With a failing and ailing housing market that Zillow predicts won’t hit bottom until 2012 *at the earliest*…, a US dollar with rapidly declining value driving prices of oil up, as well as every product down line in the transportation chain, this administration’s leadership thru the US economic woes have proven not to steer the nation towards recovery, but instead thrown us into a double dip recession.
With a new POTUS election year looming, this comes as quite the inconvenient talking point. So it comes as no surprise that Geithner decides to play politics with the crises… laying the groundwork for blaming policies that brought us to this point on on the GOPs demands for spending cuts in exchange for raising the debt ceiling.
A short-term default on government debts would do “irrevocable damage” to the American economy, according to Treasury Secretary Timothy Geithner.
In addition, failing to raise the debt limit and forcing the government to miss payments on some obligations would “likely push us into a double dip recession,” he warned Friday in one of the administration’s bluntest warnings yet on the dangers of inaction.
In a letter sent to Sen. Michael Bennet (D-Colo.), Geithner painted a bleak picture of what would happen if Congress were to fail to raise the $14.3 trillion debt limit in time. A government default would hurt an already weak housing market, drive down household wealth by hitting 401(k) accounts and pension funds, and actually increase the government’s debt burden by driving up costs.
A “bleak picture” without the debt ceiling being raised?? Are we supposed to assume that picture is less “bleak” when it is increased? With several citations of “confidence” in the US economy, Geithner tends to overlook that confidence in the US is falling primarily because this nation’s elected ones refuse to address our spending. And what is raising the debt level but allowing ourselves the ability to continue to spend?
I’m not sure if Geithner’s bothered to look closely, but with, or without, that debt ceiling, a double dip recession has already been upon us. That is if you want to focus on the economic health of anyone other than the financials, who’ve been the biggest beneficiaries of Fed’s low interest/big bucks capital gains scenario. Main Street is feeling anything but recovery as our home values continue to tumble, unemployment remains high, and costs of necessities rise unabated. And I’m sure many of will consider candle making when the inexpensive incandescent bulb is mandated out of existence, thanks to a nanny “green” Congress, rather than pay the price of new age lighting.
Political rhetoric, in the form of the game of “chicken”, is at the foundation of this cheap fear mongering. As even Mike Shedlock at Mish’s Global Economic points out, there’s no doubt the debt ceiling will be raised. It’s just under what circumstances that it will. The GOP is using the debate as leverage for spending/cutting concessions from across the aisle, and from this big spending WH denizen.
In what is one of Mish’s more uncharacteristically harsh observations, Shedlock calls the Geithner/Bennett letter staged.
Last week Senator Michael Bennett of Colorado sent a letter to Treasury Secretary Tim Geithner asking what would happen if the debt ceiling was not raised.
Geithner’s Fear-Mongering Response to Senator Michael Bennett was quite entertaining. Here are a few select quotes from Geithner
A default would call into question, for the first time, the full faith and credit of the U. S. government. As a result, investors in the United States and around the world would demand much higher rates, reflecting the increased risk we might default on our obligations again.
A Default would not only increase borrowing costs for the Federal Government. but also for families, businesses, and local governments.
Even a short-term default could cause irrevocable damage to the American economy.
The letter goes on and on with colorful warnings about double-dip recessions.
The entire setup looks like a staged event. Michael Bennett is a Democrat from Colorado who wants the debt ceiling raised. Purposely or not, Bennett lobbed a softball to Geithner who drooled all over it.
To link the non existent housing recovery – as well as a stagnant (at best) economy in the wake of the massive government injection of taxpayer stimulus cash – to the current event of the debt ceiling is an obvious political feint, designed to mask the fiscal policy failures of the current administration and Fed Reserve. To buy into this nonsense, we would have to assume that an automatic raise of the debt ceiling, unopposed, would result in the rosy future this admin attempts to paint at every opportunity.
This deliberate mischaracterization for political gain is a dangerous game of chicken for we, the people. Our problem is less the specifics of the debt ceiling debate than it is the effect of both spending and never ending QE policies on the stability of the US dollar. While the days and weeks bring us a yoyo effect, the dollar has been steadily losing against the Euro over the years, driven by the nation’s increasing debt.
