Democrats and Republicans Playing Chicken With the American Economy: How Polarized Bipartisanship In Congress Will Decimate Critical Concerns (Like Issuing Social Security Checks and Staving Off A Double Dip Recession)

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FDR on Social Security

Social Security: The Primary Financial Safety Net For Retirees

American seniors will be the first casualties of the debt limit; followed sequentially by Wall Street, the domestic economy, and finally the international economy.  President Obama and Senator Henry Reid’s ultimatum to the stubborn Republicans is that unless the public debt ceiling is raised the country will be forced to halt transfer of social security checks.  Both sides have agreed to reduce the increasing debt, however the specific amount is debated, fluctuating in the trillions.  The time for procrastination is running out.  If the August 2, 2011 deadline is not met the American dollar will become worthless as credit rating agencies, like Moody’s, will no longer support the Federal Reserve.  Not to fear monger, but this a potentially catastrophic financial disaster that stems from several men being unable to agree on a set of numbers.

What is the Democrats Positions?

The Democrats have united around Obama and the Democrats Congress Leaders.  Their unified polices have forwarded relatively generous offers to the Republicans.  Talks have been breaking down at this point, as they are repeatedly snubbed.  Their offers have been denied, there fair deals do not meet the requisites of the Republicans.  They are collectively determined to stay strong and stay the course; their economics work and will sustain the country and they know that their generous deals that they have submitted are feasible.  They just have to get the Republicans to agree.

What is the Republicans Position?

Despite the necessity for tax hikes Republicans uniformly oppose any new taxes.  This is where coordination break down, various factions of the GOP are each concocting their increasing implausible schemes to propose on the Senate floor.  They cannot create a coalition policy that might be taken seriously.

The crisis has become a ammo for the campaigns of the Republican candidates.  Romney pleads for cutting and capping of federal spending. Bachmann has accused Obama of holding the government hostage to continue the government’s spending spree.  Just like the senators, there specifics disagree while their cause does not.

This will result in their demands being painfully denied.

What is the Probable Resolution?

The Republicans  will cave at the last second, giving away a deal that is much less favorable towards them than what they originally rejected.  Their “non new revenue” rhetoric has shown negatively in the public’s eye.  Polls heavily favor the Democrats, because they have appear reasonable and open to debate while the republicans have been demanding ridiculous cuts that will do more harm than good.  Without public backing or good economics their situation is unsustainable and they will have to cave.

In the, unthinkable, event that Republican leaders carry out this game of chicken till it finality,  the result will be their own self-destruction.  There will be a the initiation of the second dip in a double dip recession on August 2, 2011.  The investors on Wall Street will panic as their traditional stable government mishandled the largest debt in the world and endangers national security.  Social Security checks will stop coming, granny will start starving.  Millions of Section 8 tenants will be tossed out in the streets until the government checks come.  Fannie Mae and Freddie Mac, with their millions of mortgages, shut down.   Protests will be held, riots will form.  We will all remember the event with a few days of anarchy until the Republican leadership can recover what little sense they have left.  Unless, of course, their million dollar mansions are burned down with them in it.

What is Public Debt and How Has it Accumulated?

Whenever a spending deficit in the government occurs, such as when finances for federal programs exceeds tax revenue, Congress covers the excess with bonds; these bonds are the source of public debt.  It is not in the best interests of governments to issue bonds unless pressed because every bond, even with inflation, pays off more money than it takes to buy one.  The government loses money on every bond.

Why Would the Government Have Any Public Debt?

Historically, only when clear and present threats to national security emerge are bonds issued.  These finance the war effort and allow the nation to persist.  This is fine and encouraged.  Issues arise first when public debt is unnecessarily accumulated and the danger of the national debt ceiling.  The debt ceiling is the amount set by Congress that can be withdrawn; defaulting or going over the national debt is unthinkable.  The consequences would freeze international investing, because nobody will be able to rely on the Federal Reserve.

Why is the Debt Hitting the Debt Ceiling?

Unnecessarily accumulation by fiscally inept leaders.  Our last president, George Bush exuberantly quarterbacked  two of the most long and expensive wars of our time while engaging in risky self promoting publicity stunts, such as the Bush Tax Cuts.  These terrible money hoarding policies dealt stole trillions of dollars from the majority of the American tax payers, funneling it to the richest Americans.  Collectively, these policies led us down the wrong path, creation short-term economic gains at great expense for those who suffer in the 2008 recession.  Financially, this is major defeat, comparable to Battle of Waterloo or the baseball curse that halts the Cubs from ever winning a World Series.  Politically, it bought him his second term.

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Double Dip Rescission Inbound: Dow Falls Below 12,000 and is Declining

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The Dow fell below the 12,000 as nervous investors continued to sell off their stocks. This is the six consecutive day of losses in the stock market, destroying tentative gains made since the recession. The only Fortune 500 companies who successfully made gains were AT&T and Proctor and Gamble. All the other blue chip companies suffered hard losses; the worst was Travelers losing falling 135 points and losing 1.1% of their stock value. Motor company Toyota announced a loss of 1.6 billion in profits, due to the earthquake-tsunami double punch that has crippled the Japanese economy. The S&P and the NASDAQ Composite both fell by roughly 1.1% throughout the course of the day, contributing to their sixth consecutive week of losses. Safer investments, such as US back bonds, surged; driving down the interest rate by 0.04%. The stock market is in the opening stages of a second massive sell off, which will damage the international economy even more than the latest recession.

Why is the Double Dip Recession Happening?

The United States economy needs to get its act together before investors lose their nerve completely and sell everything. The international socioeconomic relies on trust and confidence. As long as everyone can pay of their debts people will gladly invest in any number of derivatives and stocks because it is a profitable thing to do. However, when massive blows to the stock market hammer that confidence consumers quickly stop buying stock, driving down the price. This is bad for the economy because companies rely on selling stocks to the market and their employees to fund their operations. Without the core faith in the stock market investments in new companies grind to a halt. This prevents new companies from entering the market, which further inhibits the economy.

It is a dangerous spiral that quickly stagnates the economy. New businesses cannot form to enter the market and existing companies cannot get the necessary funds to meet market demands. The circular movement of money halts, starving consumers and producers alike. This is the fear of what will happen should this double dip recession ensue; the only issue is that faith in the stock market and investments will be even harder to retrieve because of the recent 2008 recession. The economy could stagnate near indefinitely. One major aspect of this relates to economics, fiat money. The world relies on fluctuating currencies that are valued only compared to each other, they have no value themselves. This is good because it allows for large amounts of money to be utilized.

How Could This Hurt the Economy?

This is potentially disastrous because the money is prone to rapidly inflate and deflate, making counties rich one day and comparatively broke the next. Currencies are traded throughout the international economy, if the American dollar falls do to the currency trading markets driving it down Americans will be hard pressed. They will not be able to pay the mortgage, send their kids to college, or even by grocers if inflation rises too high too quickly. The unstable stock market could toss America into a recession instantly should there be a massive selloff. There is also the threat of a slow transition to a recession; as the American economy is strangled by the reduced investments they produce even less and then there are even fewer investments. This vicious circle is compounded ten times over by the banks leverage working against them, for every dollar they lose in their reserves they lose nine dollars they could invest. The double dip recession would attack America on two fronts, bringing misery to all.

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