The U.S. Economy: Stand by for more worse news

[Billy T]

I think the massive U.S debt assures it 2nd world status after the economy tanks. Something like...perhaps Brazil before it started booming.

I had not looked at it that way before, but you'r probably right. US will be like Brazil of two or three decades ago - a few very rich, living in closed well-guarded compounds with the masses begging for the job of shinning their shoes instead of going hungry. The US's middle class is shrinking already. - GOING, going, gone.

 

[X-Man2]

History tells us no Nation stays number 1 for ever,sure some last longer than others but they all fall down.Now that we in the US are actually living at a time when the US is falling down it kinda sucks,I mean who wants to be "it"

It really sucks harder when you know it was caused by the elite and did not have to happen.

 

[Billy T]

Real "shovel ready" but government dead.

“… the longer Keystone XL doesn’t get built, the more and more likely becomes the construction of at least one and likely several pipeline proposals to the British Columbia coast. The US Dept of Energy (DoE) concluded that these pipelines to BC would open the Canadian oil sands to Asian markets and result in a substantial increase in US reliance on oil sourced from unstable and/or hostile Middle Eastern and African regimes.

The DoE report found that “the same slate of crude oils would have to be refined even if reallocated geographically.” In other words, Canadian oil sands crude is going to find its way to market.

Returning to the main point, plain and simple, approving Keystone XL is a jobs-creator that the Obama administration won’t have to take to Congress. It has positive short-term-messaging benefits on the issue that is clearly No. 1 among voters, so it’s good politics.

According to a 2011 study by the Canadian Energy Research Institute (CERI), new oil sands investments are expected to create 444,000 new US jobs by 2035. As for right now, TransCanada’s Robert Jones, the executive in charge of the project, recently noted that Keystone XL is indeed “shovel ready” and that construction would involve hiring as many as 10,000 Americans immediately and up 34,000 by 2014. …”

Quoted text from: http://www.moneyshow.com/investing/article/1/tptp082511-24272/Ethanol-Will-Do-More-Than-Survive/
Photo and Map from: http://money.cnn.com/2010/12/23/news/economy/oil_sands_pipeline/index.htm?a=4

Billy T comment: Not only that, but when Chavz cuts off the heavy crude now sent the several gulf state refineries, which were built to process it, the US dependency on Mid Eastern & West African oil will grow. Read more on this here: http://www.sciforums.com/showpost.php?p=2667151&postcount=62

and for China’s role in leaving the US “high and dry”, oil wise, read last half of post here: http://www.sciforums.com/showpost.php?p=2742509&postcount=395

PS - Perhaps this post too belongs in thread "How DUMB can US voters be?" But there is such large supply of stuff to post there that I put it here as it is mainly the government that is messing up and voters are only indirectly responsible for that. That is unfortunately going to get even worse, if "no new taxes" - Tea Party and "Drill Baby Drill" types gain more strength in Congress. We badly need voters who can think instead of repeat slogans feed to them by the wealthy in their self interest. Until we get them, the middle class will continue to shrink, lose their homes, etc. - Stand by for more worse news to come with the elections.

 

[Billy T]

On average:

BTW, Brazil is No. 4, holding slightly less than the UK. Some other interesting facts:40% of the officially unemployed have been looking for a job for more than 6 months (and many no longer looking, so not counted, have been out of work for more than year). Corportate profits are the highest they have been in 60 years, yet taxes on corporations are at a 60 year low! - Many, like GE, now pay zero corporate tax and actually collect refunds from the government. Most keep huge cash assets outside of the US now and invest in job making activities only there - close US plants, or outsource production of components once made in the USA etc..

“... U.S. banks held $176 trillion in derivatives at the height of the debt crisis in 2008. Today, U.S. banks hold $244 trillionin derivatives — nearly 40% more.” {Billy T adds: 17 of the largest banks are being sued because they misrepresented the toxic trash they sold to Fanny May, etc. Yesterday when this news broke, BAC shares dropped 8.34% (only on Friday) and during last week, Bank of America stock fell from $7.91 to $7.17/sh. This despite Buffett giving them 5 billion on very favorable terms (to him), including options, etc. As BAC tries to meet his higher than regular stock holder claims, I think BAC will go belly up, but perhaps the tax payers will save it, again.}

“... In just 12 months between 2007 and 2008, Washington TRIPLED the federal deficit from $161 billion to $459 billion.” {Billy T notes that was GWB’s last year as POTUS. Of course now with the 18million jobs deficit and recession GWB handed Obama and associated shrinking federal revenues and growing costs of food stamps, unemployment benefits, etc. that still continuing recession caused, plus the growing interest on the growing debt the annual deficit is three times higher still ~1.3 trillion dollars}

