Below from Congressman Frelinghuysen's weekly e-mail message is a financial summary of BO's programs since the inauguration - just about all of which (& really even more) have been the subject of one or another of our messages over the past five months. I highlight some of the more egregious parts to me in red. Below that is a an understandable explanation sent to me by two different members of our group using an analogy of a proprietor of a bar who has about as much business sense as BO, the Democrat controlled Congress, & any of the rest of us who cannot see what is happening to our country.
---Frelinghuysen E-mail Message---
In the wake of news of another rise in unemployment, President Obama this week spoke passionately about the dangers of massive government spending, budget deficits and unsustainable debt. Unfortunately, the President's actions speak louder than his stirring words. Over the past five months, this Administration has racked up the highest spending in history, run up a deficit four times greater than last year's all time high, and put the U.S. on course to double the national debt in ten years. These facts are not in dispute.
"Stimulus": Promising to save 3.5 million jobs, Speaker Pelosi and the President forced an unpaid-for $787 billion "stimulus" bill through Congress in February. The bill also added an extra $350 billion in interest on new debt. The Administration claimed unemployment would peak below eight percent if Congress passed the President's "stimulus" bill. Since the "stimulus" was passed, America has lost 1.6 million private sector jobs and unemployment is at a 26-year-high of 9.4 percent. Frankly, a great deal of this money has been spent meeting the President's goal of hiring 600,000 new public employees!
Deficits: The President will rack up a deficit of $1.84 trillion this year—four times higher than the all-time-record deficit of $458 billion last year. In May alone the deficit was $190 billion, a record-high for a month. The President claims that by 2013 he will cut the deficit to $512 billion, which would still be higher than last year's record. The President's deficit then shoots back up to $800 billion by 2019, digging deeper into the same hole as before. It is interesting to note that the United Kingdom and other nations may lose their "Triple A" rating due to their financial situation. And, little wonder other countries, particularly China, are worried about our credit-worthiness.
Debt: The President's "stimulus" spending spree, combined with the largest budget in history, will increase the public debt from $8.5 trillion in 2009 to $16 trillion in 2019. In January, CBO estimated the debt would rise to $9.3 trillion in 2019. In five short months President Obama has put us on a path to increase the public debt by $7 trillion over CBO's estimate, and borrow as much public debt in ten years as our entire nation borrowed in 233 years. These facts are mind-boggling and should frighten every American!
Health Spending: President Obama's budget includes nearly $1 trillion in new entitlement health spending—a $634 billion reserve fund as a "down payment" for government controlled coverage, and $330 billion in spending for increases to physician reimbursements. Apparently, the President plans to "save" money on health care by spending $1 trillion.
Budget: The President's budget has increased total spending to $4 trillion in 2009—or 28 percent of Gross Domestic Product—the highest Federal spending as a percentage of GDP since World War II. Even after ten years of the President's budget, the White House predicts a budget of $5.2 trillion, or approximately 25 percent of GDP according to CBO.
Savings?: This week, the President strongly endorsed the budget concept of 'Pay-as-You-Go' or 'PAYGO.' He said, "Congress can only spend a dollar if it saves a dollar elsewhere." The President has tried to show his dedication to budget savings by asking federal agencies to reduce their budgets by about $100 million or roughly .002 percent of the total budget for 2009—a mere drop in an ocean of spending.
---An Understandable Explanation Of The Above---
This explains everything. At last, what we've all been waiting for, an understandable explanation of derivative markets...
Heidi is the proprietor of a bar in Detroit. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around about Heidi's drink now pay later marketing strategy and as a result, increasing numbers of customers flood into Heidi's bar and soon she has the largest sale volume for any bar in Detroit. By providing her customers' freedom from immediate payment demands, Heidi gets no resistance when she substantially increases her prices for wine and beer, the most consumed beverages. Her sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes these customer debts as valuable future asset and increases Heidi's borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral.
At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then traded on security markets worldwide.
Naive investors don't really understand the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, their prices continuously climb, and the securities become the top-selling items for some of the nation's leading brokerage houses who collect enormous fees on their sales, pay extravagant bonuses to their sales force, and who in turn purchase exotic sports cars and multimillion dollar condominiums.
One day, although the bond prices are still climbing, a risk manager at the bank (subsequently fired due to his negativity), decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar.
Heidi demands payment from her alcoholic patrons, but being unemployed they cannot pay back their drinking debts.Therefore, Heidi cannot fulfill her loan obligations and claims bankruptcy.
DRINKBOND and ALKIBOND drop in price by 90%. PUKEBOND performs better, stabilizing in price after dropping by 80 %. The decreased bond asset value destroys the banks liquidity and prevents it from issuing new loans.
The suppliers of Heidi's bar, having granted her generous payment extensions and having invested in the securities are faced with writing off her debt and losing over 80% on her bonds.
Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 50 workers.
The bank and brokerage houses are saved by the Government following dramatic round-the-clock negotiations by leaders from both political parties. The funds required for this bailout are obtained by a tax levied on employed middle-class non-drinkers.
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