Hennessy's View

The mounting government debt–$2.98 trillion in recent bailouts and stimuli alone–is an oppressive anchor around the neck of every American.  Currently, every family of 3 is obliged to pay over $118,000 in the next 30 years.  That’s a house payment with a variable-rate.  In other words, the government has done exactly what helped cause the mess for individuals by borrowing beyond its means at a teaser rate of 0.8 percent.  

That Teaser Rate Will Skyrocket

In order to keep rates low, the Federal Reserve began buying up Treasuries bonds last week.  Sort of like your spouse co-signing a loan for you.  The idea was that the Fed’s purchases would take some of the notes off the street, driving up the price (scarcity) which would reduce the interest rates. 

But it didn’t work.  According to the Wall Street Journal on March 31:

The 30-year Treasury yield immediately moved higher Monday after the Fed bought $2.49 billion in long-dated government bonds, jumping as high as 3.656% from an overnight low 3.519%. The yield was pushed below 3.6% in the afternoon session as worries about U.S. auto makers and banks spurred a haven demand in Treasurys.

This will be an oft-repeated story until the Fed’s spent its Treasuries allowance of $300 billion.  As the economy perks up (which it will for the next 2 weeks to 2 months), bond prices will fall, pushing up the yield.  Those yields will drive up the deficit and the national debt.  That’s the adjustable-rate mortgage effect.  

US Debt Will Skyrocket

One reason that the deficits were so high under Carter and Reagan but low (actually some surplus) after the GOP took the House and Senate in 1995 was interest rates for government borrowing.  Even though Reagan’s rates were cool compare the fever (18+) rates under Carter, they were still much higher at 8 percent under Reagan than they were in the 1990s. 

Today, rates are much, much lower than they were in 1998.  They are lower than they were late in George W. Bush’s second term when, the Democrats tell us, deficit spending was “out of control.”  Even with these all-time low interest rates, Barack Obama and the Democrat Congress have managed to explode the deficit and the national debt.

When rates move up, deficits and debt will move even higher.

Consumers Will Pay

In a sense, the worst thing that can happen to consumers is an economic rebound.  With trillions of dollars of cash poised to hit the streets and trillions of dollars of debt to pay, every up-tick in the economy–GDP, stocks, jobs, anything–will increase prices and rates disproportionately.  

Think of it this way (but ignore my numbers which are for demonstration only).  Suppose you own a stock whose volitility rating is 1.0.  That means if the S&P goes up 2 percent, the stock goes up 2 percent.  When the budget is close to balanced, that’s how debt, rates, and prices respond to a growing economy.  If the GDP grows at the 3 percent, inflation will be around 2 percent.  

But our volitility rating is more like 1.5.  So a 2 percent increase in the broad market will yield a 3 percent increase in your stock.  In terms of inflation, a 3 percent increase in GDP will yield a 4.5 percent price increase.  (The GDP:inflation ratio might be much higher than 1.5 considering the amount of borrowing that’s occured in a very short time.)  So your salary might go up 3 percent, but your cost-of-living will go up 4.5 percent, leaving you worse off than before.  

Unemployment sucks, and I want that rate to fall.  But be realistic.  Someone who lost a $60,000 job and finds a new $60,000 job will not be back where he started.  Even if he managed to survive on savings during the unemployed period, $60,000 will no longer buy what it did before.  That’s the problem with inflation:  it erodes the purchasing power of the dollar.

Stop the Borrowing! Stop It Now!

The road to meaningful recovery requires the same steps as life-saving:

1.  Stop the Bleeding:  stop borrowing

2.  Start the Breathing:  cut taxes to drive investment and cash-based spending

3.  Treat for Shock:  let communities help those who need assistance until the economy lifts their boats

Currently, the administration is doing none of these.  It’s force-feeding anti-coagulants which will increase the bleeding; it’s raising taxes which will deprive the patient of oxygen; and it’s forcing its heavy hand on those in need. Bassackwards.

Popularity: 1% [?]

Obama and his minions want to tell you how much you can make, how much water your toilet can flush, where you can work, what career you may pursue, where your kids can go to school, what your college-age kids can major in, the kind of toilet paper you can use, how many sheets of copy paper you may use in a month, and what you can name your children.  Don’t bother arguing with me–all of these controls are in place in European “democracies” or Canada.  And the left want them here, in your country.  

I’d rather be dead.

Not sure if you’re attending?  Listen to Mark Levin.

Popularity: 1% [?]

I love watching a non-lawyer beat the crap out of a lawyer over the law. Here, the AG of Connecticut demonstrates communist tyranny.  Glenn Beck demonstrates reason.  The AG should lose his law license:  he isn’t even an effective liar. HOT AIR

In a just world, the good people of Connecticut would toss this demagogue AG into the Thames River on the coldest day of the year.

Popularity: 1% [?]

Barack Obama has asserted his dictatorial powers by firing GM CEO Rick Waggoner.  The firing of a company’s chief executive by a US president should send chills down the spine of every American.  This is totalitarianism defined.

While Hennessy’s View has been critical of Waggoner’s leadership at GM, we oppose illegal and unconstitutional dictatorial powers in the hands of any US president. 

Nothing in the Constitution permits a sitting president to direct a private company.  For that matter, the Constitution prohibits the US from owning stock in private companies.

The precedence is remarkable.  Under its newly acquired, unconstitutional powers, the government could buy a minority position in any US company and replace its management team with hand-picked cronies. 

American’s should sign up for a Tax Day Tea Party in their area immediately.  They should also flood local media with their view that the Constitution, not a two-bit dictator, should control government activity.

Popularity: 1% [?]

Rasmussen’s weekly report shows the Tea Party message of limited government and lower taxes is hitting home with voters.

Tax Cuts:  More voters than ever now say tax cuts help the economy.  Over 60 percent now agree with JFK, Reagan, Bush, and the undeniable facts of economic history: cutting taxes increases GDP and personal wealth.  

A separate survey released earlier today found that 66% of voters think the president is likely to raise taxes on those who make less than $250,000 per year. 

Obama Approval:  Obama’s net favorability is down to +4 from + 30 after his inauguration.  Rasmussen notes that Obama’s flurry of exposure–The Tonight Show, 60 Minutes, primetime press conference, townhall–did not increase his favorability at all.  In fact, it’s fallen 2 points since last week.  

Nationalized Banks:  Only 11 percent believe the government can do a better job running banks.

If these trends continue, Obama will be unable to influence key Democrats in Congress, and he will be a 3-year lame duck.  That’s the best the country can hope for.

You can help by spreading the word:  Obama’s plans for a socialist dictatorship are dangerous and un-American.  

Stop him!  Stop him, now!

Popularity: 1% [?]