“ {the catastrophy} I’m talking about, a sudden rejection of U.S. debt by the world’s investors — a creditors’ revolt that suddenly leaves Washington with no choice but to live within its means. …”

{Billy T notes that it is not just that only the FED will be buying Treasury but those holding ~4.47 trillion (face value, but much less when sold) will be selling it in a mad rush to get out before the real value drops even more.. – This is the “run on the dollar” I predicted would take place before Halloween 2014 back when GWB still had two more years as POTUS. – Just remember to call the worst ever depression, that rapily follow the run on the dollar “GWB’s depression". His off budget wars, lowering of the purchasing power of Joe American’s salary, lack of his SEC enforcing the law/regulations, tax relief for the already very rich, which gave them funds to build the modern factories in China and closed US’s no longer competitive factories, increasing unemployment cost, etc. is what made it possible for me to predict that GWB’s depression was “inevitable.” While GWB ws still POTUS.}

Quotes and figures from: http://finance.moneyandmarkets.com/...&formid=&type=CustomFormWeb&contactId=2322273

 

[nietzschefan]

If I gather the nutbar protest right...they don't like shale oil because of the big dump trucks and the destruction of landscape (fairly desolate land in northern Alberta and Saskatchewan not to mention clear blue sky and a boreal forest that probably sucks up the local CO2, and even if it doesn't it's fuck all in the grand scheme of things). The Natives all signed off on it long ago and no one gives a shit about land more than they.

Build the pipeline through B.C and then we can hire interior B.C people to build it. Chinese money is always good.

 

[Billy T]

If I gather the nutbar protest right...they don't like shale oil because of the big dump trucks and the destruction of landscape (fairly desolate land in northern Alberta and Saskatchewan not to mention clear blue sky and a boreal forest that probably sucks up the local CO2, and even if it doesn't it's fuck all in the grand scheme of things). The Natives all signed off on it long ago and no one gives a shit about land more than they.

Build the pipeline through B.C and then we can hire interior B.C people to build it. Chinese money is always good.

I am nearly sure the Keystone ext pipeline will not get built. Not only due to Republican desire to cut budget expenditures, but perhaps more due to NIMBY - local opposition in the US. (NIMBY does not operate in China. -Why they could build the world's largest, most modern, airport in time for the Olympics - in less time than the UK needed in public hearings just for a minor expansion of Heathrow!)

Not all shale-oil technologies disturb the surface but most use a lot of water and or chemicals and some require making steam on the surface and of course that adds to the already high CO2 release per Barrel of oil produced. I own stock in one, PBEGF, that only uses air, but that stock has not gone up in price yet (I hope soon). They have a big commercial scale experiment in progress - other investors probably are waiting to see how it turns out, but I liked their basic idea so bought when the pilot test proved the THAI concept.

In-situ technologies currently in use include steam-assisted gravity drainage (SAGD) and cyclic steam simulation (CSS). Potentially more cost-effective and less environmentally intrusive technologies. are vapor extraction (VAPEX), which uses hydrocarbon solvents instead of steam to release bitumen from the sand and to oil flow more easily for extraction at lower heat and thus with lesser energy input. Petrobank Energy and Resources Ltd (TSX: PBG, OTC: PBEGF) is testing toe-to-heel air injection (THAI) at its Whitesands project.

 

[nietzschefan]

I guess these protesters prefer fracking which causes far more environmental problems, but it happens in the U.S so it's ok.

 

[X-Man2]

Hard to say weather the Keystone will get built,we have NIMBY on one side and powerful oil on the other.We will see more and more of this type of thing with oil fights as it get more and more harder to get at.In so many places oil is getting more expensive and harder to extract.

Although there is perhaps 30-50 yrs of oil left in the Earth,precious little of that is extractable economically or technologically.It's probably more like 15-20 yrs of declining oil left.What to do?

We have a decent knowledge of several Countries oil amounts so we can estimate the reserves.Although the Middle East loves to exaggerate their remaining oil reserves we know better and they too are coming to a close.

http://peakoil.com/production/major-countries-burn-up-crude-reserves/

 

[nietzschefan]

Well they just found massive reserves in the arctic(a real sweet load north of Alaska too). It could be WWIII is a fight over this stuff.

Hopefully renewable energy will be mainstream in 10-15 years, Oil used for energy less and less until not at all. Only it's other uses.

