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Archive for the ‘National Debt’ Category

Obama Asks Congress to Raise National Debt Ceiling by $1.2 Trillion

Posted by Steve Markowitz on December 28, 2011

Obama Asks Congress to Raise National Debt Ceiling by $1.2 Trillion

Last week President Obama had the public and the media focus on a trivial financial issue, i.e. extending for two months the payroll tax deduction.  This succeeded in deflecting the Country’s attention from the real financial issues facing the United States, the unsustainable national debt.

This week, conveniently sandwiched between Christmas and New Year’s, the Obama Administration indicated that it will ask Congress to raise the nation’s debt ceiling by $1.2 trillion.  This is the third such request by Administration since its argument with Congress to raise the national debt in August 2011.  This will increase the nation’s debt ceiling to $16.4 trillion.  While a huge number, it is estimated that it will only satisfy America’s that until the end of 2012.

America’s huge national debt results in rubbing from the younger generation to support handouts for others today, especially Baby Boomers.  It is immoral and unsustainable.  However, like crack cocaine, the Country is addicted to it.  Withdrawal is a painful process.  Currently, the only candidate running for the presidency to understand this reality is Ron Paul.


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Interest Rates, Debt and Unintended Consequences

Posted by Steve Markowitz on April 20, 2010

The federal government continues down the path of ever increasing intervention in markets and our economy.  Often the interventions start with good intentions, mainly to avoid recessions and hardships for citizens.  Just as often they lead to unintended consequences creating even greater long-term issues than the initial problems addressed.

Perhaps the most dangerous of interventions by our government has been keeping interest rates artificially low.  The short-term benefits of this policy keep the cost of the government’s own debt lower by reducing the interest it pays.  The lower rates also act as an incentive for companies and individuals to borrow more in the hope that this will help jumpstart the economy.

History has shown that the low interest policies of the Greenspan era lead to false economic growth i.e. bubbles.  The ongoing recession and financial mess worldwide are the legacies of this failed policy.

While Greenspan is gone, the current Federal Reserve Chairman, Ben Bernanke, continues the low interest policies at the Fed.  Unfortunately, this will lead to other market dislocations and possibly even larger bubbles.

Today’s Wall Street Journal includes a story titled: “Tech Firms Bulk Up With Debt” that points to one potential unintended consequence of Bernanke’s low interest rate policy.  Strong companies with little current need to barrow are doing so mainly because the cost of debt is so cheap.  Examples include SAP, Adobe Systems, and Salesforce.com, as well as Microsoft.  Time will tell if this increased debt leads to problems for these companies

The ongoing economic problems we face were caused to a significant extent by artificially low interest rates that then led to individuals and companies taking on too much debt.  Then, with the bubbles being popped, the government has borrowed money to bailout those individuals and companies from excessive debt.  Now, the government also has excessive and growing debt.

It is remarkable how little we look to history to see the future!

Posted in Bubbles, economics, Free Markets, Governmental Intervention, National Debt | Tagged: , , , , , , , , | Leave a Comment »