L E T  'E R   R I P !!!

The Debt Crisis Cannot Be Solved with More Debt

The principal problem with the current economic crisis is that the authorities are trying to solve the debt crisis by adding more debt — which is akin to trying to cure a viral infection by injecting more viruses. In case some have forgotten, the United States is undergoing a serious credit crisis, that is, a debt crisis.

All sectors of the American economy are suffering from a chronic addiction to credit, which manifests itself as the disease of excess debt. Household, business, and public debt have reached all-time highs. Consequently, it would not seem logical for the federal government to fight the debt crisis by adding trillions of dollars to the national debt and by lowering interest rates to promote even more credit.

A debt crisis can only be solved by paying down and reducing debt; it cannot be solved by compounding ever-more debt on top of an extremely overleveraged economy.

Consumer credit, which in 1950 was only 6% of total gross domestic product (GDP), has by 2009 tripled to 18% of GDP. Bank credit, which in 1947 was 45% of GDP, has by 2009 risen to 67% of GDP. Household debt, which in 1957 was only about 45% of national income, peaked at over 120% of national income by 2007. According to the congressional budget office (CBO), federal debt, which was at an already-high level of 41% of GDP in 2008, is expected to balloon to 200% of GDP by 2038. The CBO expects federal debt to grow to 60% of GDP by 2010.

However, if you read the statements of the policy makers, it would seem that the problem is not excess credit, but exactly the opposite. In their view, the problem is a lack of credit. On April 14 of this year, President Obama made the following remarks about the crisis, stating that

"the second step has been to heal our financial system so that credit is once again flowing to the businesses and families. … The heart of this financial crisis is that too many banks and other financial institutions simply stopped lending money … I do agree … that we must provide banks with the capital and the confidence necessary to start lending again."

More recently, on July 21, Federal Reserve Chairman Ben Bernanke stated that "many of the improvements in financial conditions can be traced, in part, to policy actions taken by the Federal Reserve to encourage the flow of credit." And many Republican leaders have given similar statements.

It is clear that policy makers agree on something: they want more credit in the system. But what this means is that, knowingly or unknowingly, policy makers want Americans and the country to go further into debt.

Argentina suffered a similar financial collapse in 2001, when its external debt had risen to over 120% of GDP. As in most countries that have recovered from a financial crisis, total consumer, business, and government debt had dropped significantly once the bubble had burst. For instance, Argentina's external debt fell to only 46% of GDP by September of 2008. This was no coincidence; reducing their debt was a necessary step in ending the crisis.

However, the United States seems to be headed completely in the opposite direction. As shown above, the federal debt is growing at unsustainable rates, and bank credit — contrary to what many (including the president) believe — has actually continued to grow. Bank credit increased from $9.15 trillion, at the start of the crisis in September 2008, to $9.31 trillion as of June 2009.

The only way to solve a debt crisis — a path demonstrated by other countries that have survived through similar crises — is to drastically reduce the total levels of debt. Individuals, businesses, and the government must all tighten their belts, reduce expenditures, and live well within their means. How can a monetary policy that promotes more credit and a fiscal policy that creates more debt solve the debt crisis? The answer is clear: it cannot.

In a way, the lifestyle of American people and American government has been a denial of reality. For the past 50 years, America has been living on credit and piling up excessive debt. This financial crisis, if left unhampered, would have been a wake-up call. It would have forced the reduction of debt in all sectors. However, policy makers are not allowing this necessary clean up to occur — not just through their fiscal and monetary policies, but also through public policies that prevent various foreclosures and liquidations to occur.

Not only was the apparent economic prosperity of the last 50 years artificial and unsustainable, it was essentially a borrowed prosperity. And worse, the funds were borrowed, not from real savings, but from artificially created money provided by the Federal Reserve.

The prosperity of the last few decades has mostly been a grand illusion generated by artificially created credit. This financial crisis is just the "foreclosure" of the national economy. In other words, the market is simply trying to force the American economy into paying down its debt.

Therefore, any policy that effects the contrary — that is, any policy that promotes or increases debt — will only make matters worse. By piling on trillions to the national debt, the government will have to keep interest rates low for a longer period, promoting ever-greater debt. The result of this must be unsustainably higher levels of debt — and the worst financial crisis ever seen in the history of mankind.

http://mises.org/story/3615

The following is taken from a post Garth Turner (former Member of Parliament) made on his web site greaterfool.ca yesterday:

I mention this because a business news radio station in Boston asked me to be their guest Thursday on a show devoted to real estate. I received an intro suggesting I might have personally run the Canadian government and written all the books here. Close.