 

[Billy T]

Well they just found massive reserves in the arctic(a real sweet load north of Alaska too). It could be WWIII is a fight over this stuff. Hopefully renewable energy will be mainstream in 10-15 years, Oil used for energy less and less until not at all. Only it's other uses.

Yes. I learned that more than two weeks go as I also own shares in Norway's oil company. Here are my notes on it:

"16Aug11: Statoil's giant North Sea oil discovery could start production in six to eight years from now, the company's head of exploration told Reuters on Tuesday. "It will typically take six to eight years from discovery until the field comes on stream. It's so large it will produce a lot and for a long time," Tim Dodson said in an interview. Earlier on Tuesday Statoil announced that the discovery at Aldous Major South, announced last week, was connected to the neighbouring Avaldsnes field and that the two could hold between 500 million and 1.2 billion barrels of oil equivalents. "It's rare to make such large oil discoveries. This is probably the largest offshore oil discovery made anywhere in the world this year," Dodson said. This is the Statoil’s third high-impact discovery this year. (A high-impact discovery is one that holds more than 250 million barrels of oil equivalent.) ..."

Getting it out may be more expensive than even Brazil's larger and still being explored "pre-salt" fields. They are about a mile deep thru sea water and then another mile thru the salt layer, which at those pressure readily flows. Also the wax component, a liquid deep in the warm earth becomes a solid on the inside of the pipe as it passes thru the deep sea water which as at 4 degrees C. However these problems can and have been solved - Up in the arctic you need also worry about a wind driven ice berg or ice flow doing to the drilling platform what one did to the Titanic. The cheap oil is basically gone. It is still and open question if Arctic Ocean floor oil can be extracted with currently available technology. Note to solve the drifting ice berg problem, Statoil is already drilling from islands and using the "horizontal drilling" technology developed for shale natural gas.

 

[Billy T]

Up dating part of post 164 (on new suit against 17 banks & BAC in particular to support my suggestion it may go "belly up" if not saved by US taxpayers again):

"... The FHFA said in its filings that Fannie Mae and Freddie Mac bought $6 billion in mortgage-backed securities from Bank of America; $24.8 billion from Merrill Lynch, which Bank of America took over in 2008, and $26.6 billion from Countrywide, which Bank of America acquired the same year. ..."

If BAC must buy back 6 + 24.8 + 26.6 billion, I think they are toast without the tax payers eating part of this 57.4 billion especially as BAC must pay Buffett back on his favorable terms. That might even cause a cut in the BAC's CEO's bonuses - no somethings are scared.

Added on 5 September: Here is the deal Buffett got (which my help kill BAC):
"... While his investment in BAC certainly says that the bank is not going away, note that he’s getting preferred stock that is above the common in the capital structure. He is also getting a 6% dividend on it, whereas common-stock holders get 0.5%. Moreover, Buffett gets 7 million warrants as a sweetener for his $5 billion investment. ..."

"... The Wizard of Omaha made a big investment in Goldman Sachs (GS) at the height of the financial debacle in 2008. How is that working out for him? Fine. He gets 10% interest on his preferred shares and has a load of warrants; How would we of the lumpen hoi-polloi have done if we’d bought GS the next day? We would have about 3% total in dividends over the two years, and would be down about 15% on the price. What’s good for Warren is good for us only if we get the same deal. ..."

 

[Captain Kremmen]

Great lumps are being torn off Bank Share prices.
Are some banks due to fail?
Which ones?

 

[Billy T]

Great lumps are being torn off Bank Share prices.

Yes for some of the reasons I mentioned in post 171. Here are early today drops:

"... Bank of America, the largest underwriter of U.S. leveraged loans, declined 4.4 percent to $6.93 in early New York trading today. JPMorgan Chase & Co. (JPM), the second-largest U.S. bank by assets, retreated 1.8 percent to $33.99. Citigroup Inc. (C) lost 3.5 percent to $27.42, while Goldman Sachs Group Inc. (GS) fell 1.8 percent to $105.10. ..."

But don't feel sorry for Buffet's 5 billion "loan" to BAC. He'll get his 6% and as preferred stock owner, his cash back when the common stock drops to a couple of dollars / sh.

Are some banks due to fail? Which ones?

