Ron Paul: Stimulus Packages Will Turn Recession Into A Depression

[Kidlicious]

Nationalize the Banks!

Now you're starting to think right.

[Naked Gents Rut]

I only want temporary nationalization, though.

[Whoha]

Now you're starting to think right.

There won't be as many jumpers if they do that instead of letting them fail though.

[Kidlicious]

There won't be as many jumpers if they do that instead of letting them fail though.

The bankers won't jump anyway, as long as they get bailouts.

[Impaler[WrG]]

It feels like momentum for a Swedish-style Nationalization is indeed building, but it all seems to be coming from the left. What dose the right think we should do with the banks, I think some of the Libertarians may actually agree with Nationalization.

I think the proper steps are as follows...

1. Examine the bank books very conservatively, Geithner has dubbed this the "Stress Test".

2. Announce which banks are insufficiently capitalized, give them 'some' (a few months at most) time to raise private capitol but be prepared to jump early if share prices collapse.

3. Those which can't raise capitol will be Ceased by the FDIC, shareholders are wiped out, then Bond holders are wiped out as dictated by their successive tranches.

4. The banks management is decapitated and the various sub-divisions are broken up into reasonable size banks in accordance with a re-enacted Glass-Seagal act.

5. Bad assets, aka loans to people who have almost no chance of repaying them or foreclosed property that can't be sold at any kind of decent prices in this market can be moved to a "bad bank", the government dose NOT buy them.

6. The now purged and smaller banks are can now try to raise private capitol again, if this brings up private ownership to a majority then the new owners can appoint the management and the bank can operate again.

7. Banks which need more capitol might receive government capitol injections at this point, this is the ONLY public money used and taxpayers get equity and voting shares.

8. Over the next 2-5 years the government would try to sell off some or all of its ownership in the banks but only if it can get decent money for it.

9. The one "bad" Bank (created from scratch and stuff with garbage assets) would remain government owned and just needs to sit on these assets until they can be sold at decent value. Generally the longer the assets are held the more can be garnered. Once the Assets are sold the bank folds.

[The Mad Monk]

LOL, Worldnetdaily is just priceless:

Federal Obligations to Exceed World GDP

Don't be shy, you know the lazy posters around won't click links...

MONEYNETDAILY
Federal obligations exceed world GDP
Does $65.5 trillion terrify anyone yet?
Posted: February 13, 2009
11:35 pm Eastern

By Jerome R. Corsi
© 2009 WorldNetDaily

As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury.

The difference between the $455 billion "official" budget deficit numbers and the $5.1 trillion budget deficit cited by "2008 Financial Report of the United States Government" is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.

(Story continues below)



But the numbers in the 2008 report are calculated on a GAAP basis ("Generally Accepted Accounting Practices") that include year-for-year changes in the net present value of unfunded liabilities in social insurance programs such as Social Security and Medicare.

Under cash accounting, the government makes no provision for future Social Security and Medicare benefits in the year in which those benefits accrue.

"As bad as 2008 was, the $455 billion budget deficit on a cash basis and the $5.1 trillion federal budget deficit on a GAAP accounting basis does not reflect any significant money [from] the financial bailout or Troubled Asset Relief Program, or TARP, which was approved after the close of the fiscal year," economist John Williams, who publishes the Internet website Shadow Government Statistics, told WND.

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"The Congressional Budget Office estimated the fiscal year 2009 budget deficit as being $1.2 trillion on a cash basis and that was before taking into consideration the full costs of the war in Iraq and Afghanistan, before the cost of the Obama nearly $800 billion economic stimulus plan, or the cost of the second $350 billion in TARP funds, as well as all current bailouts being contemplated by the U.S. Treasury and Federal Reserve," he said.

"The federal government's deficit is hemorrhaging at a pace which threatens the viability of the financial system," Williams added. "The popularly reported 2009 [deficit] will clearly exceed $2 trillion on a cash basis and that full amount has to be funded by Treasury borrowing.

"It's not likely this will happen without the Federal Reserve acting as lender of last resort for the Treasury by buying Treasury debt and monetizing the debt," he said.

"Monetizing the debt" is a term used to signify that the Federal Reserve will be required simply to print cash to meet the Treasury debt obligations, acting in this capacity only because the Treasury cannot sell the huge of amount debt elsewhere.

The Treasury has been largely dependent upon foreign buyers, principally China and Japan and other major holders of U.S. dollar foreign exchange reserves, including OPEC buyers purchasing U.S. debt through London.

"The appetite of foreign buyers to purchase continued trillions of U.S. debt has become more questionable as the world has witnessed the rapid deterioration of the U.S. fiscal condition in the current financial crisis," Williams noted.


