Obama Unveils $3.55 Trillion Budget Plan

14 posts / 0 new
Last post
CaWayne's picture
CaWayne
Status: Member (Offline)
Joined: Nov 8 2008
Posts: 4
Obama Unveils $3.55 Trillion Budget Plan

I found this scary.

http://news.aol.com/main/obama-presidency/article/obama-budget/358945

 

Keep those printing presses running.  Surprised

pir8don's picture
pir8don
Status: Gold Member (Offline)
Joined: Sep 30 2008
Posts: 456
Re: Obama Unveils $3.55 Trillion Budget Plan

I would guess that the US government agenda is two fold; on the one hand to promote inflation by increasing the money supply and on the other to promote government by more involvement in peoples lives.

Another thought is that Obama's pledge to halve the budget deficit inside four years can work well if he doubles (or more) it now then halves it later.

But my understanding of money is that it only gets real when people are prepared to work for it. When existing goods are bought or sold nothing changes except maybe location and ownership which are both trivial. Similarly with energy and minerals. Its always there as oil in the ground, sunlight, ion ore or whatever. What is 'sold' is the work of people.  So the US government or FED can print money and juggle the books forever, unless more people do more work nothing real will change and inflation will not get a hold. I find it hard to see the downside of printing money. Yes it makes inflation more possible even more probable but it doesn't predetermine it.  As Chris says, they can inflate their way out of it and they are obviously trying hard but unless more people do more work nothing will really change.

Don

______________________________________________

7 billion people can be wrong, very wrong

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: Obama Unveils $3.55 Trillion Budget Plan

From the linked article --

'In addition to sending Congress his $3.55 trillion budget plan for
2010, Obama proposed more immediate changes that would push spending to
$3.94 trillion in the current year
. That would result in a record
deficit Obama projects will hit $1.75 trillion, reflecting the massive
spending being undertaken to battle a severe recession and the worst
financial crisis in seven decades.'

What this means is that during fiscal year 2009, Usgov expects to take
in $2.19 trillion and spend $3.94 trillion, which approaches twice its
income. To put this on a personal basis, imagine a family with annual
income of$219,000, already $1,080,000 in debt, and planning to outspend its income by $150,000 to $175,000 for the next two years, pushing their accumulated debt toward $1.5 million. Clearly, this selfish, irresponsible family is headed for bankruptcy. And they don't deserve our sympathy.

Getting back to Usgov, its $1.75 trillion deficit is on a cash basis -- not meaningful for entities with long-dated
obligations. On an accrual basis, deficits have been averaging $4
trillion a year, while the cash-basis deficit was only in the hundred
billions. At this ramped-up level of cash deficit, the accrual deficit
for 2009 and 2010 could approach $6 trillion. Oh well, it's only paper
money.

Here's an example of what this lurid Weimar party atmosphere in Washington DC leads to --

Feb. 26 (Bloomberg) -- Fannie Mae, the mortgage-finance
company seized by regulators in September, asked the U.S.
Treasury for $15.2 billion in assistance after a sixth
consecutive quarterly loss drove its net worth below zero.

A wider fourth-quarter net loss of $25.2 billion, or $4.47 a
share, pushed the company to make its first draw from a $200
billion federal lifeline, Washington-based Fannie said in a
filing today with the Securities and Exchange Commission. Credit
quality deteriorated and debt costs soared, forcing the company
to record higher expenses and write down the value of its assets.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aW2RWUSXD0wU&refer=home

A couple of years ago, it would have been astounding for a private
company to demand reimbursement from the Treasury for its losses. Now
Fannie Mae sounds almost conservative as it draws down 'only'
$15.2 billion, the first disbursement from its $200
billion federal lifeline. This is what some long-forgotten politician
called 'defining deviancy downward.'

These deficits are going exponential. As Treasury yields rise, debt
service alone will ensure that these deficits do not materially come
down. I expect trillion-dollar cash deficits for years, and $5 trillion
accrual-basis deficits (the ones that really count). The fact that the
president's deficit cutting target is expressed in cash-basis terms
tells us prima facie that it's not serious and it's not going to work.

Welcome to Weimar, amigos. Party like there's no tomorrow -- because
every day, we're gonna need more Zim-dollars to survive.

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: Obama Unveils $3.55 Trillion Budget Plan

Here is a graph of the proposed deficit. Next year's deficit will be in the same ballpark. Is this outta control, or what.