Nor does it give me a bit of satisfaction that the dollar has risen against the yen…. Give me a break. If there’s a nation that’s never recovered fully from their “lost decade”, and now in further economic crisis by their earthquake and tsunami, it’s Japan.
Below is a chart from the St. Louis Fed site, with the weighted average of the US dollar against the Euro area, Canada, Japan, the UK, Switzerland, Australia and Sweden from 1970 to 2011. The officially recognized US recession eras are noted by the shaded grey.
There are some who see a devalued dollar as a boost… and that’s true if you only want to consider short term, immediate effects. But we’re anything but short term with our soaring debt, reduced abilities to grow the economy or our individual incomes. Playing chicken with the dollar, while never curtailing out of control spending, is the stuff currency failures are made of historically. Something that many of you may remember is the third phase of the Kevin D. Freeman “Financial Terrorism” report I wrote about in March of this year. While “financial terrorism” may not be the stated goals of the Treasury Sec’y, the Fed Reserve or this WH, one can’t help but notice they are proceeding right along the path this report warns of for the fall of the US as a superpower.
At the very least, Bernanke – riding herd on continued low rates while continuing to run the US printing presses – and Geithner are doing a delicate tightrope act without a safety net. And neither are above playing political cards with fear mongering and cheap tricks to stay balanced on that wire.
The problem with the Geithner/Bernanke circus act they aren’t telling the audience when the show is over, nor how they plan to get off that tightrope. But Geithner is going to make sure that, in the inevitable fall, it’s definitely not his fault, or that of his WH POTUS. They are already pointing that finger at the GOP, and hoping the US voter buys their storyline that the GOP, holding the debt ceiling vote hostage on spending cut negotiations, is the reason they tumbled.
Vietnam era Navy wife, indy/conservative, and an official California escapee now residing as a red speck in the sea of Oregon blue.
Why would this be different. Anything that works at all is because of the ONE, the Only, the Obama with I and Me sprinkled about in every utterance. Anything that goes astray is because of Bush, Republicans, Insurance Companies, Oil Companies, Hospitals and doctors, or any other coporation not run by a friend of Obama and one who carries his water. The media will support this no matter how much this makes them look biased, stupid, hypocritical, lying, and foolish. They of course will blame the right wing conspiracy, the blogs, people who cling to their guns and religion, the tea party, and Fox News.
The sad part is many republicans seem to lack the basic skills to define and defend the principles of conservative politics and that is because far too many of them do not actually believe the core of conservative thought. Ronald Reagan, by the time he went into politics, had spent years gaining a complete understanding of both the evils of the left, and the promise of conservative policies and believed in them to his core. This allowed him to easily come across as a real person because he actually did believe that these were right for America. He also had communication skill and used humor like a surgeon cutting out the liberal lies and distortions. His “there you go again” and the nine words to fear “I’m from the government and I’m here to help” are prime examples. Today, too many look at him and try to copy and that is exactly what it looks like. We do not need lifetime political hacks who argue over where to locate the chairs on the tititanic and frankly have no real preference, but those who can communicate and with core values they actually believe with a deep love of the country. There are a few young republicans who show promise, but the group we have running today are not creating excitement because non seem to have this spark. So we end up going to vote against democrats we know hate america and are evil in their designs, but do so with our nose held tight and lack of excitement that deep down they actually believe. The are like bobble head dolls trying to look like Reagan. Cain came across well because he seems to have those core beliefs and the fire in the belly to attack. Time will tell if he is a true believer.
There has been continuous finger pointing and accusations of blame. Now, we are to believe the recovery will take longer than expected. That is an easy cop out. We are to have faith in the man who has produced nothing but pie in the sky predictions for two and a half years needs five and a half more years to get the economy rolling. We hear of alternative energy jobs that don’t exist, while he gives billions to Brazil to drill in the same ocean that is off limits to our drillers. Soon we will be buying fifty dollar light bulbs to save the world and GE will be able to buy their own countries with the money allows them to steal from the US taxpayer.
Well, Skook, the “recovery summer” has always been “just around the corner”. I suspect that “corner” will end up being beyond the 2012 election.
Just found it interesting that Geithner’s busy on the talking points that the GOP was the one holding up that “corner”. LOL
The light bulbs… can you believe this crapola? Unreal…..
