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Raising the Roof on the Debt Ceiling

By: Richard Daughty, The Mogambo Guru - The Daily Reckoning

-- Posted Thursday, 19 June 2008 | Digg This ArticleDigg It! | Source:

The bad news, of course, is that government spending will continue to increase because half of the people in the USA receive a government check of some kind every month for one reason or another, and they all need more money because their costs are going up, too, and the government will give them more by spending more, regardless of the debt incurred.

I say this because reports that "The U.S. budget deficit for May widened to $165.9 billion, bigger than the shortfall for all of fiscal 2007." The blame was put on a slowing economy that is cutting tax revenue, and the $168 billion tax rebate boondoggle where the government is literally sending money to people, as unbelievable as that sounds.

Bloomberg continues, "The Government spending since the fiscal year started Oct. 1 was up 9.7% to $1.993 trillion through May." Almost 10% more spending! Yow!

All this spending is not having much effect, because "revenue increased 0.3% to $1.674 trillion", which put the "year-to-date deficit at a $319.4 billion, more than double the eighth- month cumulative $148.5 billion shortage reported a year earlier". Double!

If there is one thing that I have learned on this planet you call Earth, it is that one huge pile of dog crap always means that there will soon be another big pile pretty soon, and sure enough, Agora Financial's 5-Minute Forecast reports that "The U.S. Congress has quietly approved the biggest government budget in the history of mankind", which comes out to a tidy $3.1 trillion. Astonishing! In an economy where total GDP is about $14 trillion!

Although everyone is too polite to say it, probably as a result of that "dog crap" thing, if the total Gross Domestic Product (roughly, the sum total of goods and services sold in a year) of the United States is $14 trillion, then government spending - alone! - is 24% of the economy! Almost one out of four dollars spent in the economy is done by the federal government!

Taking a long pull from a handy bottle of bourbon to get a little courage, I note that this $3.1 billion budget does not even count the unbudgeted $600 billion or so that the federal government will borrow this year, mostly through "emergency appropriations" they vote on at various times throughout the year.

Taking another long swallow of bourbon, and then another, I finally get up the courage to note that this does not count the couple of trillions of dollars in the budgets of state and local governments, either.

Things are getting a little woozy for some unexplained reason, and I take another shot of hooch to steady my nerves as they go on, with subtle, classic comic timing, tossed off almost as an afterthought like TV's Lieutenant Columbo, "Oh, and by the way, Congress earmarked a law in the latest budget to raise the national debt ceiling. The U.S. can now owe the world $10.6 trillion, an $800 billion increase."

In case you were wondering, the national debt ceiling is currently $9.815 trillion, and the debt itself stands at $9.428. The debt ceiling was raised less than a year ago from $8.965 trillion, which means that the despicable Congress (except Ron Paul) authorized themselves to spend about $500 billion, which is a lot more than the stinking little $165 billion budget deficit claimed by the lying, stinking Congress (except, as I said, Ron Paul).

And Congressional malversation ("improper or corrupt behavior in office, especially public office") is not the only thing that is really off-the-charts, as Jim Sinclair of reports that the Bank for International Settlements has calculated that "the notional value of all outstanding derivatives now totals approximately $1.144 QUADRILLION", which I compute, after a long and laborious process, comes out to about $200,000 for every man, woman and child on the face of the freaking planet!

And, my new favorite statistic, non-borrowed reserves in the banks, was a negative $130 billion last week, as opposed to total bank reserves of $46 trillion. I will note that this $46 trillion, although laughably miniscule as bank reserves, is still a new high for the last (checking my watch for the correct time) zillion years in a row.

And where does all the money go? I'm glad you asked! We're sending to foreigners: The April trade deficit widened 7.8%, to $60.9 billion, which is over $730 billion a year, in case you are keeping score, and which is the biggest gap since March 2007. The current account deficit is almost $900 billion.

As a result, George Friedman told John Mauldin of that "the Saudis are taking in something like $10 billion a week!"

All of this means that the Fed will keep printing money to keep us from going literally broke, but destroying us as a result with all that new money, and it also means that I will be screaming in terror and anguish far, far into the night again at the inflationary horror that is descending upon us. As will you, very, very soon.

P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Editor's Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.

The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications. Click here to visit the Mogambo archive page.

-- Posted Thursday, 19 June 2008 | Digg This Article | Source:

Visit The Daily Reckoning's website.


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