Tuesday, June 28, 2011

“Dream A Little Dream”: How Long Would It Take To Pay Off The U.S. Federal Government Debt?

Let’s dream: Let’s imagine that the American political leadership decides to get serious about U.S. Federal government debt reduction—crazy as it may sound.

“Porcus Washingtonianus”:
Recently discovered new species,
native to the District of Columbia.
Actually, that’s too crazy. The American political leadership will never “do the right thing” with regards the deficit. After all, last spring, the American political leadership couldn’t agree on a measly $50 billion worth of cuts—a mere 1.4% of the total Federal government budget.

Okay, so in order to give our daydream a veneer of verisimilitude, let’s pretend instead that the members of Congress and the president are the victims of a cunning biological terrorist attack—they are infected with truly massive doses of both the Responsibility Bug and the Austerity Virus.

And then—under the unnatural effects of these sneaky terrorist pathogens—the American political leadership decides to cut the deficit outright, and start retiring the national debt.

Yeah: That’s much more realistic.

How much would they have to cut, in order to pay off the national debt? And how long would it take, to retire that national debt in its entirety?

Well, in order to figure this out, first they’d have to get honest about exactly how much is the U.S. Federal government’s debt. (Honesty is a perverse side-effect of the Responsibility Bug and the Austerity Virus. Scientists are working feverishly to try to stop this honesty stuff.)

Total outstanding Treasury debt is $9.7 trillion—but that’s not the entire Federal government debt. To those $9.7 trillion, you have to add another $4.6 trillion, which corresponds to “intragovernmental holdings”—basically IOU’s or markers the Federal government has put in the famed “Social Security lockbox”.

Thus the total Federal government debt: $14.35 trillion.

Friday, June 24, 2011

IBG–YBG: Owning vs. Managing—Democracy vs. Kleptocracy

There’s a saying in Chile: “La vaca engorda bajo el ojo del amo”—“The cow grows fat under the watchful eye of the owner.”
Are you keeping an eye on her?

I bring up this saying because of a financial scandal we’re having down here: There’s a retail chain called La Polar—fairly big, catering to lower-middle- and lower-income consumers—that’s been caught cooking the books.

Ordinarily, a financial scandal in a second-tier retailer in an out-of-the-way Latin American country doesn’t rate much of a reaction. A shrug, maybe, but that’s about it.

However, it seems to me that the La Polar scandal illustrates something not just about corporate governance, but about political governance as well. And not just in Chile—more to the point, it reflects corporate and political governance in the United States and Europe today.

This trivial financial scandal reflects why the political and economic leadership of both Europe and the U.S. are not acting in the long-term best interests of their countries. Rather, they are acting in the short-term best interests of themselves—to the detriment of the nations they are responsible for.

The reason is simple: IBG–YBG.

Let me recap the scandal first.

Monday, June 20, 2011

If Greece Defaults, What Happens to Portugal and Ireland—and Spain?

So it looks like Greece is about to go down the toilet.

What the Eurocrats Think of Greece
Last year, Greece got a bailout—so this year (wouldn’t you know it), they want another.

But it’s looking like France, Germany, Holland and the UK are all balking at the reality of having to save the Greek’s hide once again. Boris Johnson, the flamboyant Mayor of London, openly called for Greece to exit the euro in an op-ed in the Telegraph. Several of the participants in the negotiations are asking for Greece to make deeper austerity cuts first, before getting more bailout money—

—and of course, the Greeks won’t do that: Their population won’t stand for any more austerity measures, as they believe (correctly) that the reason Greece is in the hole it’s in is because rich people shirk their obligation to pay taxes. Also, the Greek people are getting handouts left and right from their government—paid for with deficits and debt.

So no European bailout, no money for Greece to continue funding its government.

So like I said, Greece is about to go down the toilet.

So now that we can, we have to step back, look up, and figure out what’s coming up next on the horizon, once Greece defaults.

The answer is obvious: Portugal, Ireland and Spain are coming up—and coming up fast.

Specifically, Portuguese and Irish debt: As of this writing, the 10-year Greek bond is yielding a staggering 17.34%. But the Irish 10-year bond? Safe as houses, you ask?

I’m Back

Ignore her innocent look: It was all Claire's fault.
Dear Gentle Readers and Kind Fans,

Due to circumstances beyond my control, I’ve had to lay off the writing of the blog for the last couple of weeks.

Some people have complained that, now that I’m running The Strategic Planning Group, I don’t have time for my regular blog.

Au contraire. SPG had nothing to do with my forced absence from the blogosphere.

The reason I was out? Personal stuff . . . mostly having to do with girlfriends and bitches. Literal bitches: My dog Claire has had cancer. I’ll post about her over the weekend.

But I’m back—and will be posting regularly for the foreseeable future.

Thanks for your patience.

GL

Wednesday, June 1, 2011

Europhrenia

According to the dictionary, schizophrenia is “a long-term mental disorder of a type involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception, inappropriate actions and feelings, withdrawal from reality and personal relationships into fantasy and delusion, and a sense of mental fragmentation.”

Read up on it.
In Europe, they’re having the same thing—only writ large: It’s not that the political/financial leadership of Europe is at odds with the people—it’s that they’re two minds locked in a single body, struggling for control.

In the one hemisphere of this divided brain, the political/financial leadership is convinced the European union is something devoutly to be wished—no matter what the costs, no matter what fortune and the people throw up in opposition.

In the other hemisphere of the europhrenic brain, the people of Europe overwhelmingly do not want integretation “at all costs”. In some parts (a lot of parts) of Europe, they don’t want integration at all.

Now, like a lot of schizophrenics, europhrenia has been latent over the past dozen years—since the 1999 monetary union, as a matter of fact—because everything’s been going great guns.

This is natural—and completely predictable: You ever see a schiphrenic have a break-down when he’s happy, high, and just got laid? No you do not—he only has his little “episode” when he’s stressed.

Same with europhrenia: Everything was copacetic between 1999 and 2008—though there were signs of the disease. In fact, lots of unmistakable signs of europhrenia: