A $1.75 trillion joke?

from Le Metropole Cafe

What a complete farce we are living through now. President Obama submitted his budget with a $1.75 Trillion projected deficit, yeah this one's manageable, it is only about 12-13% of GDP. Can you say banana republic? Only a day after his "fiscal responsibility" speech we get the details of this porked out, bloated, nation destroying farce of a budget proposal. Did I mention the $643 billion for health care? Actually, I believe this amount was the "down payment" over 10 years, I can't wait until the final tax bill comes. We will probably witness more heart attacks, more inductions into insane asylums, and more ulcers as a reaction than they will cover the previously uninsured.

This is truly banana land and the market is sniffing it out. Yields on Treasuries are rising and the default insurance on a 5 year note now exceeds that of Germany, France, and Japan. But here is the funniest part of all, if the US were to default, who would be left standing to make good on the default insurance? Aren't the insurers the likes of AIG, GE, and JP Morgan? If the government defaults, would any public finance company be left standing to pay up in Dollars? Wouldn't these Dollars presumably have no value because the "full faith and credit" just went broke? Wouldn't it be a better idea to just take the insurance premiums and buy Gold bullion over the 5 years? Hey, at least at the end you would still have bullion even if there was no default. But the best part, you would have bullion if they did default! I am confused as to what board of directors, money managers, etc. would pay Dollars today [that could be converted into something real] to insure against default of the US, only to receive more currency of the bankrupt entity ? Buying credit insurance on US debt is the equivalent of buying a BIC lighter for fire insurance.

The whole show has gotten stupid, the autos, banks, insurers, home builders and lenders are all crippled because we went off a deflationary cliff and this in turn has dragged the balance sheet of the Fed and Treasury into a black hole. And what do we hear on CNBC? Now is the time to BUY BUY BUY, especially the banks! They will lead us out! I am no rocket scientist but I can do simple math on a scratch pad, the SYSTEM is broke and no amount of freshly created worthless monopoly money is going to change this. It is over the edge and the only thing we hear from Washington is "we will borrow more money to make the already over levered system right again"! I don't think so Tim.

This thing is busted, if it wasn't, then 0% rates, $ Trillions in bailouts and stimulus, plans A-Z surely would have turned us around. They haven't worked and in fact things are much worse now than 6-12-18 months ago. The history books will be read 100 years from now and I can already hear an astute 3rd grader asking, "who WERE these people"?