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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
October 2, 2012
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When the Dow hit its October 2007 high, the funded debt of the US Treasury was $US 9 TRILLION.  By the time the Fed had completed the obliteration of official US interest rates just
over a year later in December 2008, the debt had increased to $US 10.6 TRILLION.  Treasury funded debt hit the $US 16 TRILLION level for the first time on August 31, 2012.
According to the predictions of Treasury Secretary Geithner, funded debt will hit its present "limit" of just under $US 16.4 TRILLION around the time that the next President is
inaugurated in late January 2013.  That will mean that the four years of the (first?) Obama Administration has seen the debt rise by $US 5.8 TRILLION or almost 55 percent.  Another
four years like the last would bring it to $US 25.4 TRILLION by January 2017.

In September 1981 when Treasury funded debt first breached the $US 1 TRILLION level, long-term (10 year) Treasury debt paper was yielding a record 15.3 percent.  The Fed Funds Rate
was in excess of 20.0 percent.  Now, with the debt having increased sixteen-fold, long-term Treasury yields are hovering around 1.65 percent and the Fed Funds rate has been at 0.00-
0.25 percent for nearly four years.  Paul Volcker, who was Fed Chairman in 1981, is universally praised as the man who "conquered" US price inflation by letting interest rates rise to those levels.  Today, according to Mr Katalesky's article quoted above:  "Global investors continue buying US Treasury bonds regardless of how much the Congress borrows, safe in the knowledge that the Fed will keep short- term interest rates at zero and will support bond prices".  The
Fed's promise is now officially open ended.  The market's "confidence" is boundless.

The only irritant marring the awesome complacency of the markets is the $US Gold price.  In the 1970s, Gold soared from an artificially mandated "price" of $US 35 to a genuine blow-off high of $US 850.  Since early 2001, Gold has climbed from an artificially manipulated price of just over $US 250 to about $US 1925 and presently stands at $US 1775.  In magnitude, the Gold bull of 2001 to date has come nowhere near the Gold bull of 1971-80.  In duration, it has
already far exceeded its 1970s precursor.  The difference is central bank manipulation of interest rates.  The Fed refrained then, it dares not refrain now. 

From The Heights To The Depths:
In fiscal 1981 - the year that it hit $US 1 TRILLION – US Treasury funded debt increased by $US 98 Billion.  In numerical terms, this was the biggest one-year increase in Treasury debt ever, surpassing the huge annual increases during US involvement in WW II.  Some of this huge increase in debt was to "fight" a deep recession.  But another large part of it was run up in debt-servicing charges.  Long-term Treasury debt in 1981 was costing more than 15 percent.
Shorter-term Treasury debt was costing more than that, with three and six-month notes yielding well in excess of 20 percent for much of 1981…

In the US, the Treasury had never seen its annual increase in funded debt expand by more than $US 0.5 TRILLION until fiscal 2008.  Less than three months after the end of fiscal 2008 - and a month before President Obama was inaugurated - the Fed cut their controlling interest rates to zero.  The average annual increase in the Treasury's funded debt since the end of fiscal 2008 has been $US 1.4 TRILLION.

In the four years since the end of 2008, the US government has toyed with a "balanced budget amendment" – which naturally never saw the light of day.  Every "committee" which has anything to do with US government financing has come up with a plan to reduce the deficit - in the long term.  Several committees have actually been created for that specific purpose.  All have had their day in the media limelight.  None have had any effect whatsoever on the borrowing and spending of the government.

In July 2011, the situation became so farcical that the politicians had no choice but to set a date when taxes would have to rise and spending would have to be reined in.  That date was December 31, 2012 - the temporal edge of the "fiscal cliff".  Consumers and businesses in the US are standing in ever intensifying dread as that day draws closer.  The markets are ignoring it entirely, blithely confident that there will be no "austerity" for the US government.  As far as the markets are concerned, there is no exit from current policy.  The Fed can buy anything and everything because it can create ANY amount of "money".  



.Ó 2009 – The Privateer

(reproduced with permission)


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