Probably not any of the bigger ones. Joe Tax payer will involuntarily bail them out, as he has in the past. Don’t forget the US has a government, “Of the rich, For the rich, & By the rich” despite what you were taught in civic classes in school. (The “Buy the rich” is indirect – they pay lobbyists to get favored laws, corporate welfare, and especially favored parts written into the tax code, now 700,000 pages long!*)

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*I have suggested a simple, fair, progressive tax code that fits on a 3 by 5 inch index card, but it has a snow ball’s chance of even being considered by the 6 member “Special Congressional committee” charged with revising the tax code (They like the funds the lobbyists give.) Read my tax plan here: http://www.sciforums.com/showpost.php?p=1792841&postcount=1

In it income is income - does not come in 20 or so special types of income. etc. There is no tax on corporation to help get jobs back to the US, but corporations must distribute all their profits to US tax payers* with in 10 years or send the earning from 10 years earlier, plus the interest they earned in those years, 100% to the IRS. etc.

* Foreign stock owners have the tax they would pay if they were US residents withheld before funds leave the US. Likewise profits exported for foreign investments are heavily taxed. I'm tired of US capital building more modern factories in Asia where labor costs are much lower. That is what is closing US's older, less efficient, factories and outsourcing US jobs. Lets make it more profitable to build the new efficient factories in the US.

 

[Billy T]

"...In its latest assessment of the G7 economies, the OECD reports that growth has come to a halt and that it is time for additional stimulus. ..."
From: http://www.stateofthemarkets.com/re.../1/0/bf98bcb0a616dca7c4529bfe412fac9f2cf0d41e

Billy T comment:Main effect I expect from more of the same stimulus is more of the same boost to price of gold and silver, etc.
Let's hope Obama has something different than more of the same in his speech tonight.

Also by edit more bad news:
"... Initial Claims for Unemployment Insurance for the week ending 9/3 rose by 2,000 to 414K. The report was worse the consensus estimate for 405K and last week’s revised total of 412K (up from 409K) ..."
From: http://www.stateofthemarkets.com/report/13304/Weekly-Jobless-Claims-Continue-to-Rise

 

[scheherazade]

The disparity caused by income is very evident if one does have a modest amount of income to invest.

The scale of interest rates paid by banks and other financial institutions is based upon the amount you have to invest and what length of time you elect to lock it in for, with some 'locked in' options redeemable at a lower rate of interest, and some not accessible until the term is expired.

While investing over the long term is a risk that I feel is fair to compensate extra for, I find it seems biased in the extreme to offer hugely better rates to those who already have lots of money at the expense of those who have little to invest.

The bigger money mushrooms, while the small investor is lucky to stay ahead of inflation.

It seems a strange way to achieve equality of persons, which is just 'lip service', I know.

The veneer of civilization is thin, IMO. It's a jungle out there, and likely to remain so.

 

[Billy T]

The disparity caused by income is very evident if one does have a modest amount of income to invest. ...
While investing over the long term is a risk that I feel is fair to compensate extra for, I find it seems biased in the extreme to offer hugely better rates to those who already have lots of money at the expense of those who have little to invest.

The bigger money mushrooms, while the small investor is lucky to stay ahead of inflation. ... The veneer of civilization is thin, IMO. It's a jungle out there, and likely to remain so.

You re absolutely correct, but this "It takes money to make money" upward concentration of wealth built into the economy is much worse than your present. It is part of why with GWB reduction of taxes on the very rich, the middle class in US society is being destroyed.

Another very important factor is well illustrated by Warren Buffett's buy of 5 million dollars worth of PREFERRED shares of BAC with a guarantee of 6% return and no cost options also granted. The common share holder only gets a 0.5% return and even that may soon be zero. Unlike Buffett, he is losing a great deal as the share price drops. More details in my recent posts.

Note also that the tax code is complex (700,000 printed pages, written by lobbyist for the rich and corporations) so that for example Warren only pays 17% of his income in taxes, but his secretary pays 34% of her income to the IRS!

But even that is not the main cause of the dying middle class. - The main cause is the concentration of wealth in the US society which is set up for the benefit of the already rich. (Government "of the rich, by the rich & for the rich")

I have several times posted MATHEMATICAL PROOF that the system is rigged to take wealth from the middle class and transfer to to the most wealthy, even if they did not get higher rates of return on their investment and pay lower tax rates!

The essence of the simple math model is to note that every one has certain necessary expenses (food, housing, clothing, etc.). In the model I have assumed that they are E dollars for the middle class and 10E for the very wealthy ("E" for Essential costs.) and just for numerical illustration, that the after tax income for the middle class is "I" and 25I for the better off. (The most wealthy have at least 200I as their after tax income.)