Anyway, here’s the thing they wanted to know: If you guys up there have a real estate bubble, and you saw the disaster that happened to us, why isn’t your government stopping it?

Radio silence.

I mean, how’d ya answer that without sounding like a northern rube? Say, well, you know we’re different, eh? Or, our banks are a lot smarter than yours? Or, there’s this border thing that repels your cooties? Or, gosh, you mean you’ve had some housing troubles down there? Or, but we have the Olympics?

In any case, I just stated the obvious: The government has no balls.

Policy-makers including the Bank of Canada and the feds made conscious decisions to inflate our housing market even while yours was taking a dive. They sanctioned long amortizations and zero downpayments, then dropped interest rates to dust, and have a federal agency which buys all the mortgage risk from the banks and transfers it to the taxpayers. As a result, I added in my best Bostonian flat-a accent, today we have mortgages given without income verification, financing extended to people without savings and legions of new home owners who would be under water if prices declined by just 5%.

And that was a shock, for an obvious reason: The Canadians are losing it.

Today 15 million American households have negative equity, and 2.5 million more are about to join them. Fully 58% of all the families in Florida with mortgages, for example, owe more than their houses are worth. Their equity vanished as property values collapsed after being allowed to reach a point of unaffordability. Will cold Canadians not repeat this – at least in part – once the federal gush ends and rates move higher next year?

But this is not really about houses. Instead, it’s the economy.

My Boston buds made it clear to me that there has been nothing – not job losses or stock market chaos included – that has impacted people as much as the stability of their homes.

Between commercials, I was asked another obvious question: Don’t you worry about what’s coming?

Those Americans. Such idiots.

http://www.greaterfool.ca/2009/08/20/balls/

Looks like we are back to the regular Friday Free Fall stuff.

Brazilians used to joke that their country was the country of the future – and always would be because a new crisis seemed to crop up every time the economy came close to fulfilling its potential.

But given the economy’s strong performance following the financial meltdown that crushed economies the world over, it looks like Brazil’s time is now.

Brazil’s gross domestic product (GDP) contracted 0.8% year-over-year in the first quarter and 0.8% from the fourth quarter. That beat analysts’ expectations but wasn’t enough to keep the country from sliding into its first recession since 2003. However, the economy is already showing signs of recovery and many economists believe Brazil is already on the rebound and poised for a strong second half.

Brazil’s GDP likely grew 2.2% in the second quarter compared with the previous quarter, according to a report by Bank of America (BAC 17.37 ↑1.34%) Corp. (NYSE: BAC).

Nelson Barbosa, Brazil’s economic policies minister, optimistically told the Rio de Janeiro-based O Globo newspaper that Brazil’s economy will grow by 4-5% this year.

That kind of optimism in July helped Brazil’s benchmark Bovespa stock index book its best monthly gain since 1998. The index jumped 2.3% to 55,997.81 – its highest level in 11 months. It’s up about 50% this year, outpacing even the red-hot MSCI Emerging Markets Index. The Dow Jones Industrial Average (DJI 9392.22 ↑0.45%) and S&P 500 Index (SPX 1013.14 ↑0.57%) are up just 5.8% and 11% respectively.

you can read the rest of the story here:

http://jutiagroup.com/2009/08/12/brazils-economy-shows-great-promise

MORAL OF THE STORY??????

SOME COUNTRIES ARE DIFFERENT THAN THE usa

Oh ... and the other moral of the story ...

Others can cut and paste too ... but some continue to try to at least give the reader an idea of what the reason is for cutting and pasting it for the world to see.

******** SMILE ************

Yeah! But does Brazil have hockey?

Get ready to bend over BC'rs because we will be slammed next year with more tax increases from all levels of government right down to our own city and regional district. Just dont forget while your bent over to keep very quiet and still.

Yeah! But does Brazil have potholes?

sorry - its Friday so the "P" word had to come up... Have a great weekend everybody!

No, they have mardi gras and capojala.

To compare:
A bunch of arrogant neanderthal bullies beating on each other and the occasional cabbie

or

A huge block party with joyous music and a lot of almost naked women running around in the sun for an extended period.

What would you rather see?

And in neither case have they ever heard about Garth Turner (actually I had not either and now I know I am not missing anything), Opinion 250, and maybe not even the state of the economy.

Some people just know how to live a full life.

