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Timothy Geithner’s Famous Last Words?

February 7, 2010 Leave a comment
(thanks to Big Hollywood for this)

From Bloomberg:

Treasury Secretary Timothy F. Geithner said the U.S. is in no danger of losing its Aaa debt rating even though the Obama administration has predicted a $1.6 trillion budget deficit in 2010.

“Absolutely not,” Geithner said, when asked in an ABC News interview broadcast today whether a downgrade is a concern. “That will never happen to this country.”

The U.S. plans to rein in the deficit once the labor market recovers, Geithner said. In the short run, that means focusing on ways to “make sure that this economy is growing again,” he said. The administration says the deficit will shrink over the next four years as more Americans find jobs and the economy accelerates.

“This is within our capacity to do,” Geithner said.

Where to begin?  First off, I have long believed that Tim Geithner is in fact the fall guy for the economy in the Obama administration.  He has been involved with the bailouts from day one including perhaps a criminal one with AIG, come off as smarmy and weaselly in testimony and been perceived as less competent and well-liked than Bernanke in the court of public opinion.  If I had to guess, when it becomes clear that we are stuck in the economic doldrums (probably closer to the 2010 elections), Barack Obama will fire Geithner and trudge out a man with more panache and credibility, likely Paul Volcker.

On the substance of Geithner’s comments, that anyone in this administration can actually believe that the economy is going to accelerate and the deficit will shrink over the next four years is laughable.  Even if you had breakneck economic growth, and there are absolutely no signs of that on the horizon, the deficit is still growing at an exponential rate, and Congress has shown no signs that it is going to take the steps to deal with the most bloated line items — namely entitlements.  The most expensive parts of our budget are considered sacred, and for a politician to touch them would be considered a sin.

How could Geithner be right that we will never lose our rating?  Well, the ratings agencies are US companies, granted an oligopoly by the state, so it is possible that government could threaten them were they to consider downgrading us.  In this scenario we could have a de facto downgrade however if yields spike up in the bond markets on US debt with Treasuries trading effectively as if we have been downgraded.  Another scenario is that the government builds false demand (or an artificial “bid” in trader lingo) to keep the yields on our debt low by either pressuring the primary dealers to continue to gobble up our bonds (and then at times selling them back to the Fed shortly thereafter), threatening foreign nations to prop us up or creating some kind of incentive to get Americans to invest in Treasuries.  Otherwise, I don’t see how America can be considered fiscally Aaa, but then again the ratings agencies rate a lot of junk Aaa.  They can in fact put lipstick on a pig.

Bloomberg Not So Salty

January 29, 2009 Leave a comment


I really wonder sometimes how the people of New York can love Michael Bloomberg so much. I mention this after reading a recent article regarding the mayor’s desire to force food manufacturers to cut back salt content to 1970s levels. According to local politicians, people do not realize just how heavy the salt content is in certain of the foods they eat frequently, such as chicken noodle soup. “Salt, when its high in the diet, increases the blood pressure and high blood pressure is a major factor for heart disease and stroke,” Dr. Sonia Angell of NYC’s Cardiovascular Disease Prevention Program proclaims.

Also, drinking Jack Daniels is bad for your liver. Eating copious amounts of chocolate cake can make you fat. Oh, and the sky is blue. What world are these people living in!? New York has already put up a smoking ban and barred trans fats. What comes next? Mandatory weekly exercise? Limits on tv-watching time? Restrictions on angry blog posts (after all, you can get carpal tunnel syndrome)?

I don’t see how any of these bans are Constitutional, or moral for that matter. They merely represent blatant social engineering, and more government intervention in our daily lives. Not to mention that all of these bans inevitably will have unintended consequences. For example, given the cost of replacing salt with something salt-like, businesses will have to use replacements that might be more costly, or present alternative health risks. Also, some companies might stop selling their foods in New York. With less competition for food sales, this will allow existing food suppliers to raise their prices. When you try to tamper with the choices of free people, there are always going to be unforeseen costs, inevitably borne by the consuming public.

There is one other price for all of these ridiculous decrees – given how expensive New York already is, the major job losses from the financial sector (the lifeblood of the states’ finances) and the increasingly interventionist city government, people are going to leave en masse at some point. After all, business can be done almost anywhere today, and with the collapse of Wall Street, I tend to think that over the next twenty years, other cities with lesser tax burdens and restrictions on individual freedoms will attract an increasing number of firms. I’m not saying New York or Wall Street is necessarily dead, but rather that as I can attest to, coming from New Jersey, wealthier individuals are moving out of these areas due to bad government already, and the economic collapse will only speed this exodus. Socialism has been the death knell of many a civilization, let alone a city.