"Truthfully," Williams pointed out, "there is no Social Security 'lock-box.' There are no funds held in reserve today for Social Security and Medicare obligations that are earned each year. It's only a matter of time until the public realizes that the government is truly bankrupt and no taxes are being held in reserve to pay in the future the Social Security and Medicare benefits taxpayers are earning today."

Calculations from the "2008 Financial Report of the United States Government" also show that the GAAP negative net worth of the federal government has increased to $59.3 trillion while the total federal obligations under GAAP accounting now total $65.5 trillion.

The $65.5 trillion total federal obligations under GAAP accounting not only now exceed four times the U.S. gross domestic product, or GDP, the $65.5 trillion deficit exceeds total world GDP.

"In the seven years of GAAP reporting, we have seen an annual average deficit in excess of $4 trillion, which could not be possibly covered by any form of taxation," Williams argued.

"Shy of the government severely slashing social welfare programs, federal deficits of this magnitude are beyond any hope of containment, government or otherwise," he said.

"Put simply, there is no way the government can possibly pay for the level of social welfare benefits the federal government has promised unless the government simply prints cash and debases the currency, which the government will increasingly be doing this year," Williams said, explaining in more detail why he feels the government is now in the process of monetizing the federal debt.

"Social Security and Medicare must be shown as liabilities on the federal balance sheet in the year they accrue according to GAAP accounting," Williams argues. "To do otherwise is irresponsible, nothing more than an attempt to hide the painful truth from the American public. The public has a right to know just how bad off the federal government budget deficit situation really is, especially since the situation is rapidly spinning out of control.

"The federal government is bankrupt," Williams told WND. "In a post-Enron world, if the federal government were a corporation such as General Motors, the president and senior Treasury officers would be in federal penitentiary."

[Agathon]

By Jerome R. Corsi

'nuff said.

That man is a buffoon.

This is like saying that a person's mortgage is 10 times their yearly salary. Oh noes!

It used to be possible, but now it is increasingly likely that the right have lost, forever.

[Darius871]

Don't be shy, you know the lazy posters around won't click links...

I simply refused to dignify WND in general, let alone Corsi in particluar, with a copy-paste. The blatant logical fallacy in the title's implications already speaks for itself. Maybe someone here takes them seriously though.

[Impaler[WrG]]

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

I've seen people throwing around this statistical method for YEARS and It truly sounds like BS to me. Even if I granted you that it was appropriate to count future entitlement spending as Dept, how on earth could you NOT weight it against future Tax revenue? And for that matter how do you determine the cutoff date for calculating those future entitlement costs, their theoretically infinite if I assume the program remains in existence forever, but by the same logic so are revenues (yes KH I know one infinity can be larger then another).

Do you take a time-horizon of everyone currently living and add up the total entitlement cost over their projected lifetimes? That's a VERY long projection that would be nearly impossible to make with any accuracy. But suppose you actually did it now for that number to MEAN anything intelligible you need to then compare the pay-out rate of that populations entitlements to the expected revenue at the time its payed out (because entitlement money is not gambled in the market like conservatives wish) which would be the taxation income in the year 2070 payed by generations yet unborn!

The $65.5 trillion total federal obligations under GAAP accounting not only now exceed four times the U.S. gross domestic product, or GDP, the $65.5 trillion deficit exceeds total world GDP.

Again we can't evaluate that number without a time-horizon, and in all reality four times GDP would be collected in a span of 20 years at a taxation rate of 20% of GDP, less even with GDP growth is factored in.

I'm not saying that we shouldn't make projections of future entitlement costs and future tax revenue and thus approximate deficit forecasts and them adjust our spending and taxation appropriately. But Hyperbole like claiming future entitlements makes the country Insolvent in the present is absurd and at worst a wanton deceit.

[Darius871]

I've seen people throwing around this statistical method for YEARS and It truly sounds like BS to me. Even if I granted you that it was appropriate to count future entitlement spending as Dept, how on earth could you NOT weight it against future Tax revenue? And for that matter how do you determine the cutoff date for calculating those future entitlement costs, their theoretically infinite if I assume the program remains in existence forever, but by the same logic so are revenues (yes KH I know one infinity can be larger then another).

Do you take a time-horizon of everyone currently living and add up the total entitlement cost over their projected lifetimes? That's a VERY long projection that would be nearly impossible to make with any accuracy. But suppose you actually did it now for that number to MEAN anything intelligible you need to then compare the pay-out rate of that populations entitlements to the expected revenue at the time its payed out (because entitlement money is not gambled in the market like conservatives wish) which would be the taxation income in the year 2070 payed by generations yet unborn!



