Scary Effects of Static Debt

[Lost from site and reposted.]

Hey Barry:

Let's try taking Boehner at his word and see what will happen. After all, he appears convinced that the Tea Party idea of not raising the debt ceiling is a good one.

Here's a likely scenario:

1. We cannot sell any more T-Bills;

2. We can spend only what we collect in tax revenue;

3. That's a 30% reduction in the revenue shown in your 2012 Budget;

4. Let's continue following Boehner, so we won't raise any taxes and we'll reduce expenditures by 30% or $1.1 trillion and we'll do it across the Board;

5. But, wait a minute - since we won't raise taxes and cannot borrow, we will be taking $1.1 trillion out of the economy;

6. That will reduce GDP by some $4 trillion more or less because of the Aggregate Demand multiplier effect;

7. GDP will drop from a forecast $15 trillion to $11 trillion - that's a 25% drop in GDP;

8. A 25% GDP drop is very similar to the GDP drop in the Great Depresssion;

9. We would expect great increases in human misery and social problems - 25% unemployment, increases in crime, violence, and drug abuse - from the GDP drop alone;

10. Also, the drop in GDP would reduce tax revenue, so that government spending would have to be reduced even further, creating an ever descending whirlpool of depression and social misery;

11. Additionally, in the beginning, Defense, Social Security, Medicare, and Medicaid spending would drop by the 30% revenue reduction just to balance the budget - our national defense would be 30% weaker;

12. Since we could no longer pay interest on the outstanding debt, we would not be able to borrow in the future, even if we wanted to;

13. State and local governments would also see large budget shortfalls from the depression and lost tax revenues, leading them to cut security and education spending;

14. With a lack of police and security personnel, we would see a great increase in terrorism;

15. With a lack of schools, we would see great increases in gang activity - basically, no neighborhood will be safe from violence;

16. Due to reduced budgets and increased violence in the Homeland, we would call all troops back from foreign countries to provide order at home;

17. We would lose two wars to the Taliban and Al-Queda - and we would retreat from the war on terror;

18. With no effective American presence, countries like Iran and Syria would be free to take over Iraq and attack Israel.

This is the future the Tea Party wants for us.

I hope you don't agree, Barry.

Your pal,

E U Debt Crisis Coming

Hey Barry:

We are having a debt problem in the USA - the EU may be joining us soon. It's not for sure, but needs watching.

Countries in the Euro zone mostly have sovereign debt problems from financing social programs with debt.

If some of them go - that is, if several countries have financial crises like ours - look for another worldwide recession.

We are all in the same boat now; when one sinks, we all drown.

Y'all can read it here:

http://www.reuters.com/article/2011/05/09/businesspro-us-eurozone-crisis-communica-idUSTRE74836T20110509

Here's the thing: banks.

No surprise here Barry.

If we don't corral the bankers, they will just make things worse by profiting from disaster. Not just US bankers, either; I mean all of them.

Greedy bankers pass the laws they want in every country so they can make billions while the rest of us can just 'eat cake' if we don't like it, just like Marie Antoinette said.

I'd really like to say that we are leading the world in reforming bankers and helping average folks; but I can't say that. Our bankers are right there with the leaders in passing laws that help themselves at our expense.

Brings a grown man a tear.

Your pal,