Mata–
You’re exactly correct. The democrap plan is (and has always been) to blame the Republican “spending cuts” when the end game of 40 years of democrat fiscal responsibility happens.
Since we have little more than humor to sustain us as “hope” of late, John Cooper, look at the satire here. Geithner is the American family’s accountant. He’s responsible for paying the bills that roll in, and is in a panic because his credit card is full, the income revenue stream is dwindling, and the family job prospects in the economy suck for any hope of stable revenue streams.
What’s a desperate guy to do?
Welcome to our world, Timothy… a world where the credit company is reticent to extend your debt because you are obviously a bad credit risk.
What would America’s family do? Tighten the belt and spend less. Is that what Tim Geithner does? Hang no… he argues with the credit company that the limit should be higher, and prepares everyone around him that it ain’t his fault when they do… and he ultimately still defaults on the debt. But he’ll make a good show of it until he’s no longer holding that position, and can blame it on the new “family” accountant.
Geitner is a fool, of course you knew that.
The world hasn’t detonated either, nor will it, if the debt ceiling isn’t raised ever. Only Obama will detonate, which would be a good thing. Everybody knows the USA is flat broke. Well except the regime …
Don’t be bullied … watch this video …
Debt Ceiling
Let’s add more political rhetoric to the fire, shall we? Politico’s left winger pundits attempt a climate change play on words, labeling those trying to rein in Geithner’s fear mongering, as “skeptics”. What becomes *most* apparent is Geithner’s only defense to these “skeptics”… the perception of default as opposed to REAL default.
No, Tim… we’re already in a double dip recession… with considerable thanks to you and your appointees. If you want to talk about “tattering the country’s creditworthiness,” then you better start talking about spending cuts before you hang your laurels on increasing the nation’s credit card limits.
I understand the back and forth about the debt ceiling (although the rhetoric of calling each other “evil” is a bit over the top, guys and gals), but I don’t completely buy the rationale. It smacks of the “too big to fail” fiasco in 2008 that ultimately kept the big boys in play while Main Street suffered. Maybe that’s just me…
Mata, right on. Geithner, the United States Secretary of the Treasury, should never, ever have used such language, denigrating and disparaging his own country, its financial state, and its currency, to the rest of the world, to the world’s money managers, and to American taxpayers. That is something that in my book is defined as treason. And he’s lying about imminent default if the ceiling isn’t raised. What an idiot.
You appropriately labelled his aspersions as politics and fear mongering. Pathetically, this career civil servant has done the personally expedient and advantageous, . . . truth and common sense be damned. His threats are not in the best interest of American taxpayers.
We know that Geithner was playing the game of politics and fear, because we know that he knows the world’s bankers, fund managers (off and on shore), trust managers, are all supremely and intimately familiar with the dollar, the deficit, the debt – minute by minute, hundredth of a cent by hundredth of a cent. They know. They don’t need Timmy to tell them how good or how bad it might look to increase the debt ceiling. The debt ceiling is not relevant.
What is relevant is the deficit first, and the debt second.
On housing, we can look to well beyond 2 years before recovery, probably 5+, and a further drop in values of somewhere between 20%-25%. It won’t be pretty, and we can expect another avalanche of foreclosures.
The whole world is floating in an unprecedented bubble of debt. It has become an obsession and a global expectation, even a “right.”
It will be impossible for voters to believe this Administration’s promises of wealth redistribution since there won’t be any wealth to redistribute, but the Republican leadership really needs to do a better job of “getting ahead” of the story, because the Obama political machine is in full swing, and the MSM is repeating it’s stupidities without questioning them.
Tim Geithner can try to blame Republican policy for hitting the debt ceiling but truth is we would have hit it sooner had not a Republican economic policy of extending the Bush tax CUTS been signed by Obama!
Sure, spending the way we are, we had to hit it eventually.
But we did bring in MORE revenue from the LOWER taxes than we expected to under the plan to raise taxes.
What other Republican economic policies might also be GOOD for our economy?
Could we (consumers) be spending any less?
Where is all the paper money going?
We are (the Fed) printing it up in astonishing amounts.
Yet look at this chart.
The money supply is static.
Loans & leases from banks are going down.
Yet the monetary base has skyrocketed!
More here.
Even if we raise the debt ceiling, they will keep spending to hit it again. It’s time for tough love for Dems.