Usgov's Looming ARM Rate Reset -- UH OH!!!

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machinehead's picture
machinehead
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Usgov's Looming ARM Rate Reset -- UH OH!!!

Remember when Mad Al Greenspasm, with his policy rate set at ZERO, advised home buyers that ARMs (Adjustable Rate Mortgages) were a great deal? That was in 2004. Three short years later -- KAPOOM! Rates reset higher; payments exploded; borrowers defaulted; housing imploded. You didn't need to be no rocket surgeon to see that it would all end in tears.

Well, guess what? It's happening again. This time, the designated victim is our favorite drunken-derelict uncle, Flim-Flam Sam. The looming disaster is so bloody obvious, it's being published in the New York Times years in advance:

Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.

With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.

In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.

The potential for rapidly escalating interest payouts is just one of the wrenching challenges facing the United States after decades of living beyond its means.

http://www.nytimes.com/2009/11/23/business/23rates.html?_r=1&em

From a purely technocratic point of view, the Treasury is doing the right thing by extending duration, to lock in relatively low long-term rates. But, if the Treasury hadn't been run by racketeers like Hank Paulson and Tim Geithner, looting trillions for their corrupt cronies, the debt wouldn't be so high.

Let's face it -- the U.S. is being managed like a Third World banana republic. A country which chronically can't live within its means, can't maintain the external value of its currency, and can't stop deficit spending, is NOT a serious country no more. It's headed for a currency collapse.

But what can you expect, when you install looters and criminals to run the place? Hint: gold is not a titled asset. It doesn't necessarily have to show up on asset searches, when the failed-state hooligans get desperate enough to start looting individual consumer-depositors. A better choice might be to flee before currency controls are clamped on. These crack-addled bozos are gonna drive the bus into the ditch -- I guarantee you.

 

docmims's picture
docmims
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Re: Usgov's Looming ARM Rate Reset -- UH OH!!!

Folks just need to quit paying their mortgages then refuse to move out.  Most of the banks no longer have clear title because of the derivative mess, anyway: they probably can't get you evicted if you fight it.  Quit playing their game.

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SagerXX
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Re: Usgov's Looming ARM Rate Reset -- UH OH!!!
machinehead wrote:

Let's face it -- the U.S. is being managed like a Third World banana republic. A country which chronically can't live within its means, can't maintain the external value of its currency, and can't stop deficit spending, is NOT a serious country no more. It's headed for a currency collapse.

But what can you expect, when you install looters and criminals to run the place? Hint: gold is not a titled asset. It doesn't necessarily have to show up on asset searches, when the failed-state hooligans get desperate enough to start looting individual consumer-depositors. 

Bingo!  Pay cash.  Keep it outta the system.  Wait for the Great Unraveling (coming soon to an economy near *you*!)...

Viva -- Sager

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DrKrbyLuv
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Re: Usgov's Looming ARM Rate Reset -- UH OH!!!

mh - You're damned funny even when you're delivering bad news.

...the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year 

According to the U.S. Treasury, the interest payments on the national debt in 2008 were just over $451 billion.  For 2009, they report the interest debt at almost $384 billion.  - Interest Expense on the Debt Outstanding - U.S. Treasury

The NYT article says $202 billion in interest for this year (I assume they mean fiscal 2009 which ended in September) - this is a huge difference; anyone have another source?

The $700 billion interest / year is going to happen much sooner than 2019; more like 2011.  But Treasury Timmy is one step ahead of us.  He will devalue the dollar (FRN) so that $700 billion will seem cheap.  The looters game has been to steal our money by running scams that are like hidden taxes.  For example, by debauching our currency, they've been able to steal a portion of our accumulated wealth as measured in buying power.  

How do you measure it?  If you use the price of gold as a measuring stick, the dollar has dropped 43% against the value of gold in the past 12 months.  We are being trapped in debt - as we move to extend the duration - we can expect higher interest rates/payments.

Larry

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Damnthematrix
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Re: Usgov's Looming ARM Rate Reset -- UH OH!!!

Folks just need to quit paying their mortgages then refuse to move out.

HEY!!  That's my line......  do you mean to say it's catching on...?

Mike

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presidentbyamendment
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Re: Usgov's Looming ARM Rate Reset -- UH OH!!!

In order to not be to polemic in here, just let me refer you to

"Why its time to herd the Reagan Robots off a cliff"

at presidentbyamendment.com/blog.html

Any fiscal conservatives in here?

So how are we going to get out of debt? HMMMmmmm?

 

RH

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goes211
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Re: Usgov's Looming ARM Rate Reset -- UH OH!!!

In order to not be to polemic in here, just let me refer you to

"Why its time to herd the Reagan Robots off a cliff"

at presidentbyamendment.com/blog.html

Rick,

People might take your positions more seriously if you did not constantly link back to your site where you promote yourself becoming president.  Just a thought ....

 

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cmartenson
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Re: Usgov's Looming ARM Rate Reset -- UH OH!!!

Larry, the difference between the two interest payment numbers reported is the difference between cash out the door and the total interest bill.

The cash out the door part is the payments on the 'debt held by the public' while the total interest bill includes interest on the bonds the government owes to itself in the "intragovermental holdings" accounts (entitlement programs mainly).

It's the same ol' trick as always.  Ignore the part the government owes to itself and report the lower number.

However, as soon as the entitlement programs are no longer taking in enough to cover the outlays, those interest streams begin to kick in as cash out the door payments as surely as interest on a bond 'held by the public.'

There are really not that many ways to view this situation.  The US is on a fiscally ruinous path, the dollar is the most likely victim, and everyone's life changes radically during a currency collapse.

 

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DrKrbyLuv
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Re: Usgov's Looming ARM Rate Reset -- UH OH!!!

Chris, thanks for clearing up the discrepancy in the numbers.

Call me cynical but I think the health care reform bill is designed to compliment the decreasing SS revenue.  We will begin paying into it immediately but the benefits won't be realized for several years.  Supposedly, they will build a "trust fund" to make the transition easier.  What are the odds that the health care proceeds will be kept any safer than the borrowed SS?

Larry

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docmims
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Re: Usgov's Looming ARM Rate Reset -- UH OH!!!
DrKrbyLuv wrote:

Chris, thanks for clearing up the discrepancy in the numbers.

Call me cynical but I think the health care reform bill is designed to compliment the decreasing SS revenue.  We will begin paying into it immediately but the benefits won't be realized for several years.  Supposedly, they will build a "trust fund" to make the transition easier.  What are the odds that the health care proceeds will be kept any safer than the borrowed SS?

Larry

Good point Larry pay now for poor healthcare later.

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