Come next July with the implimentation of the HST anyone purchasing a vechile privately and not from a dealer with be stuck paying an extra 5%. Given the number of private vechile sales that happen in BC this should help fatten the coffers of the liberal gov't.
With the wood products industry in the tank and wanting employees to take a 20% wage reduction, the city of PG continually spending money foolishly and perpetually raising taxes and user fees, the advent of the HST, it seems it won't be long before there is an outcry that the citizens of BC just can not take it anymore. Recall may be our only way to express our anger with the present liberal gov't and their over bearing agenda.

Well stated "Resident".
I sometimes wonder if I am the only person who sees the deterioration in our governments and in society in general.
It seems that the City of Prince George is financially incompetent and lacks the checks and balances to run city services efficiently. They prefer to continually raise our taxes to compensate for their incompetence.
As for the provincial Liberal government, it seems that they will continue down the road to total destruction at the expense of BC Taxpayers. Next July it will be the HST (for once I agree with Bill Vander Zam)and an increased carbon tax. What other surprises does Gordon Campbell have in store for us? A massive debt incurred for the 2010 Olympics? Time will tell.
Finally, the noise pollution continues to increase in PG. The truckers continue to active their Jake brake within settled areas under conditions where it is totally unnecessary. Add to this the huge number of vehicles that are not fitted with proper mufflers and you have extreme noise levels. All of the foregoing leads to increased stress within our society.

If we were to recall the Liberals, who would we elect to take the place of the present governing body?
metalman.

And there it is...this is why we are in the mess we are in. It is the whole misconception that we have no other option to vote for that led us down the road of the Liberals corupt practices. If you dont like the NDP then vote green. What do you have to lose???? Rediculous to keep voting for the liberals when they have proven so many times that they are lying thieves selling BC off to the highest bidder. Yes the Green party is young and new but maybe that is EXACTLY what we need. The leader of that party is educated beyond words and has multiple masters degrees. All Campbell is, is a drunken driver with little education. He has been bought and paid for by the rich and is nothing more than a puppet. Give your head a shake and stop using the stupid excuse that there is no one else to vote for!

What if I don't like the NDP or the Green party?

You have to choose one if you are going to vote. Man up and choose!

"HST with Cheese"

is the youtube video that everybody is talking about. Go to youtube, and search 'HST with Cheese' to see it.

*Coarse Language.

The Prince George Citizen ran it on their website for a short time, then pulled it.

Let's elect John Travolta, he sounds like he knows what he is talking about !

;-)

Perhaps my perception is wrong, but do 'Gus' and 'Charles' etc... bring to mind visions of Hitchcock's Rear Window? 2 guys staring out the window, and at the computer screen all day, with very little practical experience.

I always look for none of the above.

We may be better of with some different types animals for our federal and local zoos. And since we seem to want to shut down the zoos over animal rights issues - then we could shut down the political power parties.

Maybe it is time to try no political parties but independant individuals with heart and common sense.

Frank

"You have to choose one if you are going to vote. Man up and choose!"

I did choose. It was not the NDP or the Green Party just to give you a hint.

If you vote for the Liberals once does that make you a "tard"? If you vote for them twice does that make you a "re-tard"?

If the present government kept their campaign promises, I'd be happy. They say "small, transparent, efficient government, no deficits, help for small business and the working person. Won't sell BC rail, won't gut hydro". They then do the opposite.
Are they getting rid of the balanced budget law, that they enacted, because they don't want to take a pay cut for every year they are in the red?
B.C. needs a new party with the balls to implement an industry plan that brings jobs. Let's stop being hewers of water, wood, etc, and start demanding that we process, manufacture, and get all the value out of our resources.
I don't want to hear the" well our labour costs are so high". Germany has no resources, can import raw materials, pay good wages, allow generous mandatory vacation time, and still have a huge manufacturing industry. Not saying Germany is the sh*t, but I think with vision and planning B.C. can be King Sh*t.


Sorry, but I don't want to work at Wallyworld.

There is the silent majority and then there's the whiny vocal minority. This site is mostly full of the latter category, most of whom probably never bothered to vote to begin with.

calling the kettle black?

I stopped buying lottery tickets especially 649 and Super 7s. I quit cold turkey. Used my adding machine and found out how much money I was giving to the more often than not winners in Qweebec and Ontariario. As an aside, they are both have-not provinces and thus already get a portion of all my taxes I pay. It's in the Constitution. I don't feel bad with keeping a few extra bucks in my jeans. Try it. Worked for me.

I vote in every election MrPG, municipal, provincial and federal. I've never missed a single one. I'm also one of the very few that think voting should be mandatory. I know most of you will disagree and that's ok.