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: Obama Unveils $3.55 Trillion Budget Plan
pir8don wrote:

I find it hard to see the downside of printing money.

The downside is those who have saved, and those who are on fixed incomes (pensions, annuities), suffer enormous confiscations of purchasing power. 

But it also creates poverty by robbing from everyone.  Low-paid workers are affected most by rising prices.  Rising prices do not translate into rising wages becase the rising prices do not reflect any real additional value in the product being sold   Eventually, wages are adjusted upward, but they always lag inflation.  As the CC shows, inflation benefits the early-money-receivers some, and robs from everyone else.

If you want a recent example of a group of people who at the very least seem to think they've been robbed from through monetary manipulation, look at the recent riots and government collapse in Iceland.  Next stop:  California?

kmarinas86's picture
kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Re: Obama Unveils $3.55 Trillion Budget Plan
Patrick Brown wrote:
pir8don wrote:

I find it hard to see the downside of printing money.

The downside is those who have saved, and those who are on fixed incomes (pensions, annuities), suffer enormous confiscations of purchasing power.

But it also creates poverty by robbing from everyone. Low-paid workers are affected most by rising prices. Rising prices do not translate into rising wages becase the rising prices do not reflect any real additional value in the product being sold Eventually, wages are adjusted upward, but they always lag inflation. As the CC shows, inflation benefits the early-money-receivers some, and robs from everyone else.

If you want a recent example of a group of people who at the very least seem to think they've been robbed from through monetary manipulation, look at the recent riots and government collapse in Iceland. Next stop: California?

The artimetic must change. Who is ready for the end of the exponetial money sytem? Who can find suitable replacement?

The truth may be that none are ready and that no one has found suitable replacement. If that's the case, that paints a picture of how we have gone as species. What goes up must come down!

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Re: Obama Unveils $3.55 Trillion Budget Plan

My calculator just broke...I'm going to ask the government for a bailout so I can buy a new one.

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: Obama Unveils $3.55 Trillion Budget Plan
kmarinas wrote:

The artimetic must change. Who is ready for the end of the exponetial money sytem? Who can find suitable replacement?

The truth may be that none are ready and that no one has found suitable
replacement. If that's the case, that paints a picture of how we have
gone as species. What goes up must come down!

kmarinas,

There is no need to re-invent the wheel.  There is such a thing as debt-free system.  It's called the gold standard.   Yes, it grows roughly at the same rate as the population, so I suppose it is exponentialas long as population growth is exponential.  In that case, it is population growth tha requires a solution, not the gold standard.

pir8don's picture
pir8don
Status: Gold Member (Offline)
Joined: Sep 30 2008
Posts: 456
Re: Obama Unveils $3.55 Trillion Budget Plan

Hi Patrick

My turn to battle with you instead of Joe?

How is your purchasing power lost. Only if more people work for money will it be lost. All the 'new' money is just sitting in banks doing nothing. I agree you will loose purchasing power if/when more people are working but that has to happen (which the government wants) and there is no real sign that it is happening is there? People are not working more for money yet.

If the government employs a significant number of people and they start to get others to work (baking bread or whatever) then you will start to lose your purchasing power. But it isn't a foregone conclusion. The 'new' money might just shuffle between accounts without anyone working more.

Don

____________________________________________

7 billion people can be wrong, very wrong

kmarinas86's picture
kmarinas86
Status: Silver Member (Offline)
Joined: Dec 29 2008
Posts: 164
Re: Obama Unveils $3.55 Trillion Budget Plan
Patrick Brown wrote:
kmarinas wrote:

The artimetic must change. Who is ready for the end of the exponetial money sytem? Who can find suitable replacement?

The truth may be that none are ready and that no one has found suitable
replacement. If that's the case, that paints a picture of how we have
gone as species. What goes up must come down!

kmarinas,

There is no need to re-invent the wheel. There is such a thing as debt-free system. It's called the gold standard. Yes, it grows roughly at the same rate as the population, so I suppose it is exponentialas long as population growth is exponential. In that case, it is population growth tha requires a solution, not the gold standard.

As prosperity increases, population growth tends to decline. It is prosperity that requires a soution.

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: Obama Unveils $3.55 Trillion Budget Plan
Quote:

Hi Patrick

My turn to battle with you instead of Joe?

