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Bilifuduo (96.46)

No, The U.S. Is Not In A Fiscal Crisis



February 04, 2013 – Comments (16)

Check out my guest post on Pyschology Today's Cutting Edge Leadership column: 



16 Comments – Post Your Own

#1) On February 04, 2013 at 10:45 PM, binve (< 20) wrote:

Good article!

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#2) On February 05, 2013 at 12:11 AM, awallejr (28.75) wrote:

Well I do think Congress does have a spending problem.  The only reason why we have a sequestration issue is because Congress couldn't ever agree anyway.  I say let it happen. It is the only way to force cuts.  And the "hit" is not that substantial anyway.


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#3) On February 05, 2013 at 1:56 PM, CMFbbmaven (100.00) wrote:

Wonderful article Bilifuduo.  I admire your ability to think clearly and express those thoughts eloquently. 

My wife sent me your article this morning and I tracked you down on SA and posted the link to my blog.  I should have just looked around CAPS and linked to yours.



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#4) On February 05, 2013 at 2:13 PM, edwjm (99.90) wrote:

Not yet, anyway.  It will be if certain politicians get their way, but I doubt that they will.  Gridlock isn't totally bad.

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#5) On February 05, 2013 at 3:29 PM, BigFatBEAR (28.42) wrote:

Great article, from a fellow econ junky and proud Keynesian.

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#6) On February 05, 2013 at 3:51 PM, GNUBEE (< 20) wrote:

Rec! +1

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#7) On February 05, 2013 at 4:49 PM, ChrisGraley (28.61) wrote:

My aunt Bertha isn't fat either. She is big boned.

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#8) On February 05, 2013 at 6:06 PM, constructive (99.97) wrote:

A slight correction, Greece has already defaulted twice according to the ratings agencies and the ISDA. They had an involuntary debt swap in February and a voluntary buyback in December.

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#9) On February 05, 2013 at 10:58 PM, zzlangerhans (99.75) wrote:

Hate to put myself out there in subjects I don't know much about but all the declamations that there is no debt problem today sound so much like all the arguments that there was no mortgage problem in 2006 (i'm sure many people still believe there wasn't).

The underlying concept seems to be that we can keep borrowing/printing money forever and spending it on ourselves because the US private sector and other countries will always bet on US economic growth even when that is fueled by borrowed/printed money. Then a bunch of statistics get pulled out and we get compared to other countries like Japan (Japan?).

I get immediately lost in economics which is why I only trade the stocks of companies that lose money and are weakly correlated with economic issues. But please understand that after 2005, my economically ignorant demographic has decided to rely on common sense and what seems obvious on the surface rather than deferring to pundits. I'm still going to sit this rally out for now. 

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#10) On February 05, 2013 at 11:34 PM, outoffocus (23.89) wrote:

zz has spoken! =D

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#11) On February 05, 2013 at 11:44 PM, NOTvuffett (< 20) wrote:

psychology today article on an investment website??? that is just nuts, lol.


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#12) On February 10, 2013 at 4:54 PM, Bilifuduo (96.46) wrote:

Thanks for the feedback guys!

 And noted, MegaShort. Meant to say that "Heck, even Greece's defaults weren't as catastrophic as thought." 

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#13) On February 10, 2013 at 10:00 PM, awallejr (28.75) wrote:

The underlying concept seems to be that we can keep borrowing/printing money forever and spending it on ourselves

Basically yes.  The Treasury prints the money, The Fed buys the US Tbills with the printed money. As the Tbills are paid off the Fed gives the cash back to the Treasury and they apply it to the debt.  And then rinse repeat forever as we keep raising the debt level. 

We don't need other countries.

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#14) On March 01, 2013 at 2:47 PM, dnblack (77.94) wrote:

Very interesting article.  I am continuously suprised by how closely psychology and macroeconomics are tied together. I don't think you will find many people who agree with the "we don't need other countries" argument.  Like zz, my understanding of such things is more common sense than academic.  However, I think it is pretty clear that America's run as the reserve currency has definitely helped sustain our economy in times of global hardship (we are still the best port in a storm).

As with most topics the debt "crisis" issue is not very black and white.  Politicians and the media are of course blowing it out of proportion, but that doesn't mean there aren't underlying problems that need to be addressed.  The whole system really is just a complicated balance sheet, and the liabilities can not outweight the assets indefinitely.

Here is a graph of US Federal Deficit as a % of GDP from 1930 to the end of 2011 (  As you can see we are near 2 standard deviations off the mean.

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#15) On March 01, 2013 at 7:16 PM, awallejr (28.75) wrote:

As I said in #2 above, in the end this is more about the failure of Congress to ever agree.  Sequestration is the result of that.  There is plenty of fat to more than cover the reductions.  And Congress always has the power to do plenty spending increase resolutions so this is really a nonsense game in the end.  The market knows this. 

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#16) On March 19, 2013 at 10:31 PM, MintCoin (95.63) wrote:

Such a genuinely deluded point of view.  This “recovery” is contrived, the genuinely robust valuations are built on quicksand and will be consumed by it in due course.

ALL of this recovery has been manufactured with dollars puked from a GovCo press in astronomical sums -- with significant extension to this already parabolic curve on the way.  Of course the market/real estate/etc are up and interest rates remain almost nil!

If only the party could last.  Without exception spending addictions of this nature (ie. the infinite printing press, radically expanding the money supply 3x during this administration, ect) are a heinous catch 22.  The more leverage used the more disastrous the consequences.  If most of the rest of the developed world didn’t have the same addiction the US dollar/debt/RE/etc bubbles would very likely already have gone POP.

But grab a glass CAPS fans, this shindig ain’t done quite yet.  More creative and extreme flavors of QE are on the way.  The powers that be no longer have a choice, they are hell-bent on using every weapon in the armory until all are out of ammo.  

Consider our situation:  Those we continue to elect cannot muster the political will to even submit a budget -- much less balance a budget -- much less pay down what both sides say will be at least 20+ TRILLION owed -- much less pay ANYTHING toward the 100+ TRILLION in unfunded entitlements.  And the POTUS along with his goat rodeo would have us believe slowing this spending orgy down by less than 100 billion will cripple the economy. 

Readers with even a few bits of gray matter rubbing on each other should take extreme exception.  Gridlock used to be good (I used to pull for it) but that was before spending got completely out of control.  Now gridlock is powerful poison.

This being the case common sense should kick in when one hears “More spending is GOOD!”.  If it were true then any economic superpower could simply spend their way out of recession/depression.  Even if common sense is on holiday almost all should realize that history clearly proves this nonsense disastrous on so many levels it boggles the mind.  

Very contrary to what others here take as fact the US economy is not invincible.  One way or another (crash or severe protracted decline) this idiotic spending orgy will end.  Gargantuan sums to buy our own debt, shore up banks & bailout god knows who all else that would fail without it, etc.  Could be tomorrow, could be a year or three, thing to understand is we are nearing the inflection point. 

There are already much better risk/reward vehicles to be had, which means the USA is being propped up primarily by investor inertia/ignorance.  But the herd mentality will change, it will turn once a few in the lead realize our political system is broken and our leadership is no longer worthy of their confidence (and thus their $$).  And then all the oh-so-fragile plates those extremely overworked printing presses have kept spinning will shatter.  

Those who have simply decided to ignore their common sense think this inconceivable, I choose to acknowledge fact and think it inevitable.

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