BUSINESS: Greenspan Says We Have Lost Control of the Budget

In a suprising comment to the French Finance minister, Alan Greenspan revealed the United States has lost control of its budget. An anonymous US official suggested the French minister must have misunderstood the translation. The controversy came about as the Group of Seven said the US budget could jeopardise world economics.



You can bet the markets will reflect it, if there's any truth to it come market open. Asian markets are slightly in the red at this time.

Meanwhile, $134 billion in Federal liquidity, 2 1/2 times the typical interventio, was pumped in on Monday.

See open market operations data: www.omo.co.nz...

Related News Links:
business.timesonline.co.uk
today.reuters.com

[edit on 27-9-2005 by Regenmacher]

I hope this isn't right, I hope he didn't say that, even if it is.

How much worse can it get?

Originally posted by Relentless

I hope this isn't right, I hope he didn't say that, even if it is.

How much worse can it get?

Oh MUCH WORSE.... If the 'price on the bonds goes in the toilet and the yield goes through the roof interest rates will sky rocket effectively KILLING the economy.

Higher rates on Mortgages, student loans, credit cards, cars, etc... coupled with gasoline and natural gas prices will definately intiate depression.

Springer...

The oil supply shockwave from Rita and Katrina has yet to be felt on the markets due to the great Federal liquidity manipulation. How long can they keep the facade up is anyone's guess, but dang if I would be into any of it for the long term. Sell treasuries now!

More salt in the economic wound:



The US is borrowing the equivalent of 6.1% of its GDP this year which is roughly in line with Mexico's rate just before it defaulted. Nothing to worry about?

Meanwhile in India, Strong volatility swings Sensex by 140 pts.

Are you ready to rumble?






















[edit on 27-9-2005 by Regenmacher]

Greenspan is going to speak about the economy later this afternoon, around 2:45pm Eastern.

I don't see the currency markets reacting yet.
Maybe after he speaks we'll see some action.

The crash will come from collapsing the already VERY shaky derivatives markets. The whole reason long term bond rates have not gone up is because if they do, the derivatives game collapses and so does our economy.

Of course, if Greenspan does not raise rates, our currency collapses because so much liquidity (1.5 Billion a day average) is being pumped into the system to float the debt.

The end game is near.

Gold manipulation is starting to fail because the banks are running out of physical stocks to support demand. Even a small move in demand drives the price of gold up dramatically. Silver is in much the same position. There is a good reason Bill Gates and Warren Buffet have both recommended silver. So has China, which is urging it’s citizens to buy silver and gold.

In any case, derivative positions are yielding very little cash and no one is buying so the institutions holding these bond positions cannot escape. In other words, no one is buying our bonds because they know the debt is bad. Derivatives have been used to pump up demand and make it appear there is a market for our debt when there is not.

Have you stocked up yet folks? Got Gold? Got Silver? Got 3-6 months of food on hand? No? Just look at New Orleans for a glimpse into your future. (Not the destruction, the human behavior).

1-3 days of supply is all the country has on hand. It will take 1-3 YEARS to start to repair the damage from a collapse.


This link points to a good article explaining why derivatives are in trouble. It explains technical things like gearing and arbitrage and how they are used to get profits out of bond yields.


Derivatives information


Analysis of possible derivatives crisis

Alan Greenspan revealed the United States has lost control of its budget.

No kidding? What was his first clue? That one president has managed to turn a budget surplus into the largest deficit in history? Granted, tragedies like Katrina and 911 required dough, but so did imperialistic foreign policies, fighting two wars of occupation against manufactured foes.

Alan Greenspan, Captain Obvious....

Thats along the lines of what i was thinking gazrok, but apparently there are some other things in effect here.

the governor of China's central bank
"The US has always run a fiscal imbalance and current account imbalance but in the recent two years we see the magnitude of the deficits is historically high. People start to worry"

It does seem like he is saying that the federal deficeit is the proverbial straw that broke the camel's back, but the current-account balance is also important, and I don't think that an administration has much control over this sort of thing. Also, Congress is the one that has the 'power of the purse', the president is just a very powerful advocate for certain policies (not that I would pretend that somehow alleviates the office of responsibilities for it.)

I'm not really clear on what he means by 'fiscal imbalance' tho, as in how its different from a federal budget balance.

The Oz Treasury Department notes

The fiscal balance is the accrual counterpart of the deficit in the cash GFS framework [and GFS as] measures on both a stock and flow basis. Stock measures (including net debt, net worth and net financial worth) highlight the fiscal position of a government at a point in time, providing information on the results of past decisions. Stocks reflect holdings of assets and liabilities. Stocks at the beginning of a period plus the cumulative result of flows in the period are equal to stocks at the end of the period.

Flow measures (including the net operating balance, net lending (fiscal balance), cash surplus and change in net worth) show annual changes in the fiscal position, reflecting the impact of government decisions and actions in that year. Flows represent the creation, transformation, exchange, transfer or extinction of economic value.

The key measures in the GFS accrual framework are: GFS net operating balance, GFS net lending (fiscal balance), cash surplus, net debt, net worth, change in net worth, and net financial worth.