"I vote in every election MrPG, municipal, provincial and federal."

So do I, for what it's worth. It's astounding how many people are too lazy to cast a ballot.

"I stopped buying lottery tickets especially 649 and Super 7s."

Good for you Harb. The only one that really 'wins' with the lottery is the government. Don't pay a voluntary tax! And people are complaining about the HST!

"I'm also one of the very few that think voting should be mandatory. I know most of you will disagree and that's ok. "

I think the opposite. There should be a IQ minimum or at least a demonstrated understanding of basic economic and social principles to vote. Of course then no one would vote for the NDP. Forcing people to vote if they dont take the time to understand the issues just means more votes for Carol.

I remember my first few economics 101 classes at CNC 10 years ago when we learned that the entire NDP platform is flawed and that anyone who bothered to think about it already knows that.

Sure taxing the wealthy is great politics but it just means the wealthy move away and leave more taxes for the rest of us to pay.

If anyone cares to understand how leftist policies are politically effective but economic suicide I can probably dig that old text book out. Remember this isnt politically motivated reading, it is required reading for 1st year Commerce students at the local College and University. See when I started College the NDP was in power and, as higher education is provincially subsidized, they were actually (partially) paying for me to learn that there platform was crap. Oh the irony (not positive that is correct usage, Im am proudly NOT a B.A.).

And now we have the right wing utopia?

From today's Winnipeg Free Press
http://www.winnipegfreepress.com/breakingnews/3-inates-escape-from-Manitoba-correctional-facility-53957272.html

WINNIPEG - Two convicted murderers are among three offenders who escaped Thursday from a healing lodge operated by Crane River First Nation, 350 kilometres northwest of Winnipeg, the federal correctional service said today.

The three are:

Edward Bernard, 50, who officials said was serving an "indeterminate sentence" -- meaning a life sentence -- for second-degree murder. He is five-foot-11, weighs 188 pounds and has black hair and brown eyes.
Allan Stonechild, 58, also serving an "indeterminate sentence" for second-degree murder. He is listed as six-foot-one and weighing 256 pounds. He has black hair and brown eyes.
Nelson Kahnapace, 31, who is serving a nine-year sentence for aggravated assault, escaping lawful custody, break and enter and robbery. He is five-foot-nine and weighs 177 pounds. He has brown hair and hazel eyes.
The three men were discovered to be missing from the Ochichakkosipi Healing Lodge at about 11 p.m. on Thursday.

Anyone with information on the whereabouts of the three are asked to contact their local police detachment. Officials have not yet released photos of the missing men.

The healing lodge is operated by Crane River First Nation under an agreement with the federal minister of public safety. It provides a range of spiritual and cultural programs to minimum security federal inmates, according to a Correctional Service of Canada press release.

Corrections officials say they will review the incident.

_________________________________

Time to scrap that program...

You got that right Wolfie!

Regarding one of our honest city councillors, yup - Brian Skakun. I wonder how much it cost (and who) to have headhunters dig up that itty bitty pitiful bit of slappable dirt on Brian?? Pitty that was all they could come up with, bigger pitty that they actually pushed it through.

Shame, shame, on you. No soup for you!!

"There should be a IQ minimum or at least a demonstrated understanding of basic economic and social principles to vote."

They tried that with the House of Lords and copied it with the Senate. Then they discovered there must have been too much inbreeding.

Bend over and stay quiet Canada!

http://www.theglobeandmail.com/report-on-business/us-gives-green-light-to-enbridge-pipeline/article1259511/

"Come next July with the implimentation of the HST anyone purchasing a vechile privately and not from a dealer with be stuck paying an extra 5%. Given the number of private vechile sales that happen in BC this should help fatten the coffers of the liberal gov't"

Not correct. You don't currently pay GST on a private vehicle sale so you won't pay HST (since HST follows the same rules as GST). You currently do pay PST on private sales though (when you register with ICBC), so this is actually one area where people may save money. A new vehicle sale will be the same since you already pay both PST and GST.

"If we were to recall the Liberals, who would we elect to take the place of the present governing body?
metalman."

That depends on who wins the elections that would follow. After new MLAs are selected, the party with the most members wins.

"Are they getting rid of the balanced budget law"

It has been asnnounced that the law will be modified.

http://www.cbc.ca/canada/british-columbia/story/2009/08/21/bc-four-years-budget-deficits.html

It seems Northern Health has lots of money to spend but not on the right stuff.How would you like a big Northern Health van driving around your neighbourhood with a couple of people in the van trying to find people to give out needles to ? I think that is so sick.