House of Cards, Part 2

[ripdog]

I read a blurb in the Seattle Times this morning that leaves me feeling uneasy. The government says that our deficit in 2002 was $158 billion. Greenspan says it's actually $365 billion. Well, it seems that our trusted government officials don't actually count the deficit until a payment towards that deficit is made. Great. More ENRON-like accounting to add to the list. I found out a few weeks ago that the money that my wife puts into her retirement account gets hijacked by the feds and applied to the national debt. They put an IOU into her account and promise to pay her what it would be worth when she retires. I have to wonder how bad the situation really is. I suspect that the foundation that our economy is based on may be faulty. That'll be for another post. House of Cards, part 3. Don't hold your breath for it (Spring quarter just started).

[Clarkmeister]

See the thread "As the troops roll along" below. There's a good discussion about the deficit/debt as well as 2 IMO kickass links. One to the official national debt website, and another to a list detailing the amounts and maturity dates of every security issued by the government to pay finance the debt.

[Jimbo]

Ripdog,

If the IOU by the Federal Government suddenly became worthless you would have many more serious problems to worry about than your wifes' retirement account. Another poster compared this to the minimum reserves a bank is required to keep on hand. If you have a savings account a large portion of your money is simply IOU's from people you cannot even identify. In fact if you have a loan from the same bank your note is part of your own IOU.

[Clarkmeister]

Good point.

[ripdog]

Jimbo, definitely a good point. I realize the implications that the government defaulting on her IOU would bring home. What bothers me is that the more I look, the more it seems that our whole foundation is based on these ENRONesqe accounting tactics. How bad does it have to get before our own house of cards comes tumbling down? I'll read those links when I have more time.

[brad]

look up fanny mae / freddy mac.

heh.

doesnt inspire confidence.

greenspan recently said no bank is too big to fail (jp morgan?)

warren buffet said derivatives were such a problem he couldnt even figure it out.

gee maybe seizing all that iraqi oil is a good plan after all.

[Parmenides]

Well, Bush is a fascist. His rob from the poor and middle class to give to the rich policies have destroyed the gains made in 8 years of fiscal responsibility. His father's administration destroyed the Savings and Loans. They have that in common.

He has the majority of Americans believing that Saddam (not Bin Laden)caused 9-11. He has the right wing fascist radio airwaves goose stepping to his neo conservative butcher of Baghdad. He'll roll on Iran next. Syria will follow. He'll nuke North Korea. He'll suspend the US General election in 2004 if he thinks he can't fix it. He'll start arresting Democrats that dissent, and hold them without charge or legal counsel.

He is the beast slouching towards Bethleham to be born (Yeats).

[ripdog]

I hate Bush as much as anybody, but I don't think that the problem I'm talking about falls squarely on his narrow shoulders. Seems like the $4.7 trillion in deficit took a team effort to build. I guess my point here is that you can't blame Bush for every problem and you can't credit Clinton with the economic boom either. The ENRON fiasco made me realize that the booming stock market was built on a hill of lies--and it left me wondering what other whoppers are out there waiting to be discovered. Your assertions that Bush is the reason for everything foul and distasteful in this world make you sound insane. As far as Bush having the majority of Americans believing that Iraq played a major part in 9/11, I'd have to conclude that the majority of Americans are idiots. I'd rank you slightly above them.

[adios]

"look up fanny mae / freddy mac.

heh.

doesnt inspire confidence."

Fannie Mae and Freedy Mac securities issued are almost all rated AAA I believe. I think Fannie Mae is leveraged something around 50-1 (similar to a bank) but here's a couple of things to consider. I believe that the average amount of equity in a property financed by Fannie Mae is something like 30% could be wrong about that. My understanding of most lenders regarding real estate is that there risk reduced greatly to near 0 when the equity reaches 30%. Also Fannie Mae does conforming loans only as does Freddie Mac i.e. their borrowers have the highest credit ratings. Another thing to consider is that if you put 3% down on a property you are leveraging yourself at 32-1. Also their are many corporations who have floated a lot of bonds and their assets aren't anywhere near the quality of Fannie Mae's. For crying out luud GE has a leverage ratio of 32-1. Check out Altria, they have negative tangible book value (liabilities > tangible assets), have a $12 billion judgement just handed down against them, according to Illinois law where the verdict was rendered they have to come up with $12 billion for a bond while the case on appeal and they don't have the money. Altria is one of the 30 Dow Jones Industrial Average Stocks, a blue chip supposedly.

"greenspan recently said no bank is too big to fail (jp morgan?)"

He bailed out a few in 1998 so he ought to know but yes that's true.

"warren buffet said derivatives were such a problem he couldnt even figure it out."

I would guess that vast majority of derivatives utilized are of the simple variety but who knows if another LTCM debacle is waiting in the wings.

"gee maybe seizing all that iraqi oil is a good plan after all."

Price of oil dropped a bunch today I believe.

Basically the whole financial system is based on leverage.

[adios]

hey ripdog my man John Maynard Keyenes stated that government should run a deficit when economic times are slow and have a surplus when times are good. Did you ever hear of a former President named Herbert Hoover? His economic policies included fiscal austerity, higher taxes and protective tarrifs. He implemented this policy during an economically slow period after a stock market collapse. Guess what that led too?

[brad]

'Fannie Mae and Freedy Mac securities issued are almost all rated AAA I believe.'

ive read some stuff recently about them so if i come across stuff again ill post it.

it may, however, have been predicated on a downturn in the real estate market.

[andyfox]

Did he say we should disguise the amount of the deficit from the public through questionable accounting practices?

[ripdog]

The last economics course I took was in high school, so I'm not claiming to know my ass from my elbow in this area. Some things seem black and white, though I'm probably thinking too simplisticly. What freaks me out and causes me to not spend my cash is that those in power feel the need to cover up the size of the debt. This leads me to wonder what they consider our economy to be. Actual production aside, how much of our "growing economy" is growing due to the massive credit card debt racked up by our citizens? I heard that the average CC debt is ~$8000. What happens to the economy if we pull our collective heads out of our asses and pay it off? Bad things, I think. I would like to hear your response to andy fox's question too.

[Parmenides]

The fiscal responsibility of the Clinton Administration came about by compromise between The Newt types and Clintonites.

I wish that I was insane. The truth is more crazy than I'll ever be. The election in 2000 was stolen.
The Bush Admin has given the wealthy massive cuts while effectively increasing the tax burden of the lower and middle classes. The S&L's do no longer exist.
Iraq did not attack the USA. The present military campaign has revealed NO weapons of mass destruction. The evidence presented by Bush, Powell and Blair WAS fabricated.They knew it in advance.

Wake up and smell the coffee. We are living under a dictator.

[adios]

What are they exactly i.e. describe the questionable accounting practices? If there are any I'd bet a ton of money that they're not in the exclusive realm of the Republicans /forums/images/icons/smile.gif. Come on Andy you know that there really isn't very much difference between the Republicans and the Democrats on Social Security.

[adios]

Please describe the accounting transactions in some detail that are questionable? It's the only way to have any kind of rational discussion about accounting believe me.

[ripdog]

Read the post again. It's in there. Really, it is.