And what the hell is accrural accounting?

Amex, of all places
the cash basis method of accounting, which is based on real-time cash flow. In cash method, you report an expense when it is paid, and record income when it is received. So, the day you receive a check, it becomes a cash receipt. And you record your expenses when you pay your bills, not when the bill is received. [as opposed to]
With accrual accounting, you record income when it is earned, not when it is paid. Similarly, you record your expenses when the obligation arises, not when you pay it. The tax code refers to this as recording income and expenses when they are "fixed" - when all the necessary events have occurred to receive the income or expense the liability. It is not necessary for cash to change hands.
Here's how accrual would work. Say, for example, you're a consultant and you complete a job on December 15, but you haven't been paid for it. You recognize all expenses in relation to that contract when they were incurred, regardless of whether you've been paid yet or not. Both the income and expenses are recorded for the current tax year, even if payment is received and bills are paid the following February.

*eyes start glazing over*


I suppose its ends up being a way of looking at the overall economy.

I'm thinkin' the Bank of International Settlements, aka BIS, is getting ready to buy the paper - maybe through the Carlyle Group, or Omega Agency.

Good thing Bush is dismantling Posse Comitas along with all our civil rights, otherwise he'd never get away with selling the nation to the highest bidder.


.

We are quite obviously seeing a bad moon rising... We need to do something, that actually makes a difference...
the depression is coming... even with a war on (or because of it)
time to change the plan, because it aint workin...

how about starting a whole new massive industry. New export products, made in America, with high demand in Mexico and Canada. competitive on the world market, provides jobs to the farm industry (that survives by subsidies) and can generate billions of additional revenue thru new industries and technology spinoffs...

Yeah, you all know what i am talking about...
legalize it, and reap the rewards...
otherwise... we know what will happen

*eyes start glazing over*

I tried to look this stuff up, all of it.. from the first post to the last post.. but I just can't grasp finances. It's never been my cup of tea.. hell, I can barely manage a checking account let alone understand the stock market, national debt, and all this other crap that's involved..

Can anyone break this down into layman's terms and give a probability of this mess actually coming to light?

Quietsoul...

our current economic situation can be described in one word: CLUSTERF***

today.reuters.com...

news.moneycentral.msn.com...

I know that we are in a budget deficit and times aren't looking to swell with the two storms. But we should be ok. Bonds will not go in the toliet. Yes we will rasie intrest rates, but that is to stop inflation getting out of hand. Especially with roughly 200billion dollars going into our economy(for storm hit areas). And us going into a depression is a silly thought. We have ways to prevent that from happening now. We defilently learned our lesson from the great dpression.

And consumers can defilently hurt the situation also. By freaking out and doing retarded spending habits. These up and down buying patterns are so stupid and hurt our economy. People hear storm and wig out. Just keep the buying stable and the economy will remain stable. You freakout and buy everything off the shelf then in turn that raises prices and they will not bring them down. Thankyou idiot consumer you just created an inflation nightmare.

I really hate to say this but DUH!!! It is not the most thought provoking or profound thing to say about this thread but given the circumstances what else can be said?

Blaming the consumer alone is a cop-out.

The consumer is part of the equation, but the other half bears mentioning.

We live in a service economy, and that's a clear case of non-reciprocal income. You can't have an entire country spending money while nobody makes any.

I don't know about y'all, but the job market has been tough on me for the last half decade. My skills are essentially meaningless since there's a world full of people, from India to Mexico, who can do my job for less money.

Lazarus has the right idea.

Hemp could revitalize local economies, providing energy, food, and fiber resources, while serving as a bumper crop for other nutrient greedy plants like corn.

The government wouldn't get a piece of the action, which is precisely why they're reticent to implement such changes.

But the fact remains people will have to fend for themselves, and they will likely end up making the same decision our forefathers made. Growing just a few acres of hemp can provide for all the needs of a household.

If we had urban hydro farms operating in every major city, it would reduce the strain on the lower classes and provide jobs for unskilled laborers.

Win/win situation.

I can tell you one thing for certain. If the government collapses under its own weight, I'll be the first guy on the mountain to plant my hemp plot, and y'all are welcome to come partake of the bounty during the time of harvest.

Originally posted by Regenmacher

news.independent.co.uk

Bitter disagreements over global economic policy broke out into the open yesterday as the French Finance Minister claimed that Alan Greenspan had admitted America had "lost control" of its budget while China warned the US to drop demands for radical economic policy changes.

........ ...