With taxes on each assumed to be fI, where f << 1. Note that in fact the "f" for the middle class is greater than for the wealthy (whose tax lawyers know how to exploit the tax code better) but for simplicity, I ignore that in the math model.

That means the middle class has (I - E - fI) to spend. I.e. All I except E & fI of taxes could be spent on investments if he chooses and the wealthy has (25I -10E - fI) he can invest. In addition to all the other conservative assumptions made to avoid arguments, I also falsely assuming that the both get the same rate of return, R, on their investment.

I.e. the net worth of the middle class annually increases by a capital gain of: c = R(I - E - fI) and that of the wealthy by C = R(25I -10E - fI). (Note C >> c.) Thus next year, assuming no real increase in I, E, R or f, the capital increase for the middle class will be R{c + (I - E -fI)} and that of the rich will be R{C+ (25I -10E - fI)} Note that both terms inside the {...} are larger for the wealthy than for the middle class, so not only are the wealthy growing richer faster each year, but they are doing so at an ever increasing rate as the years go by! Basically this faster rate of increase in wealth for the already wealthy is due to the fact that their essential expenses are a much smaller fraction of their income. For the poor E is essentially 100% of I so even if paying zero taxes, then can never prosper. They live "hand to mouth" and often are hungry before the end of the month, their children brain damaged by malnutrition, etc. - This in the world's richest country - SHAME!

This simple math model proves that "flat tax" ideas are doomed to destroy the middle class. A progressive tax rate* is essential to prevent all the wealth of the society from becoming concentrated in the hands of a few. (Eventual if a flat tax system remained unchanged for centuries one person or more likely one corporation, would own everything).

This concentration of wealth is INHERENT, a mathematical fact, if no offsetting redistribution of wealth away from the rich and back to the less well off is not also part of the economic system. The US had nearly an adequate re-distribution progressive tax code, but it has been destroyed by GWB's tax breaks for the very wealthy plus the modifications of the tax code for the benefit of the already wealthy (corporations included).

Thus the current destruction of the middle class and their reduced ability to support the "consumer economy" is to be expected - no surprise - and a major reason why the US is doomed. I.e. Tea Party types and most Republicans who oppose downward redistribution of wealth are guaranteeing the economic collapse of the US, but too dumb to understand math showing the current system's inherent concentration concentration of wealth. I.e. the fact that "it takes money to make money" MUST be off set for stable society.

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* Or some other mechanism of wealthy redistribution - such as social collapse French Revolution etc. style with transfer back of the society's wealth from the super rich back to the population.

 

[Michael]

When you say "the US is doomed" you're presuming the American public will go along with their own utter destruction. I'm more inclined to think they'll finally come to terms with the fact that this cycle has run its course and will crush the upper upper class that make up the 0.05% holding most of the money. My worry is they won't wake up until WWIII is over. Or that we truly to become an Empire (suppose poor Americans start colonizing other countries :S). Or someone gets the bright idea the Earth needs a few billion less humans on it and sneezes most of humanity into oblivion.


I'm still hoping for a "Green Revolution" at least in terms of fuels. What I wonder though, is how it's possible to grow the starch to make the biofuel.... without oil???

 

[Billy T]

Worse is coming because the US has a disguised Fascist Government: I.e. a government that favors the rich and business, but instead doing so openly as Mussolini did, these special breaks and considertions given the rich and corportations are hidden in 700,000 pages of tax code writen by their lobbyists. In the case of the banks it is mainly the FED which grants, more openly (Mussolini style) benefits:

"... America's banks are facing huge litigation costs {because of their prior greed, incompetence and fraud}. Worse, they've grown entirely dependent on the Fed's easy-money policy. So the Fed is going to bail them out - again. And we're going to be the ones who pay for it. ...

By keeping overnight lending rates between 0.00% and 0.25%, banks can borrow at next to nothing and buy risk-free U.S. T reasury securities that yield a lot more than their financing costs. The result is a "positive interest rate spread," which is the basis for banks' revenues and profits. {Why should they make loans with risk to small business when they have a sure thing, risk free?}

Additionally, banks can borrow more money by using their {just bought with FED money}Treasury securities as collateral for overnight and "term" loans. Then they use the cash they borrow to buy more Treasuries. They do this over and over again to leverage themselves.

