Suggested Discussion Outline

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johnkarls
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Suggested Discussion Outline

Post by johnkarls »

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BALANCED-BUDGET AMENDMENTS AND REDEEMING NATIONAL DEBT WITH "WALLPAPER" IN BOTH EUROPE AND THE U.S. -- SUGGESTED DISCUSSION OUTLINE

A. Balanced-Budget Provisions

A-1. Europe

A-1-a. The French-German "ultimatum" last August that Europe's "problem children" countries should be required to balance their budgets "or else."

A-1-b. The French-German "ultimatum" of 12/5/2011 that each of the 27 E.U. countries (or at least the 17 Euro-Zone countries) should be subject to automatic substantial fines whenever its annual deficit exceeds 3%/GDP.

A-1-c. The 12/9/2011 agreement by 26 of 27 E.U. governments (including all 17 of the Euro-Zone countries) to accept the 12/5/2011 French-German ultimatum (the U.K. rejected it).

A-2. The U.S.

A-2-a. The 1995 Balanced-Budget Amendment to the U.S. Constitution that easily achieved the required 2/3 vote in the U.S. House of Representatives to send it to the states for ratification, but fell 1 vote short of a 2/3 vote in the U.S. Senate.

A-2-b. 49 states have Balanced-Budget provisions in their state constitutions.

A-2-c. The required vote this fall by Congress on a Balanced-Budge Amendment to the U.S. Constitution.

A-2-c-i. Required by the August 2011 Debt-Ceiling Agreement.

A-2-c-ii. Proposed by Republicans as a "wedge issue" since 20 Democratic U.S. Senators are on record as favoring such an amendment, and 20 of the 33 Senate seats up for election in 2012 have Democratic incumbents.

A-2-c-ii. Republicans now "back pedaling" furiously because Republican state legislators routinely vote for tax increases on the grounds that their state balanced-budget constitutional provision required them to do so.


B. "Fiat" Currencies and Sovereign-Government Debt

B-1. Consequences of a "fiat" currency becoming worthless (such as Germany's Reich Mark in the 1930's and Russia's Ruble in the 1990's) = everyone starves (literally) UNLESS s/he can grow/catch/shoot her/his own food, OR become a whore for those who can grow/catch/shoot, OR become a pimp for successful whores, OR join a "Russian Mafia" gang that simply takes whatever it pleases.

B-2. Consequences of a country's debt being viewed as "junk bonds."

B-2-a. Average debt for countries around the world is approximately 60%/GDP.

B-2-b. Europe's "problem children" ran into trouble when their debt approached 100%/GDP (though Spain is under attack because of the large year-to-year increase from 53.3% in 2009 to 60.1% in 2010).

B-2-c. The U.S. national debt surged past 100%/GDP earlier this year and is headed for 122% to 164% over the next 10 years (the range depends on the assumption regarding the economy's growth rate).

B-2-d. If the U.S. national debt (currently about 105%/GDP) suddenly required "junk bond" interest rates of 20% to attract enough investors, there would be NOTHING LEFT in the federal budget for ANYTHING ELSE after interest payments!!!

B-3. It should be noted that the 12/5/2011 French-German ultimatum to which 26 of 27 E.U. countries agreed on 12/9/2011 provided that there would be NO GUARANTEES of the sovereign debt of any more European "problem children" governments -- in other words, what was done for Greece was a "faux pas" and would not be repeated for Italy or Spain or any other country!!!


C. "Quantitative Easing" (aka "printing" dollars) by the Federal Reserve

C-1. Virtually all central banks around the world have a SINGLE mission = maintaining a stable currency (that is, minimizing inflation).

C-2. The Federal Reserve was given a SECOND mission by Congress = minimizing unemployment.

C-3. The Federal Reserve gives its "minimizing unemployment" mission a "butterflies flapping their wings on one side of the earth causing hurricanes on the other side" interpretation that the Federal Reserve thinks justifies doing "anything under the sun"!!!

C-3-a. QE-1 = "printing" $7.77 TRillion 2007-2009 (per information pried out of the Federal Reserve by Bloomberg News' successful "Freedom of Information Act" lawsuit) to bail out insolvent commercial banks WHEN ALL WE KNEW AT THE TIME WAS THAT CONGRESS HAD PASSED THE "TROUBLED ASSET RELIEF PROGRAM" ("TARP") IN THE FALL OF 2008 FOR THE SAME PURPOSE WITH ONLY $700 BILLION.

C-3-b. QE-2 = "printing" $600 Billion earlier this year to purchase U.S. governmental "long bonds" (that is, 30-year bonds) in an attempt to drive down long-term interest rates and force private lenders to make real-estate mortgage loans -- however, the U.S. government's Fannie Mae and Freddie Mac still account for more than 90% of U.S. mortgages, vs. less than 50% prior to the 2007-2009 meltdown.

C-3-c. "STEALTH QE-3" = "printing" as much as $4 TRillion to keep Italy and Spain solvent through 12/31/2011 -- "stealth" because it was implemented less than 3 weeks after Bernanke's 8/26/2011 promise of NO MORE QE's and the Fed has refused to provide any information on "STEALTH QE-3!!!

C-3-d. QE-4 = "printing" probably $7.77 TRillion 11/30/2011 > 2/1/2013 to keep insolvent European commercial banks afloat.

C-4. QE-4 & QE-4 can easily total $12 TRillion -- when our national politicians are struggling to reduce the federal government's budgets over the next 10 years by a MEASLY TRILLION DOLLARS OR TWO!!!


D. Proposed Six-Degrees-Of-Separation E-Mail Campaign

To narrow substantially the Butterflies/Hurricanes interpretation by the Fed of its mission to minimize U.S. unemployment because under the Butterflies/Hurricanes interpretation, THERE IS NOTHING that the Fed is not empowered to do, no matter how tenuous or insignificant the impact on U.S. unemployment. And "printing" another $12 TRillion dollars to keep the Italian and Spanish governments solvent through 12/31/2011 and European banks solvent through 2/1/2013 is MORALLY BANKRUPT when the $12 TRillion could have been used, for example, to rebuild America's inner-cities and finally provide a decent education for our inner-city children.

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