America’s NOD
by ilene - August 10th, 2009 9:48 pm
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America’s NOD
Courtesy of Karl Denninger at The Market Ticker
"Honey, we got a NOD in the mail today, so we’re not going to pay – make sure you buy everything on our credit card, ok?"
Spending through July of 2009 has increased by $530 billion, which is 21 percent over the same period in 2008. The bailout money for Freddie Mac and Fannie Mae accounted for almost half of the spending increase. Unemployment benefits have more than doubled, Medicaid spending has grown by a quarter and Medicare spending has increased by 11 percent.
Tax revenue for the first three quarters of 2009 has fallen by approximately $350 billion, or 17 percent compared to the same period last year, due mostly to the effects of the recession on payroll, income and corporate taxes. A third of the decline is due to tax breaks in the stimulus, including the middle-class tax cut that President Obama campaigned on during last year’s election.
Got that?
The Stock Market has been on a tear, powered by printed money. Bernanke and his clowns have been monetizing debt – only $400 billion of the more than $2 trillion in market increase came out of money markets – the rest of the "firepower" – more than $1.5 trillion – came from "new bank reserves" used to buy mortgage-backed securities (Fannie and Freddie) and Treasuries – a figure that incidentally is close to the market’s rise in terms of capitalization.
Annualized, the $181 billion deficit increase in July alone is approaching one half of the full year 2008 deficit – in one month – and Treasury has announced it is going to sell almost half that much again this week in new Treasury issuance – that is, yet more deficit (or addition to debt.)
Think about a personal example. You get a NOD in the mail and realize there is no chance you can pay the mortgage in full going forward. Therefore, you don’t – on purpose.
Instead, you spend the mortgage money on consumption. You go out to eat every night, you take a cruise, you live the high life. Why not? You’ve got an extra $3,000 a month now, and by God you’re going to spend it. Even better,…