Please visit the link provided for the complete story.

uh oh....
maybe ya'll see a deterioration in the value of the dollar...in the exchange rates, domestic inflation, and international movement away from the petro-dollar.

myself, i see, firstly, that the US will engineer some types of compelling 'problem' for the 2 nations in the above snippet,
France and China, which had the audacity to issue 'warnings'
and accusative finger-pointing at the U.S.A & Empire....

whatever these manipulated 'problems' might be........... is open ended,
but the dire emergencies will effect these countries both in the sphere of
Status in the world & will cost these countries a heavy financial burden.
(this is not a prediction....its only an observation of the political world)

Thus will the US financial predicument be overshadowed with the 2 other
emergencies...giving the State Department time to make its case (or cajole, browbeat, pressure) and maintain the StatusQuo.........................imho

~~~
yes, hemp would be another value-added-item,
but that wouldn't actually change anything...
just as changing to a hydrogen fuel source
wouldn't change much either, just the names of the "holder of the reins"

Everyone is surprised like this is some sort of secret? uhhh HELLO!!! Where has everyone been the last 6years? Bush has screwed America for years to come and do you think he cares? No! He's making his money from the oil he's been stealing, I mean from the war on ter..I mean. you know what I mean.. He's giving billions and billions of dollars to everyone of his cronies just to get it back in his own pocket 10 fold later on when it all pays off to him. Budget?..What budget!? Greenspan didn't know something the rest of the world didn't already know, he just spoke up about it. Its only going to get worse, so brace yourself.

Originally posted by grover
I really hate to say this but DUH!!! It is not the most thought provoking or profound thing to say about this thread but given the circumstances what else can be said?

A little quick history may be in order here Grover.

Earlier this year China stopped buying U.S. T-Bills--they had been buying aprox. 160 billion dollars worth every year up to the moment they stopped. The reason they stopped is that the value of the dollar was declining to the point their investment would be worth less and less as time moved on. The reason their move was important is they had in effect been supporting the U.S. budget deficit through those purchases. (Their purchases also--in a sense--helped their economy by keeping their goods flowing to the U.S. at a high rate. If they had not been buying them the U.S. would have been forced to purchase less from them, which would have hurt their economic expansion.) What it really amounted to is the Chinese economy was tied to the U.S. Dollar's value and they were propping up that value as best they could.

At any rate, their move put considerable additional downward pressure on the U.S. Dollar, making everybody's holdings of dollars worth less & less. This made & is still making the entire world nervous because most of the world's currencies & economies are more or less tied to the dollar. Of particular note is the oil producing countries--The value of their oil decreases as the dollar declines. To escape from this dilema some of the oil producing countries have recently untied their currencies from the U.S. Dollar by pegging the value of their oil to a so-called "market basket" of currencies from several countries. As you can imagine, this internationl flight away from the Dollar does not help the Dollar--On the contrary, it accelerates the decline in value.

What this really means is that--for one thing--the price of oil (in U.S. Dollars) is going up and up. Since the U.S. imports a lot of oil, this trend weakens the U.S. economy by demanding an ever greater share of the U.S. budget. The same general trend is happening across all other U.S. imports as well.

Some countries have tried to prop up the value of the Dollar by stepping in to buy U.S. T-bills, but their efforts have not made up for the withdrawal of monetary support from China. Similarly, the U.S. has attempted to prop up the value of the dollar through various manipulations in this country. None of these manipulations; however, can make up for the fact that the U.S. is spending more money than it has and is consequently running deficits. These deficits cannot be sustained for very much longer as they effect the economies of many countries--not just the U.S. So far, the combined manipulations of the U.S. & other countries have kept the U.S. from sliding into a recession, but it appears that may be about to change.

If the U.S. goes into an economic recession it will not be quite as easy to get out of as past recessions simply because the underlying causes will be completely different and harder to fix. Of course the only real fix is for us to stop running budget deficits and start retiring some of our debt. That is an easy thing to say, but hard to do because each year we have less and less discretionary money to put towards paying our debts. We could just renege on our debts, but the world-wide ramifications of that move are almost to disastrous to contemplate.

P.S., What Alan Greenspan says, or does not say, can tilt our economy in one direction or another simply because he is so influential. If he came out and advised people to "buy gold", for example, the U.S. economy would go into a very quick downward spiral because he would, in effect, be saying "protect your investments & savings--the dollar is no good."

[edit on 27-9-2005 by Astronomer68]

FSCK!

I can't remember how many times I told my family it was time to start stockpiling food!

Augh... and here I am caught between jobs...

This isn't going to go over well. I only have enough Ramen to last me another week (if I go without breakfast and dinner)...

Does anyone have an estimate on when we should start seeing the drastic changes? Maybe I'll have enough time to stockpile....

fsck....

Originally posted by Mbuhir
Does anyone have an estimate on whn we should start seeing the drastic changes? Maybe I'll have enough time to stockpile....
fsck....

I personally don't forsee any drastic changes coming. The U.S. economy is so large that not much can change it. You'll be spending more money on gas & oil & utilities than previously, but nothing really drastic. If you drink imported wines, beers & such or buy a lot of stuff from Wal-mart then you can expect to spend more for those things, but again nothing drastically different. You can expect mortage intrest and intrest in general to go up as banks & manufacturers try to protect themselves. If you have savings, the real value of those savings will go down, etc., etc., etc.. Again, I don't forsee any single change as being drastic; however, the combined changes will definitely effect the amount of money you have available for emergencies, vacations, etc..

What all the changes will do is redistribute the world's wealth differently. The U.S. will have less for example and China will have more. How much wealth we lose will depend upon how quickly we fix our budgetary problems and curtail the decline of the dollar.

[edit on 27-9-2005 by Astronomer68]