Budget Buster: Pentagon Unable to Account for Trillions in Spending

How Much US Government Debt Do We Owe?

The United States military budget accounts for over 40% of the world’s annual military expenditures and, at around $700 billion per year, more than 20% of the federal budget. The Federal government wants to curb that spending as part of deficit reduction.

Last week’s deficit deal calls for up to $350 billion in cuts over the next decade on the departments of Defense, State, Homeland Security and Veterans Affairs, among others. And, if the debt “super-committee” fails to reach a deal on $1.2 trillion in budget cuts, it will automatically trigger an additional $500 billion in cuts over the next decade.

Cutting in a bureaucracy as large and convoluted as the Pentagon is no easy task, but Stephen Glain author of State vs. Defense: The Battle to Define America’s Empire says there are three issues at the heart of their spending problem.

Growing obligations: Much like other public sector groups, the Pentagon has growing liabilities coming from pension and medical insurance plans. It’s “very much a microcosm” of the problems facing the country, says Glain. The Pentagon’s liability for civilian employees is currently $60 billion and the “rate of growth is enormous,” says Glain. The figure was $15 billion a decade ago.

Accounting Problems: You think Enron’s accounting was troubled? The Pentagon has very little accountability when it comes to its books. Since first submitting financial accounts in 1991, the Pentagon “has been unable to account for trillions of dollars, well over almost $10 trillion by my own account,” says Glain. Conspiracy theorists suggest this is CIA money being laundered through the Pentagon, a claim Glain has some sympathy for.

Ending the Wars: Ending operations in Iraq and Afghanistan will instantly save the defense department $180 billion per year. According to Joseph Stiglitz the wars have cost the government $3 trillion and counting.

Gold Prices Spike as Recession Worries Spread

NEW YORK — Gold prices soared again Wednesday, closing in on $1,700 an ounce, as worries that governments won’t be able to grow their way out of debt caused a rush into the safe haven asset.

Gold for December delivery rose $21.80 to settle at $1,666.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,675.90 and as low as $1,654.40 while the spot gold price was a bit less enthusiastic adding only $3.50, according to Kitco’s gold index.

Silver prices closed up $1.66 to $41.75 an ounce.

The US Dollar index was down 0.69% at $74.02 while the euro was up 0.75% vs. the dollar.

“The Worst President in My Lifetime”, Howard Davidowitz on Obama

President Obama is having a rough go of things lately. As noted here last week, for the first time in his presidency, more Americans disapprove of Obama (48%) than approve of him (45%), according to the latest WSJ/NBC poll. And 62% say the country is headed in the wrong direction.“The American people are right,” says Howard Davidowitz of Davidowitz & Co. A critic of Obama’s, from the start, Davidowitz refers to him as the “worst” President of his lifetime, even worse than of Jimmy Carter, based on: * — The War in Afghanistan: Davidowitz doesn’t see the point. As far as he can tell, after 7 years, hundreds of billions spent, and thousands of U.S. lives lost, the Afghans still can’t defend against the Taliban. Plus, the Afghan government is stealing billions in aid from the U.S. The WSJ reports, $3 billion in U.S. aid has been loaded onto planes by corrupt officials and flown out of the Kabul airport since 2007. “If they can’t be trained, if they’re stealing all our money, all our soldiers are dying. I don’t understand how any of this is logical,” proclaims Davidowitz. * — Out of Control Spending: Davidowitz thinks Obama has wasted time and taxpayer money pushing ‘Obamacare’ into law at a time when the debt-to-GDP ratio is expected to hit 62% by year’s end. “We’re going broke because of Medicare, Medicaid and everything else. He added another benefit, health-care. Can you explain that to me?” * — BP Oil Spill: “It could destroy the country,” he says. Davidowitz fears the continued loss of hundreds of thousands of barrels of oil per day will drive gas prices higher, further choking and already struggling consumer. Meanwhile, he questions why the President waited 50 days to contact BP executives. Davidowitz recognizes Obama was handed a difficult hand upon entering office, and admits the political system is dysfunctional. Actually, in the many times Davidowitz has appeared on Tech Ticker he’s rarely had a nice thing to say about any politician, regardless of party. What he’d like to see is a return to fiscal responsibility, lacking these days. “Ross Perot did a huge service to this country when he ran because all he talked about was the budget and what was going on and it forced Clinton to deal with it,” Davidowitz says.

Vodpod videos no longer available.

“The Worst President in My Lifetime”, Howard Da…, posted with vodpod

Dude, We’re Screwed! Recession to Get Worse – Unemployment to Rise – Government Spending Debt to Skyrocket!

Slow Growth – Double Dip Recession may be coming – Odds are over 50% – We are in the process of De-Leveraging our Debt and this trend will continue for years. If it happened all at once, we really would have a depression! Unemployment rate will rise 1% per year for the next few years and put pressure on the government to create jobs – spend more money – create higher deficits and debt, and the consumer will pull back and spend less – which is bad for business and people’s jobs! – all very risky for our long term economic growth. Dude! Save Your Money!!

