are in a death spiral. As interest rates on our bonds go up we will have to print more money to service the debt. The more money we print the greater the impact on our GDP, which of course will have a negative impact on our creditworthiness, forcing interest rates higher.

The only way out is to reset the system, a task that our government does not have the stomach for because it would cost the wealthy players in the system too much money and damage the politicians. Not to mention just generally suck for the rest of us. But, if we do it in a controlled manner we can come out of it, maybe. We may be past the point of no return.

However, to do nothing, as we are doing now, will certainly result in the greatest depression and civil unrest; along with the potential destruction of our system of government.

Whichever way it goes, life as we have known it is in it's last days. Get ready, the time is short!

STICKING OUR HEADS IN THE SAND

"The U.S. government must spend its way out of the recession, the Democrats' third-ranking House leader stressed Monday.

Rep. James Clyburn (D-S.C.), the House majority whip, said that trying to find greater savings in the budget, which was released by President Barack Obama this morning, wouldn't help alleviate the recession.

"We've got to make some decisions here as to what's in the best interests of our country going forward," Clyburn said during an appearance on Fox News. "And I think the best interest is to invest in education, control these deficits, while at the same time trying to get people back to work."

"We're not going to save our way out of this recession," the majority whip added. "We've got to spend our way out of this recession, and I think most economists know that."

The Hill

Is it just me or does it seem like Clyburn is talking out of both sides of his mouth? We need to reduce the deficit by increasing spending? Of course, if he was a Republican he would say we need to reduce the deficit by cutting taxes. One looks to government while the other looks to business. Of course, neither look at the root of the problem; self control.

I don't care what the government does to manipulate the economy. We can never take in enough to pay the bills. We could take all of the money from everybody in the country and still not pay the bills. The country is bankrupt.

When a business or an individual goes bankrupt a third party steps in and determines who gets paid and how much. Assets are liquidated to the extent they can be to cover as much of the debt as possible. Some creditors get paid and some don't. When it's over, the person or business is returned back to a financial state that is far more realistic than where they were. And they will stay there for a good long while because hardly anyone will lend them money. They are forced to diminish in size and influence.

A country, because it is a sovereign entity can't go bankrupt in the same way as an individual or business. Bankrupt countries and their economies collapse. If a sovereign state were to accept third party control over its finances it would cease to be sovereign, thus it would cease to exist as an independent state. To retain its sovereignty, its national identity, a country must retain it independence.

An individual or business is considered bankrupt when it can no longer pay its bills, when the money coming in is insufficient to cover the cost of operation. However, it's possible, at least for awhile, to hide this through the use of credit. A bankrupt entity with access to credit can pay bills for a long time using that credit. Obviously this doesn't change the fact that they are bankrupt. It just makes the final collapse that much worse. Because, when the credit finally dries up the debt will be so large that it will be impossible to pay it back, even if all assets are liquidated.

This is the truth that for some reason the American people and our politicians seem to think doesn't apply to our country. But no matter how many times we click together the heels of our slippers and no matter how hard we wish it were different this time, it won't be. Our economy will collapse without MASSIVE cuts in spending. Across the board cuts; no sacred cows. Defense, welfare, healthcare, education, homeland security, FCC, FDA, FDIC, NTSA and everything else. Everything! Or they will be cut for us, through collapse. And if we refuse to make the hard choices right now the chances are that our government will go with them, because a collapse cannot be controlled. We won't have a third party making the choices for us. Because if we do, our country will have ceased to exist.

So what do I think will happen? I think that we will continue to try and spend our way out of the mess we're in. We are using credit cards to live on in the vain hope that things will improve. The truth is that even if things do improve it won't last long because we CANNOT pay our bills. There isn't enough money in the world. America will collapse, probably in the not too distant future.

We don't have to collapse. We can shrink in an orderly and controlled fashion. We can put ourselves through a self imposed bankruptcy court. This would allow us to determine who gets paid and how much. We could determine which assets to liquidate to help retire our debt. And, we could figure out who is just out of luck, the poor guy that thought he made a good loan that won't get paid. Some relationships are more important than others.

We won't be able to influence the world or project power to the four corners of the globe, but we can survive. And most importantly, we could retain our sovereignty, our Constitution and our freedom. We would be forced to return to something much closer to what the Founders designed us to be. We could disentangle ourselves from all of the foreign powers we've cozied up to through the years. We could become truly independent.

We won't shrink because no politician, besides maybe Ron Paul, will speak the truth much less act on it. They'll hide under the covers hoping the problem goes away, emerging only long enough to line their pockets with whatever little bit of wealth they can still find to tax away from us. They are cowards because we are cowards.

So America will collapse.

Pray and prepare because this is all we have left. I don't know when this country will come apart and I don't know exactly how. I just know it's coming because math generally works and the math I'm doing adds up to collapse. We can't afford to live like we do and we will maintain the illusion through the use of credit. The credit is starting to dry up. China is refusing to extend it and the Fed is monetizing our debt. It's just a matter of time.

And Rep. Clyburn will continue to say we can spend our way out.

ICELAND MAY TELL EU TO KISS OFF

So what happens if the people of Iceland decide to decouple from the world financial controls? What if they tell the bankers to take a leap?

It's going to be interesting to see what sort of pressure is brought to bear. I can't imagine that the money guys want people to think that they can stand on their own two feet. Independent thought and actions would be dangerous and not in the interest of the elites.

"LONDON, Jan 5 (Reuters) - Iceland would cut itself off from global financial assistance if its people vote not to compensate Britain and the Netherlands for losses caused by the collapse of Icelandic bank Icesave, Britain's financial services minister Paul Myners said on Tuesday.

Britain and the Netherlands are seeking more than $5 billion from Iceland which they paid in compensation to their domestic depositors after Icesave's failure in 2008, but Iceland's President Olafur Grimsson vetoed a parliamentary bill which approved this.

Grimsson's decision earlier on Tuesday will likely trigger a referendum in the North Atlantic island where a quarter of voters have already signed a petition calling for the deal to be scrapped.

Myners told the BBC that if Iceland voted against the deal, it would cut itself off from the global financial system and from International Monetary Fund aid for its economy, one of the worst hit by the world bank crisis.

'The Icelandic people, if they were to reach that conclusion, would effectively be saying that Iceland does not want to be part of the international financial system, that Iceland doesn't want to have access to multi-national, national and bilateral funding and doesn't want to be regarded as a safe counter-party with whom to do business,' Myners said."

London Southeast