Financial Briefing: Shave and a haircut, two bits

The President's National Commission on Fiscal Responsibility and Reform released its report early. Surprisingly (to me), the panel addressed the absolute necessity of cutting Social Security and Medicare, which of course means that no Democrat who values his job (including Bammer) will support the plan. And Republicans are likely to shit on the tax hikes and ObamaCare extensions from a great height. So the whole thing was -- again, as expected -- a futile exercise in ass-covering. The report will be sent into committee, where it will be humanely shot in the head. (You can get a PDF of the draft report by following this link.) I think Rep. Paul Ryan's "roadmap" is a much more realistic path to solvency, but it has even less of a chance of being passed into law than this thing. Here's Ace's post from yesterday.

In fact, the report was still warm from the copier when the shrieking from the usual leftist suspects commenced. A sample of the well-reasoned discourse we can expect from the left in the coming months:

The sharpest reaction came from Pelosi. [Editor's note: I had to sit down, my knees were that weak from the surprise.]

“This proposal is simply unacceptable,” she said. “Any final proposal from the Commission should do what is right for our children and grandchildren's economic security as well as for our nation's fiscal security, and it must do what is right for our seniors, who are counting on the bedrock promises of Social Security and Medicare. And it must strengthen America's middle class families — under siege for the last decade, and unable to withstand further encroachment on their economic security.”

I've said it over and over again: if you're not going to address Social Security and Medicare, you might as well not bother, because nothing else really matters. It's going to be an ugly fight. The end of a Ponzi scheme is never pretty.

Via Slublog, some chart-fu from Heritage showing just how profound the SS/Medicare burden is compared to all other government programs. (And I think this chart understates the Social Security burden for a variety of reasons, probably by as much as 20-30%.)

Rates on long bonds are going up. We won't be able to keep rolling our short-term debt at zero interest for much longer, and the price to roll our debt could skyrocket quite suddenly. Trust is a funny thing -- there's no halfway. You either trust someone, or you don't. And that status can change overnight. (You'd have to be a real optimist to be investing in 30-years right now. I wonder how many buyers will actually end up holding those bonds until maturity?)

I believe that this is what is known as poetic justice. The Schadenfreude will be hard to contain if this situation does indeed come to pass.

I'm sure you'll all be as shocked as I was to find that government spending had gone up just a bit under the reign of King Obama the Profligate and his Merry Band of Idjits.

I wonder what the Portuguese is for "Oh, shit!"?

Sir Oswald Fitz-Picklar, Third Earl of Pewt: I say, Charles, come to the window! Who are all these grimy urchins demonstrating in front of the club? There is an unwholesome look to them!
Sir Charles Gilligan Whyte-Arke-Layton, Baronet: Why, the vulgarity! The cheek! I should go out there and give them a damned good thrashing!
Sir Oswald: Well, now, let us not be hasty, my good man. Perhaps there has been some upset at the lunatic asylum down the road, and these poor souls have escaped into the city.
Sir Charles: Bosh! Guttersnipes, trollops, and layabouts, the lot of them. Fetch me the sword I used in Sudan against the fuzzy-wuzzies, Fitz! Lord Kitchener himself presented it to me! I'll have these louts cleared out in a trice!
Sir Oswald: The world has moved on, alas, Charles. We can no longer use hot lead and cold steel against these cheeky monkeys. More's the pity.
Sir Charles: Hrmph. I suppose not. Bloody nuisance they are, though. Might we get Hackett to spray them down with the hose, or set the hounds upon them?
Sir Oswald: Hackett is not as spry as he once was, Charles. Nor the hounds, come to that. Look! Look there! Is that not my nephew, the one with the pitiful little chin-beard? I'll be dashed! Civilization collapses before our very eyes, old boy.
Sir Charles: No saving the situation, then?
Sir Oswald: No, no, I shouldn't think so. It's all quite hopeless.
Sir Charles: Hrmph.
Sir Oswald: Hrmph.
Sir Charles: Billiards, then?
Sir Oswald: Righty-o.

For Ireland, Judgement Day is about a week off. As Sartre might say: les jeux sont faits. I don't know the Gaelic for the same sentiment.

NRO's Uncommon Knowledge is interviewing Gary Becker (a founder of the so-called "Chicago School" of economics) this week. Good stuff. A great point that Becker makes is this: banks were exposed to a lot more risk than they thought they were; they thought they were well-hedged, but they weren't. The risk was so huge and pervasive that it simply became invisible to people immersed in it.

There's no criminal in the world I hate so much as a thief, but this is a new low.

Supply is fine; it's demand that's lacking. The Christmas season will tell the tale, at least in terms of retail. I think the story is going to be what most of us expect: very slow growth, but nothing to break out the bubbly for.

I've been told this by any number of ex-girlfriends: desperation is not an attractive quality.

I rant and rave about the economic situation, but it's all just good fun until something truly serious comes along and reminds me of the danger we all face. This shall not stand! (Via Insty.)

Here's some fuel for you folks who dislike my goldbug ways: Dr. Doom thinks a gold standard is a bad idea. Pull quote:

Roubini raises the following question: If you are on a gold standard, or modified gold standard, what do you do in the event of a bank run—if you don't have enough gold to fully back the currency? Roubini explains that most central banks in today's economy have far greater financial liabilities than gold in reserve. In fact, according to Roubini, in the case of most central banks today that ratio is about 40 or 50 to 1.

Of course, many who support a gold standard would say that limiting the ability of central banks to increase their leverage would be a benefit of adopting the gold standard.

Remember back when the concept of "moral hazard" was something other than a bad joke?

Is economics a science? A branch of sociology or psychology, maybe. It most assuredly is not a hard science like math, in spite of its mathematical trappings.

I think I've found a likely site for the future Ace of Spades Retirement Community. Where the Val-U-Rite Vodka flows like water and the hobo preserve is restocked monthly.

Global debt as percentage of GDP.

California, how boned art thou? Let me count the ways: boned, boned, boned, boned, and again boned. Thou art fair, but thou art boned beyond redemption, my love. Verily, akin to the lowest clapped-out strumpet upon yonder boulevard. A barber's cittern, for every man to play upon.

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A dreamer of pictures
I run in the night
You see us together,
chasing the moonlight,
My cinnamon girl.

posted by Monty at 08:36 AM

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