Vodpod videos no longer available.

more about “Our Economic Recovery Was Never Stron…“, posted with vodpod

Fannie Mae and Freddie Mac Money Pit Will Suck 1 trillion Of US Taxpayer Cash

Bloomberg checked in on the state of Fannie Mae and Freddie Mac, the two once-quasi-private mortgage subsidy companies that are now almost wholly owned by taxpayers. Bloomberg found that Fannie and Freddie have already drawn down $145 billion in their unlimited line of taxpayer credit, and that their losses could ultimately be as high as $1 trillion.To put that in context, Fannie and Freddie alone may consume more than the entire TARP Wall Street bailout, which was in the neighborhood of $800 billion. Fannie and Freddie’s taxpayer-money-vaporization will likely dwarf even that of AIG, which most people still consider the most appalling bailout beneficiary of all.Just as bad, Congress isn’t even pretending that it has a plan to stop the losses at Fannie and Freddie. Reducing the Fannie and Freddie losses would mean reducing a huge housing-market subsidy–and that’s the last thing Congress wants in an election year. Also, the Fannie and Freddie losses are functioning as a back-door Wall Street bailout: Fannie and Freddie are using the taxpayer cash to buy mortgages from Wall Street, and they are paying prices so high that they’re taking a loss.It’s certainly tough to decide what SHOULD be done about Fannie and Freddie, because just disbanding them immediately would likely have a negative effect on the housing market and economy.But it doesn’t seem to much to ask to demand that Congress at least come up with a plan.

Vodpod videos no longer available.

more about "fannie and freddie money pit may suck…", posted with vodpod

Delinquent Mortgages Hit Record 15%

• The percentage of loans that were in foreclosure or behind at least one payment hit 15.02%, the most since MBA’s records began in 1972.   Foreclosures will likely stay high in 2010.
• Real estate Web site Zillow.com recently said one in five homeowners were underwater in Q4!!
• 4.5 million foreclosure filings are expected this year, up from 2.8 million in 2009.
• “The bulk of foreclosures are coming in spring and summer, and we do expect home prices to continue falling through the end of this year,” said Celia Chen, director of housing economics at Moody’s Economy.com.

Wave of Debt Payments Facing U.S. Government

WASHINGTON — The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true.

But that happy situation, aided by ultralow interest rates, may not last much longer.

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.

Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.

Peter Schiff, James Bullard and Alan Blinder Argue Over Ben Bernanke

Putting Peter Schiff on a panel with St. Louis Fed President James Bullard and former Fed Vice Chair Alan Blinder is asking for trouble or, at the very least, a heated debate.That’s just what occurred last Sunday night in New York at an event sponsored by Princeton’s Business Today.Predictably, Euro Pacific Capital’s Schiff disagreed with Bullard and Blinder on just about everything, including the government’s role in causing the crisis, and the outlook for the economy and the dollar.But the most contentious moment came toward the end of the evening when a student asked the panel to comment on Ben Bernanke’s 2005 “global savings glut” theory, and what role China’s high saving rate played in the credit bubble.Schiff’s response, “Ben Bernanke has never gotten anything right,” generated some guffaws from the crowd and a sharp retort from Blinder and Bullard, who rose to Bernanke’s defense.

Vodpod videos no longer available.

more about "Peter Schiff, James Bullard and Alan …", posted with vodpod

Why Our Massive Debt Will Kill Us in the End

Now that the worst of the recession is over, Americans are waking up to the fact that we’re borrowing nearly $1.5 trillion per year. Instinctively, this worries us.But why?What’s really so bad about piling on debt in excess of 10% of GDP every year?Japan has been borrowing through the nose for years, and Japan, well… okay, maybe Japan’s not a good example. Japan’s economy has been in the tank for two decades.Actually, Japan’s a great example, says John Mauldin of Millennium Wave Advisors. What’s happened in Japan in the past 20 years is that government borrowing has largely replaced private sector borrowing: The total debt hasn’t risen, but the government’s percentage of it has soared.Unlike private-sector borrowing, which is (usually) productive, government borrowing doesn’t stimulate growth, Mauldin says. This may be at least part of what’s ailing Japan. And as long as we rely on the government to borrow and spend for us, the same thing could happen here. Our economy could become dominated by a huge, inefficient bureaucracy instead of lean, competitive private-sector companies.And that’s the good outcome. The bad outcome is that China and other countries finally get sick of lending us money at rock-bottom interest rates and start demanding real compensation. If that happens, interest rates could soar, stopping the economy in its tracks.

Vodpod videos no longer available.

more about "Why Our Massive Debt Will Kill Us in …", posted with vodpod

How Long Can We Print Money And Increase Our Debt

Stocks and commodities are on the rise today as the dollar falls. It’s nothing new or surprising.What is newsworthy is a report from the British newspaper The Independent claiming the dollar’s days might be numbered in the oil trading pits.The story says “secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.” The details on how and what would replace the dollar, according to the report, are still in the works.Sources aren’t named and Saudi officials, among others, are quickly denied the veracity of the report. However, it appears some investors are buying the story based on today’s move in gold prices.As Henry and Aaron discuss in this clip, questioning the U.S. dollar as the global reserve currency makes sense. How long can we print money and increase our debt before other global markets take action? And, how will the Fed manage its exit strategy without causing hyper-inflation?

Vodpod videos no longer available.

more about "How Long Can We Print Money And Incre…", posted with vodpod