Wednesday, February 9, 2011

And Now The States Will Get Bailed Out Too

So in 2008, the U.S. Federal government and the Federal Reserve essentially nationalized the losses of the major banks, bringing onto their respective balance sheets all the toxic assets and all the bad bets made over the last decade or so.

To that, the Federal government is going to now add the insolvent state governments. According to the NY Times:

Looks like a corpse, doesn’t it?
President Obama is proposing to ride to the rescue of states that have borrowed billions of dollars from the federal government to continue paying unemployment benefits during the economic downturn. His plan would give the states a two-year breather before automatic tax increases would hit employers, and before states would have to start paying interest on the loans.
The proposal, which administration officials said would be included in the 2012 budget that the president is scheduled to unveil next week, was greeted coolly by Republicans on Capitol Hill, who warned that the plan would ultimately force many states to raise their unemployment taxes in the years to come.
Screw the “unemployment taxes in the years to come”—the Federal government will be adding massive liabilities to its balance sheet now, which will force even more issuance of debt in order to keep the Federal government afloat.

And since the Federal government is insolvent, this added debt will force the Federal Reserve to continue buying up Treasuries. 

Obvious question: Is there anyone in a position of power in the United States who gives a shit about the fact that the government is being driven bankrupt?


  1. Hmmmm. Interesting. "two-year breather". When is Obama up for re-election? Oh, yeah, in about 18 months.

  2. With the federal government debt being greater than the revenue it brings in, would you consider the government technically bankrupt at this point?

  3. "Obvious question: Is there anyone in a position of power in the United States who gives a shit about the fact that the government is being driven bankrupt?"

    Obvious answer: No

  4. Funny stuff, I remember when I could actually buy something made in Canada. Exotic imports were either from the UK or the USA.

    Now I seldom, if ever, meet someone who actually makes stuff. I meet insurance people, retired and living on pensions, government employees. And , last but not least, heaps of people who work in retail.

    This is a story without a happy ending.

    All the best to those erudite people who follow the real news.

  5. Well, I think a bailout of the UC fund does not a complete State bailout make. There are plenty of huge losses from declining revenues and bad bets on municipal debt interest rate swap CONS, enough left over that the buzz du jour now enters into Bankruptcy.
    Ironically, my state Florida, just passed it's 10th amendment resolution this morning, so I am waiting to see if the movement to establish a sovereign banking charter, that is, a state bank based on the model of North Dakota, so as to recalim from the Rothschilds our constititional mandate to control our own money supply and interest rate. While the bank of North Dakota does not run a Bernanke style printing press, it DOES issue credit for the commonwealth of its citizens and its state, and not for the financial interest of global elite money powers.

    North Dakot is the ONLY State in the union for which a bailout is not even under logical consideration. It has a budget surplus, its largest ever, and is the only State in the union which can boast such.

    Do your homework Gonzo. Prove me wrong.

  6. Is there no one here who understands "cui bono"? They, them, not you have designed a system in which you can not particpate. It can not successfully be fought. Its' collapse will be suffered by you and yours not them and theirs. Oh gosh, I dropped my soap could you get it for me?

  7. Dear Wil
    You seem to be talking the talk of Ellen Brown: eliminate" the Federal Reserve and replace it with 50 State Federal Reserves.
    Then we'll have 50 agencies counterfeiting money instead of one.
    The problem will get worse. Never mind that it is unconstitutional.
    The enabler of uncontrolled government spending is fiat money, fractional reserve banking and a central bank.
    Solution: No central bank, gold standard, fractional reserve banking outlawed and let the market set the interest rate.

  8. EBAG,
    The Federal government is hopelessly lost, a captured pawn of globalism, period.

    So how do you plan to eliminate the FED, outlaw 10-1 leveraging of capital and let the market set rates with so much manipulation available to power players?

    We had Goldman Sachs leveraging credit risk exposure at nearly 1000 to 1, and so now people are out their trying to kill 10-1. OVER-REACTION.

    But I grant you this ... if you feel that the 49 remaining states would simply "counterfeit money" recklessly, or use it to speculate on collateralized commodity obligations in the global debt casinos then I hope you've made that last payment on the fallout shelter, because that simply means that honest banking is impossible at ANY level, so let's just do away with it altogether, along with credit.

    Now YOU'RE talking that Mike Shedlock talk.

    I think it has been established that it's the massive unhedged interest rate swaps of the TBTFs that manipulate interest rates through artificial bond demand.

    Just getting rid of the FED does not eliminate the massive manipulation in the so called free market that you think can "set the interest rate".

    Why is it that people refute the simple reality of a solution that is working, that HAS worked since 1919, and that has worked in every successful avoidance of usury throughout history? If the 49 states that bond out to Wall Street were in North Dakota's position today, the states could have a massive collective budget surplus, not the other way around.

    Glass Steagall kept fractional reserve lending in check for over 50 years until dismantled. It is the Federal Reserve which is unconstitutional, not the Hamiltonian principle of sovereign credit embedded in article 8, and displayed for all to see in example set by North Dakota's sovereign banking charter.


Knock yourself out!

The cult of stability is a culture of death.