[AgentR11]

$this->bbcode_second_pass_quote('prajeshbhat', 'T')urns out it doesn't matter who loses, goldman,JP and Citi always win.

[prajeshbhat]

I don't agree that the US government has insufficient funds. The tax revenue of US government was $ 2.16 trillion in 2010. The GDP of India was $1.538 trillion. The government of USA earned more than the entire nation of India with its 1.2 billion people. They could balance the budget if they want to. But that would mean JP Morgan and Citigroup and Goldman Sachs would be very unhappy. The government has to borrow money in order to run deficits, so they sell bonds to these banks.When buying government bonds, which supposedly have no risk, they use maximum leverage and actually have no reserve requirements. Plus the government pays interest on that loan. Even at 0.25 %, if the government runs a $ 1.5 trillion deficit, it has to pay an interest of $3.75 billion. As deficits keep adding up, so does the interest payment and it all goes to the banks.So the banks can just create $1.5 trillion out of thin air, and make billions in income.!! !!
So if the government stops running deficits, the banks will no longer be able to show large assets(loans) on their balance sheets. Plus all that interest income is gone.

[Pops]

Yep, I'm with Agent, the Plutocracy won't lose because both sides are on their side. Expect some window dressing but trickle-up will continue for the foreseeable future, on balance the trickle will increase.

Expect lots of cuts to departments and services like the EIA's reports, the money supply reports, EPA, FDA, the stillborn consumer protection agency, basically any letter group that limits or documents or regulates the exploitation of the "commons". The corps will fight for these and the libs will trade them away in a heartbeat because the great unwashed don't care and aren't looking.

Speaking of which, the big name entitlement programs will be fairly safe, because as Agent explains, they are pacification. But the little things in HHS will go, I don't even know what they are but you can bet Rush can rattle them off, block grants for this and that, Head Start funding and school lunch programs and community health and methadone clinics and halfway houses - anything with a small non-voting constituency will get the axe.

Axed also will be military programs from districts with small constituencies, and maybe some limited-time across the board freeze but that's about it for that half of spending.

But mostly, expect reduced services and aid to the aspiring middle class. This is what's left of the working poor and blue collar population that are now the walking casualties of the 20th century global revolution and the main target of the TEAs and pubs. Gone will be things like PELL grants and guaranteed loans, home office exemptions, whatever "retraining" programs are left, maybe even GI bill programs, etc. Home mortgage interest deduction and employer provided health insurance tax exemption cuts could happen if there is the a Grand Bargain but I doubt it, that starts cutting into the upper tiers. This group will be fall down into the bottom rung as MBAs increasing learn to ask "Wan-fries-widat?"

I doubt many of these cuts will be much publicized but like the man said, 'Never waste a good crisis.' The net effect will be a greater stratification of wealth, that has always been the pubs goal, and is explicitly the TEA's and the Dem rank and file have so lost their way in the rainbow of the '70s they don't realize we've circled back to the pub's halcyon days of Rich Uncle Pennybags


I've been saying since last winter the TEAs will force the pubs into pulling a Gingritch. They've actually gone much farther than I expected and I'm trying to figure out whether this whole deal will result in a large enough fiscal bloodbath to make it even more historic, maybe turn this next few years into Barry's Camelot. I know lots of conservative think he's Marx reincarnated but personally I don't really know what his Camelot might look like.

I mean crimmeny, even God only gets a 52% approval rating so by comparison O's 45% ain't bad!


Anyway, my bold prediction is that the Recession of 2010 started in May and the TEAs will get the blame.


Edited to clarify my hallucinations...

[Timo]

Prediction: A very meaningless increase in the debt ceiling will be gained, but not until after August 2nd. After that, Congress will raise it without any meaningful spending reductions or efforts to balance the budget deficit. The US will lose its AAA credit rating. Italy will also experience a complete economic meltdown. Ditto Greece. The EU will begin to crumble apart. The Fed prints more money to "reassure" the markets that everything is under control, but the world loses all confidence in the US as a trustworthy investment. Republicans use this to blame Obama and Democrats for the financial disaster. Millions of local goverment and state employees will be out of work. Private contractors who do work for the government will lose their contracts and go broke. The Administration legalizes Mary Jane so no one will really care how bad the economy gets.

[EnergyUnlimited]

$this->bbcode_second_pass_quote('Timo', 'P')rediction: A very meaningless increase in the debt ceiling will be gained, but not until after August 2nd. After that, Congress will raise it without any meaningful spending reductions or efforts to balance the budget deficit. The US will lose its AAA credit rating. Italy will also experience a complete economic meltdown. Ditto Greece. The EU will begin to crumble apart. The Fed prints more money to "reassure" the markets that everything is under control, but the world loses all confidence in the US as a trustworthy investment. Republicans use this to blame Obama and Democrats for the financial disaster. Millions of local goverment and state employees will be out of work. Private contractors who do work for the government will lose their contracts and go broke. The Administration legalizes Mary Jane so no one will really care how bad the economy gets.

[PrestonSturges]

The House will pass a one sentence increase in the debt limit. The window for debating their radical social engineering plan closed a month ago. However, they may only pass it after we default.

Whatever happens the GOP will try to use the confusion to launch further attacks in the areas of sex, religion, and undermining public education.

I feel that on the ground there is the sort of Maoist peasant anti-intellectual rebelliousness that the Khmer Rogue tapped into (I notice more people making that connection) while at a national level they are trying to create Weimar Republic misery to launch an openly fascist party.