Essentially, banks have become giant hedge funds that finance their "trading books" with virtually free money, courtesy of the Fed's zero-interest-rate policy. ..."From: http://moneymorning.com/2011/09/15/the-insidious-truth-about-federal-reserve-policy/ {Except for BT's inserts in these brackets}

Billy T comment:
With such a good deal going for them it is amazing that many banks are, again, in deep financial trouble. (Bank of America, for example needing a 5 billion loan / preferred stock sale with options and 5% return guaranteed from Buffett, yet still forced to lay off 30,000 employees! BAC pays only 0.5% to its regular share holders, and that very likely will become zero soon as the stock value declines.)

They managed to dig this deep financial hole with greed, gross incompetence and essentially fraud but of course the bonuses to the management higher ups continue very large. The "greed" was their agent's eagerness to lend money to collect the placement commissions and other origination fees.

The "incompetence" was the "no money down" / the unchecked "liar loans" / the "interest only, balloon loans" etc. granted to any homeless bum they found sleeping on the street and could sober up enough with free coffee so he could sign the paper work. - Only a slight exaggeration, for effect, as after all, the agent's commission and origination fees came out of the loan principle before the remainder was granted to the borrower, who signed for the full amount.

The "fraud" did require the gross "incompetence" of the rating agencies. I.e. these never to be paid loans were packaged with others, which might be paid and sold off the bank's books to innocent investors who though that S&P, Moodies, etc. AAA rating had validity, when no investigations were actually done. The loan packages were soon recognized to be "toxic trash" most of which the US tax payer, via Franny & Freddy, are making good for the big money investors who bought these packages - i.e. Joe American is eating the losses. Currently, ~25% of all home mortgages are "under water" and foreclosure at an all time high. So some Joe Americans, who make too little to be screwed via the tax system, are being screwed by losing their homes and living in their cars of public park, etc.

The middle class is shrinking, their children are less well off for first time in US history, their salarys' purchasing power are declining with the dollar (if they even have job) but is this not exactly what you should expect in a country with a disguised Fascist government, Of the Rich, By the rich, and For the Rich?

 

[Billy T]

As discussed in adjoining post 178, the US has a disguised Fascist government which is based on the 700,000 page tax code, written by the lobbyists of the rich and corporations for their benefit. Here is one cure:

Scrap the current tax code and replace it with my simple tax code (entire code fits on a 3 by 5 inch index card) more completely described a few years ago here: http://www.sciforums.com/showpost.ph...41&postcount=1

For your convenience here are the main features:

(1) Income is Income – no special types taxed differently.

(2) The corporate tax rate is zero (To encourage jobs to return and stay in the USA); However all profits must be distributed to tax payers in less than 10 years from date they were earned or sent 100% plus interest earned on them to the IRS. (Foreign stock holders have the tax withheld before funds leave the US, as now.)

(3) Only unavoidable expenses are deductible (typically that is medical costs) up to a limit. I.e. the home owner gets no advantage over the renter.* The oil company gets no “depletion allowance” to reduce their profits, etc.

(4) The tax rate is progressive (higher for higher incomes) and every one’s computed tax has an annually set multiplying factor** that balance the budget, except in war time.** I.e. government increasing spending shows up directly in your taxes, not as a debt for your grandchildren.

Although the code itself fits on one side of a 3x5 index card, (not 700,000 pages) both sides of an 8.5x11 inch sheet of paper are required for the precise definitions of what is "income" what is "gift" etc. and the numerical examples of all parts of the code.

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* That is "central planning" by the IRS. The government should not bias your economic choices. The government's encouragement of all to become homeowners is probably the main factor that caused the current economic mess - why Bank of America is now firing 30,000 employees, etc. The childless couple with joint $200,000 income is strongly pressured by the current tax code to buy a large (million dollar plus) home, which they do not need because they do need the mortgage interest deduction. If not for this IRS code pressure, they probably would chose to rent a luxury apartment in town, close to their work, use less gasoline etc. Central planning by the government (even when disguised as tax code) promotes waste.

** For about 10 years after the war, that factor is higher to pay off the war debt than the factor needed just to make government revenue = budgeted expenses for the coming year in this "pay as you go" financed government.

 

[quadraphonics]

Billy T comment: Not only that, but when Chavz cuts off the heavy crude now sent the several gulf state refineries,

"When," not "if?"

Chavez isn't going to do any such thing, at least on purpose. He might well mismanage Venezuela's production to the point where they aren't producing any oil to sent to any refineries (oil production in Venezuela is down 25% since Chavez took over, fired all the technicians at the state oil company, and started using it as a piggy-bank instead of investing in production). But more likely he'll be dead and/or out of office by the end of next year anyway. Anyway he's been blustering about this for years now - if he were seriously going to do it, he'd already have.