Reply With QuoteWell doneSince both R and D are more or less equally responsible for this mess, they should be banned form the next two election cycles. Let's bring new faces to the political table
US budget deficit for 2009 expected to reach 2 trillion USD, 12.5% of GDP
http://www.bloomberg.com/apps/news?p..._M0&refer=home
Cost of U.S. Crisis Action Grows, Along With Debt (Update1)
By Matthew Benjamin
Oct. 10 (Bloomberg) -- The global financial crisis is turning into a bigger drain on the U.S. federal budget than experts estimated two weeks ago, ballooning the deficit toward $2 trillion.
Bailouts of American International Group, Fannie Mae and Freddie Mac likely will be more expensive than expected. States are turning to Washington for fiscal help. The Federal Reserve said this week it will begin buying commercial paper, the short- term loans companies used to conduct day-to-day business, further increasing costs. And analysts now say the $700 billion bank- rescue plan passed by Congress last week may have to be significantly larger.
``I always assumed they would be asking for more money along the way if it was necessary, and it looks like it's going to be necessary,'' said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington. ``At the moment, there's nothing happening here that's positive for the budget. Nothing.''
The 2009 budget deficit could be close to $2 trillion, or 12.5 percent of gross domestic product, more than twice the record of 6 percent set in 1983, according to David Greenlaw, Morgan Stanley's chief economist. Two weeks ago, budget analysts said the measures might push deficit to as much as $1.5 trillion.
Yields to Rise
That means a lot more borrowing by Treasury, which will push up interest rates, said Greenlaw. ``The Treasury's going to be ramping up supply dramatically over the course of coming months to meet this enormous federal budget obligation,'' Greenlaw told Bloomberg this week. ``The supply will trigger some elevation in yields.''
Treasuries have fallen the past four days even as stocks sank, a sign investors are preparing for bigger U.S. government borrowing. Benchmark 10-year note yields rose to 3.82 percent at 7:49 a.m. in New York, from a close of 3.45 percent Oct. 6.
Payments the government allocated to keep vital companies solvent are beginning to look insufficient.
AIG, the giant insurance company that was taken over by the government in mid-September, said this week it may access $37.8 billion from the Federal Reserve Bank of New York, in addition to the $85 billion the government already loaned it to stave off bankruptcy.
``You're in for a dime, you're in for a dollar on this one,'' said David Havens, a credit analyst at UBS AG.
The financial health and earnings prospects of Fannie Mae and Freddie Mac -- seized by the government on Sept. 7 to prevent them from failing -- worsened in the second and third quarters, the companies' government regulator said this week.
Price Declines
The companies and regulators are recalculating the value of all of their assets to factor in price erosion. That may mean the government will have to spend more to keep the firms solvent.
Earlier this week the Fed announced it will create a special fund to buy commercial paper, the credit that businesses use to finance payrolls and other ongoing expenses. The Treasury will deposit money into the Fed's New York district bank to help set up the new unit. A Fed official said Treasury funding for the program could be ``substantial.''
California, Alabama and Massachusetts are urging the Fed and Treasury to include their securities in rescue plans designed for banks and businesses. The $2.66 trillion U.S. market for state and city bonds has been all but frozen since Lehman Brothers Holdings Inc., weighed down by losses in mortgage-backed bonds, declared history's largest bankruptcy on Sept. 15.
California has said it needs to sell as much as $7 billion in notes to maintain its schools, health system and other public services. The Bush administration said it is reviewing the states' financial positions.
Plan for Banks
Meanwhile, Treasury Secretary Henry Paulson indicated two days ago that he is considering buying stakes in a wide range of banks in coming weeks to help recapitalize them.
Such a move is allowed under the $700 billion bailout package Congress passed last week. Edmund Phelps, winner of the 2006 Nobel Prize for economics and a professor at Columbia University, said such action is necessary -- and will likely turn out to increase the measure's cost. Spending beyond the amount set in last week's bill would require further Congressional approval.
``We have to recapitalize the banks,'' Phelps told Bloomberg Television this week. ``I don't imagine that there's enough money in the first Paulson plan to be able to do all that needs to be done in that direction.''
The additional borrowing could push the national debt well past 70 percent of GDP, the highest since the immediate aftermath of World War II, when the U.S. was still paying off war debt.
Debt Limit
Gross U.S. debt, which includes debt held by the public and by government agencies, this year reached about $9.6 trillion, or about 68 percent of gross domestic product. The rescue legislation increased the government's debt limit to more than $11.3 trillion from $10.6 trillion.
On top of all that, budget watchdogs say the sheer size of the interventions is making Washington more pigate than usual. To attract votes in Congress, leaders added several costly items to the $700 billion rescue, including extensions of some tax credits and tax breaks for makers of wooden arrows and stock- car racetrack owners.
Under normal circumstances, there would have been more resistance to such expenses, said Robert Bixby, executive director of the Concord Coalition, a non-partisan budget watchdog.
The rescue legislation ``creates a mask for all sorts of fiscal irresponsibility,'' said Bixby. ``It covers up a multitude of sins.''
To contact the reporters on this story: Matthew Benjamin at mbenjamin2@bloomberg.net
Last Updated: October 10, 2008 07:55 EDT
Well done
we pay so much taxes just to get deeper into debt ? MISMANAGEMENT.
if we stop paying taxes, maybe we can save money. or not spend so much on frivolous things, or at least spend better/smarter (hybrid tanks instead of gas-guzzling ones, lol).
Deficit spending is the very cause of this whole financial/economic mess. The government cannot spend billions of dollars in "printing press" money year after year without devaluing and debauching the currency. Going another $2 trillion dollars in the hole, means another $2 trillion dollars flooding the money market in excess of real production, an act that will result in massive inflation of the currency. This is the real reason gasoline prices have gone up, along with groceries and everything else. Loans are also paid back with cheaper dollars, causing investors to loose the value of their returns.
It should be obvious, at this point, that the government is deliberately ruining our country. The only thing at this point that would be absurd would be to say that there is NOT a conspiracy.
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www.richard-t-osborne.com
www.lonewolfsurvivalist.com
Ron Paul would have been a great new face.Originally Posted by 0rphie
Well done
_______________________
www.richard-t-osborne.com
www.lonewolfsurvivalist.com
Because Ron Paul wouldn't have to work with a Dem or Repub congress right ?
http://www.youtube.com/watch?v=M3-rslY_Yf8
I wonder how this financial situation will impact on the wars in Iraq and Afghanistan? This might place further pressure on the next government to reduce deployed forces. Thoughts?
If you like lunatics....
Will a proposal to get Fortune 500 CEO's donate their 2008 bonus into rescue be considered too extreme?
X2. Shame something like this wouldn't happen.Well done
Can't be any worse than what we've already seen and have.
...as the Founders roll in their graves in disgust.
I fear our founding fathers have been spinning in their graves for nearly a hundred years now.
Last edited by Hilbert; 10-14-2008 at 06:25 AM.
At least since 1913.
Don't worry. Obama can appoint two of his economic advisors, Raines and Johnson, to be Fed chair and SecTreas to fix all the mess they helped create at Fannie and Freddie.
Change?
The real deficit will almost certainly be higher than that since the Fed has been granted the authority to enter into currency swaps with ECB, which in essence, is a way to provide an unlimited amount of dollars to inject into the system while not having to show them on the balance sheet. You can be assured that they will use this tool to the fullest (they won't have a choice) when they have to bail out all the victims of the credit default swaps which are on the two orders of magnitudes higher than the 3 Trillion or so committed so far.
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