Behind all this "libertarian" hog wash is a lot authoritarianism that goes back to the McCarthy era and before that the German America Bund. Remember, you only had 10 years between McCarthy claiming to save the America from communism, and the German American Bund claiming to save America from communism (and publicly celebrating Hitler's birthday). Then we had the John Birch Society, and those people (and the their children) are still with us. Most people get involved with these movements out of pure ignorance rather than malice, but many of them lack the character to leave and instead simply keep spouting the latest propaganda and conspiracy theories. Scary how easy it is to transition from religion to a hate group but all you have to do is keep agreeing with everyone else and there you are.

[AgentR11]

$this->bbcode_second_pass_quote('PrestonSturges', 'H')owever, they may only pass it after we default.

[PrestonSturges]

$this->bbcode_second_pass_quote('AgentR11', '')$this->bbcode_second_pass_quote('PrestonSturges', 'H')owever, they may only pass it after we default.

[Sixstrings]

$this->bbcode_second_pass_quote('prajeshbhat', 'I') don't agree that the US government has insufficient funds. The tax revenue of US government was $ 2.16 trillion in 2010. The GDP of India was $1.538 trillion. The government of USA earned more than the entire nation of India with its 1.2 billion people.

[prajeshbhat]

$ 2.16 trillion divided by 300 million population is almost $7000 per capita. The per capita GDP in India is $1200. There is no need to accept an Indian standard of living. My point was that the US government is deliberately running deficits in order to enrich a few banks and the elite. The government spent $ 3.7 trillion last year. Did it improve your standard of living?

[Keith_McClary]

Obama will cave in and sell out to the wealthy and powerful.

[prajeshbhat]

Here's one sure shot way to balance the budget:-

[Sixstrings]

$this->bbcode_second_pass_quote('prajeshbhat', '$') 2.16 trillion divided by 300 million population is almost $7000 per capita. The per capita GDP in India is $1200. There is no need to accept an Indian standard of living. My point was that the US government is deliberately running deficits in order to enrich a few banks and the elite. The government spent $ 3.7 trillion last year. Did it improve your standard of living?

[Outcast_Searcher]

Last minute meaningless punt (anything of size is promised sometime in the future, and doesn't actually happen).

If it lasts past the 2012 election, Obama won.

If it only goes to before the 2012 election, then the GOP won, as they will leverage this into a MAJOR compaign issue.

...

It would be NICE, BTW if congress could actually do its job and pass an actual BUDGET with real figures which we could get a detailed OMB review of, but apparently it's just fine to just ignore that requirement now (and blame all the problems on the House of Representatives -- nice spin there dems).

[prajeshbhat]

Some European countries have pretty high levels of taxation. And they manage to provide excellent social services. France has the best healthcare in the world. But the government also collects 48% of the GDP as taxes. Germany-42% , Italy - 46 %,
UK- 41%, Netherlands- 45%, Sweden- 51%, Denmark - 55%, Switzerland- 55%, Finland- 53%, Greece- 43%, Portugal- 47%, . In Canada the number is 38.4% and Australia- 32%. In USA taxes are 14.6% of the GDP. So I can see what you mean when you say USA doesn't have first world taxation. I think the Europeans have better social services because they have witnessed first-hand, the ravages of of the 2 world wars. They were fought on their soil. They saw their properties and lives being destroyed. After the war the people were broke, injured, sick and helpless. On top of that , if their governments had told them that they had to pay for healthcare out of their pockets, those governments would have been burnt to the ground. Taxing the rich(lot of them who profited during the war making weapons)made perfect sense to them. USA has not been through these conditions. But here we are 66 years later, the European experiment is also coming to an end.

[Keith_McClary]

$this->bbcode_second_pass_quote('prajeshbhat', 'I')n USA taxes are 14.6% of the GDP.

[EnergyUnlimited]

$this->bbcode_second_pass_quote('Keith_McClary', '
')If you are required to pay medicare premiums to a state plan is that a tax? Is it not a tax if you are required to pay premiums to some private insurer, as in USA?

[prajeshbhat]

$this->bbcode_second_pass_quote('', 'B')TW, my bet is no agreement by 2nd August which may or may not cause US to default

[EnergyUnlimited]

$this->bbcode_second_pass_quote('prajeshbhat', '
')Why do you believe there will be no agreement. The debt ceiling has already been revised 70 times. What's different this time.

[Mesuge]

Well, for one thing it will be quite usefull to watch this particular development, should there emerge some real complication in passing the next/higher debt level, such as USA loosing it's triple A rating status afterall etc. It could be evaluated as further step on the olduvai staircase into oblivion. However, if they "fix it" for now - it's just another sign about prevailing "resiliancy" in the dying system, i.e. prepers got some more time..

Since this is a prediction thread, I'd say nothing to medium inconvenience will happen out of this charade at the moment. So, I don't expect the other spectrum medium to full out crises like states/local governments going into emergency mode etc.

I guess we need huge net energy evaporation to kick the system into the terminal abyss, and we are not there yet.. so in the meantime anything can be temporarily "fixed" by FEDsters and their friends in politics and media.

Obviously a big game changer would be some sovereign going "nuts overnight", for instance, imagine country of the status as Switzerland, suddenly blocking it's borders, shuting down large parts of financial sector (exposed to global players), announcing bilateral agreements for energy/food imports in gold etc., basically going solo on the premise he who runs first..

One can theorize countries like Iceland, Norway, Finland, Switzerland, New Zealand.. may try at some point opting for this strategy.