Again we can't evaluate that number without a time-horizon, and in all reality four times GDP would be collected in a span of 20 years at a taxation rate of 20% of GDP, less even with GDP growth is factored in.

I'm not saying that we shouldn't make projections of future entitlement costs and future tax revenue and thus approximate deficit forecasts and them adjust our spending and taxation appropriately. But Hyperbole like claiming future entitlements makes the country Insolvent in the present is absurd and at worst a wanton deceit.

I warned you not to take it seriously.

[DaShi]

http://www.nytimes.com/2009/02/15/opinion/15rich.html?em

February 15, 2009
Op-Ed Columnist
They Sure Showed That Obama
By FRANK RICH
AM I crazy, or wasn’t the Obama presidency pronounced dead just days ago? Obama had “all but lost control of the agenda in Washington,” declared Newsweek on Feb. 4 as it wondered whether he might even get a stimulus package through Congress. “Obama Losing Stimulus Message War” was the headline at Politico a day later. At the mostly liberal MSNBC, the morning host, Joe Scarborough, started preparing the final rites. Obama couldn’t possibly eke out a victory because the stimulus package was “a steaming pile of garbage.”

Less than a month into Obama’s term, we don’t (and can’t) know how he’ll fare as president. The compromised stimulus package, while hardly garbage, may well be inadequate. Timothy Geithner’s uninspiring and opaque stab at a bank rescue is at best a place holder and at worst a rearrangement of the deck chairs on the TARP-Titanic, where he served as Hank Paulson’s first mate.

But we do know this much. Just as in the presidential campaign, Obama has once again outwitted the punditocracy and the opposition. The same crowd that said he was a wimpy hope-monger who could never beat Hillary or get white votes was played for fools again.

On Wednesday, as a stimulus deal became a certainty on Capitol Hill, I asked David Axelrod for his take on this Groundhog Day relationship between Obama and the political culture.

“It’s why our campaign was not based in Washington but in Chicago,” he said. “We were somewhat insulated from the echo chamber. In the summer of ’07, the conventional wisdom was that Obama was a shooting star; his campaign was irretrievably lost; it was a ludicrous strategy to focus on Iowa; and we were falling further and further behind in the national polls.” But even after the Iowa victory, this same syndrome kept repeating itself. When Obama came out against the gas-tax holiday supported by both McCain and Clinton last spring, Axelrod recalled, “everyone in D.C. thought we were committing suicide.”

The stimulus battle was more of the same. “This town talks to itself and whips itself into a frenzy with its own theories that are completely at odds with what the rest of America is thinking,” he says. Once the frenzy got going, it didn’t matter that most polls showed support for Obama and his economic package: “If you watched cable TV, you’d see our support was plummeting, we were in trouble. It was almost like living in a parallel universe.”

For Axelrod, the moral is “not just that Washington is too insular but that the American people are a lot smarter than people in Washington think.”

Here’s a third moral: Overdosing on this culture can be fatal. Because Republicans are isolated in that parallel universe and believe all the noise in its echo chamber, they are now as out of touch with reality as the “inevitable” Clinton campaign was before it got clobbered in Iowa. The G.O.P. doesn’t recognize that it emerged from the stimulus battle even worse off than when it started. That obliviousness gives the president the opening to win more ambitious policy victories than last week’s. Having checked the box on attempted bipartisanship, Obama can now move in for the kill.

A useful template for the current political dynamic can be found in one of the McCain campaign’s more memorable pratfalls. Last fall, it was the Beltway mantra that Obama was doomed with all those working-class Rust Belt Democrats who’d flocked to Hillary in the primaries. The beefy, beer-drinking, deer-hunting white guys — incessantly interviewed in bars and diners — would never buy the skinny black intellectual. Nor would the “dead-ender” Hillary women. The McCain camp not only bought into this received wisdom, but bet the bank on it, pouring resources into states like Michigan and Wisconsin before abandoning them and doubling down on Pennsylvania in the stretch. The sucker-punched McCain lost all three states by percentages in the double digits.

The stimulus opponents, egged on by all the media murmurings about Obama “losing control,” also thought they had a sure thing. Their TV advantage added to their complacency. As the liberal blog ThinkProgress reported, G.O.P. members of Congress wildly outnumbered Democrats as guests on all cable news networks, not just Fox News, in the three days of intense debate about the House stimulus bill. They started pounding in their slogans relentlessly. The bill was not a stimulus package but an orgy of pork spending. The ensuing deficit would amount to “generational theft.” F.D.R.’s New Deal had been an abject failure.

This barrage did shave a few points off the stimulus’s popularity in polls, but its approval rating still remained above 50 percent in all (Gallup, CNN, Pew, CBS) but one of them (Rasmussen, the sole poll the G.O.P. cites). Perhaps the stimulus held its own because the public, in defiance of Washington’s condescending assumption, was smart enough to figure out that the government can’t create jobs without spending and that Bush-era Republicans have no moral authority to lecture about deficits. Some Americans may even have ancestors saved from penury by the New Deal.

In any event, the final score was unambiguous. The stimulus package arrived with the price tag and on roughly the schedule Obama had set for it. The president’s job approval percentage now ranges from the mid 60s (Gallup, Pew) to mid 70s (CNN) — not bad for a guy who won the presidency with 52.9 percent of the vote. While 48 percent of Americans told CBS, Gallup and Pew that they approve of Congressional Democrats, only 31 (Gallup), 32 (CBS) and 34 (Pew) percent could say the same of their G.O.P. counterparts.

At least some media hands are chagrined. After the stimulus prevailed, Scarborough speculated on MSNBC that “perhaps we’ve overanalyzed it, we don’t know what we’re talking about.” But the Republicans are busy high-fiving themselves and celebrating “victory.” Even in defeat, they are still echoing the 24/7 cable mantra about the stimulus’s unpopularity. This self-congratulatory mood is summed up by a Wall Street Journal columnist who wrote that “the House Republicans’ zero votes for the Obama presidency’s stimulus ‘package’ is looking like the luckiest thing to happen to the G.O.P.’s political fortunes since Ronald Reagan switched parties.” There hasn’t been this much delusional giddiness in these ranks since Monica Lewinsky promised a surefire Republican sweep in the 1998 midterms.

Not all Republicans are so clueless, whether in Congress or beyond. Charlie Crist, the moderate Florida governor who appeared with the president in his Fort Myers, Fla., town-hall meeting last week, has Obama-like approval ratings in the 70s. Naturally, the party’s hard-liners in Washington loathe him. Their idea of a good public face for the G.O.P. is a sound-bite dispenser like the new chairman, Michael Steele, a former Maryland lieutenant governor. Steele’s argument against the stimulus package is that “in the history of mankind” no “federal, state or local” government has ever “created one job.” As it happens, among the millions of jobs created by the government are the federal investigators now pursuing Steele for alleged financial improprieties in his failed 2006 Senate campaign.

This G.O.P., a largely white Southern male party with talking points instead of ideas and talking heads instead of leaders, is not unlike those “zombie banks” that we’re being asked to bail out. It is in too much denial to acknowledge its own insolvency and toxic assets. Given the mess the country is in, it would be helpful to have an adult opposition that could pull its weight, but that’s not the hand America has been dealt.

As Judd Gregg flakes out and Lindsey Graham throws made-for-YouTube hissy fits on the Senate floor, Obama should stay focused on the big picture in governing as he did in campaigning. That’s the steady course he upheld when much of the political establishment was either second-guessing or ridiculing it, and there’s no reason to change it now. The stimulus victory showed that even as president Obama can ambush Washington’s conventional wisdom as if he were still an insurgent.

But, as he said in Fort Myers last week, he will ultimately be judged by his results. If the economy isn’t turned around, he told the crowd, then “you’ll have a new president.” The stimulus bill is only a first step on that arduous path. The biggest mistake he can make now is to be too timid. This country wants a New Deal, including on energy and health care, not a New Deal lite. Far from depleting Obama’s clout, the stimulus battle instead reaffirmed that he has the political capital to pursue the agenda of change he campaigned on.

Republicans will also be judged by the voters. If they want to obstruct and filibuster while the economy is in free fall, the president should call their bluff and let them go at it. In the first four years after F.D.R. took over from Hoover, the already decimated ranks of Republicans in Congress fell from 36 to 16 in the Senate and from 117 to 88 in the House. The G.O.P. is so insistent that the New Deal was a mirage it may well have convinced itself that its own sorry record back then didn’t happen either.

[Naked Gents Rut]

Pelosi won. She's the real power in Washington at the moment.

[The Mad Monk]

Frank Rich is either disingenuous or an idiot. Nobody I read or listen to in the conservative media thought the Republicans could block it.

We did think it was important to make our disapproval known.

[Whoha]

Given the mess the country is in, it would be helpful to have an adult opposition that could pull its weight, but that’s not the hand America has been dealt.

What a vote of confidence for Obama.

[DaShi]

Frank Rich is either disingenuous or an idiot. Nobody I read or listen to in the conservative media thought the Republicans could block it.

Where did he say that?