How is your purchasing power lost. Only if more people work for money
will it be lost. All the 'new' money is just sitting in banks doing
nothing. I agree you will loose purchasing power if/when more people
are working but that has to happen (which the government wants) and
there is no real sign that it is happening is there? People are not
working more for money yet.

If the government employs a significant number of people and they start
to get others to work (baking bread or whatever) then you will start to
lose your purchasing power. But it isn't a foregone conclusion. The
'new' money might just shuffle between accounts without anyone working
more.

Don

Don,

I do not understand your point.  Yes, the money has to flow into the system, either through government created jobs or real jobs.  Either way, as long as that money is printed into existence instead of traded-for, it represent a net increase in dollars, and those who receive the new dollars first, benefit the most.

There are plenty of dollars in the world to fix all this.  The problem is they're all in China.  We can produce things of value and trade them to China to get $ back, or we can print money or borrow money back from China.  The first method reduces the debt, tames inflation, and creates savings.  The other two do the opposite on each count.

pir8don's picture
pir8don
Status: Gold Member (Offline)
Joined: Sep 30 2008
Posts: 456
Re: Obama Unveils $3.55 Trillion Budget Plan

Hi Patrick

Looks like we don't disagree much. But the people who receive the money first must spend it on creating work for others before we see change. They might buy a huge luxury yacht but that won't cause inflation. Your purchasing power won't drop because they printed money or bought anything existing. 

I see asia as full of people working their buts off, often in appauling conditions and for very long hours, and saving in US dollars so Westeners can consume. Wonder why they would want to stop doing that?

Don

_______________________________________

7 billion people can be wrong, very wrong

 

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: Obama Unveils $3.55 Trillion Budget Plan

Hi Don,

 

Quote:

Hi Patrick

Looks like we don't disagree much. But the people who receive the money
first must spend it on creating work for others before we see change.

Yes.  We could also do it the capitalist way, and let the people who already have money purchase assets that should be liquidated by insolvent companies or institutions, and then use their money to combine those assets with labor to produce value.  Unfortunately, the government believes it is better at allocating resources than the private market and it is going to increase taxes on the very people who are the only ones truly capable of creating jobs, in order to increase the employment level for make-work jobs, not jobs that actually produce something someone might want to purchase.

Quote:

They might buy a huge luxury yacht but that won't cause inflation. Your
purchasing power won't drop because they printed money or bought
anything existing.

I don't see government printed money going to buy yachts, but then I again, I guess I shouldn't be surprised if it did.  If only we could trick all the beaurocrats to board it at once... ;)

 

Quote:

I see asia as full of people working their buts off, often in
appauling conditions and for very long hours, and saving in US dollars
so Westeners can consume. Wonder why they would want to stop doing
that?

Don

Until now, most Chinese have benefited from US trade.  I know it's hard for you and I to consider that existence as "good" but obviously its better than whatever their prevous alternative was for them or they wouldn't be doing it.  In any case, I think those days are coming to an end.  US imports from China are down 40-60%.  Factories are closing all over.  Even before the downturn, China had 700 million people living below the poverty line.  It will be interesting to see what happens over there.  The Chinese have some big advantages:  very strong culture, traditions, work ethic, strong family traditions.  Their culture has survived 5,000 years.  Something tells me they'll last a while longer, but their gorvernment probably won't.

 In any case, I consider printing money into existence the economic equivalent of paying for sex and expecting to get a meaningful relationship.  That's probably a horrible example, but that's how I feel about it and I think there is a basis of truth to it.

Cheers,

Pat

pir8don's picture
pir8don
Status: Gold Member (Offline)
Joined: Sep 30 2008
Posts: 456
Re: Obama Unveils $3.55 Trillion Budget Plan

Pat

Whatever we/ you might want, we have a fiat money system and the consequences of printing money are not necessarily catastrophic. Otherwise you have no disagreement with me.  I don't share a belief in a money system based on gold or any other single resource(?). Hell, I don't even share a belief in a money system at all. We live in a world made by us and reap the consequences whether we like it or not. And its mostly not.

The instability inherent in the system is very apparent.

I'm glad that we can discuss the principles and philosophy behind our present reality and that so many of us are doing just that at the moment. It can only be healthy for us. I have learnt heaps through being on this site. Long may our comprehension grow!.

Cheers 2. 

Don

_______________________________________________

7 billion people can be wrong, very wrong

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments