Bailout Funds Low, People Outraged Over Government Spending
Only $135 billion of the $700 billion bank bailout funds is left, U.S. Treasury Secretary Timothy Geithner said Sunday. He would not rule out the possibility of asking for more bailout money before the year is out.
Meanwhile, the world is watching. China in particular, which owns the largest portion of the U.S. debt, has already expressed concern — through its premier — about the U.S. spending spree led by President Barack Obama. And as the U.S.’s deficit climbs to record levels, 13.1% of GDP this year, some Americans are getting nervous. The number of tax tea parties, peaceful demonstrations against the massive bailout and stimulus packages, is rapidly rising as the specter of higher taxes across all tax brackets looms.
Many Americans are asking who will pay for all the spending being done in Washington; the answer seems to lie in higher taxes for everyone. How else will our government pay for the nearly $3.6 trillion budget currently before Congress — and pay down the huge U.S. deficit?
Some investors and economists are asking the tough question: who will buy our debt, our Treasury notes, if the U.S. continues to rack up a huge deficit? Our 5 year Treasuries are currently paying a very low rate of return, yielding 1.8%. Well, as U.S. debt becomes riskier, we will have to offer a higher interest rate to entice buyers — which will increase our deficit. We may be seeing the beginning of that risk. March 25 there was a Treasury market surprise in which there was low demand for the 5 year Treasuries offered.
Spending is easy to do when it’s not your money. Our Congressmen and President need to hear tough questions from us; after all, they’re spending our taxpayer money and mortgaging our future. What are the odds we’ll see another bailout request from Mr. Geithner before the end of the year?
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We’d all be kidding ourselves if we said BO’s minion: Tim “Tax Cheat” Geithner won’t keep pushing BO’s Socialist agenda! Sadly, “TC” will ask for more and more $$$. Geithner and BO don’t care about the $$$;its all about pushing their USSA agenda to the far left! They have to be stopped and “We the People”, at the ballot box, are going to be the only ones that can stop the “BO” United Socialist States of America Express”!
I wish I knew enough about macroeconomics. Inflation is a big concern, sure, but I keep reading about deflation. What would be the effect on our ability to pay our creditors in a deflationary cycle? Anyone know?
Deflation can have a number of effects, depending upon which economic theory you are using. Viewed as the opposite of hyperinflation, it taxes borrowers in favor of lenders/savers. On the other side, Hyperinflation benefits those who are borrowing because the debt that they owe becomes worth less and easier to repay.
Deflation can also be viewed as very bad because consumers will delay purchasing under the assumption that goods will be cheaper in the future. This could in turn negatively impact the economy, much like what happened during the Great Depression.
The problem is that the easy monetary policy of the Fed precipitated the current situation in which consumers became overly debt-laden. Once debt-levels became too difficult to service through income, we had defaults. The concern about deflation seems to me more of a bogey man. The Fed is printing $$ money like nobody’s business to fight ‘deflation,’ which is extremely convenient given how much the government is borrowing (remember, hyperinflation benefits borrowers). The government would never allow deflation because deflation would work against it, given how much debt we issue. In deflationary times, a rational investor would want to save, not borrow.