Lew’s Illusions

Remember when we were told that the Year 2000 bug was going to make our computers implode? Our coffee machines were supposed to stop working as the clock struck midnight on December 31st 1999 and the people partied to celebrate the new millennium. My coffee machine doesn’t even have a clock on it. But, we were all told to rush out and buy a new one. Good marketing from the guys at IBM that started it all back in 1971, when Bob Bemer first issued a warning that the two-digit date format would implode on us all. Banks, hospitals, utility companies were all supposed to come to a grinding halt. What happened as the last hints of Auld Lang Syne fizzled out like champagne that had gone flat on us? Nothing. Absolutely nothing, except being a few hundred dollars lighter in the back pocket because we were foolish enough to have paid out for the replacement hardware. Jack Lew will be doing the same to us.

US Treasury Secretary Jack Lew has warned Congress today that the US will be signing its own version of Auld Lang Syne on October 17th 2013, when there won’t be any money left under President Obama’s mattress.  Ok, so we can start counting down and setting our synchronized timers (now that our PCs have gotten through the Y2K tomfoolery business) to count in the moment when the USA goes officially bankrupt.

But Jack Lew’s having a bout of illusions, erroneous perceptions of reality, deceived by false beliefs just as much as the big bug that was going to kill us off in a science-fiction fantasy, closing down our computers because they went haywire.

Jack Lew knows only full too well that the US government is not going to go bankrupt and anything that he might be telling Congress in the letter he has written is similar to what Bremer once told the world back in the 1970s. The computers didn’t shut down and nor will the US government. But, the show is good to watch and much more entertaining than anything you can catch on the television these days. Lew is in the starring role of the scaremongering Treasurer that wants to frighten the people. Maybe they will make a donation if they feel that sorry for the country.

October 17th is supposedly the day when the US only has $30 billion in cash in the stash behind the bedside cabinet. That will hardly go very far. Why doesn’t the Federal Reserve just print double the loose money that they have been doing so well at? Does Jack Lew know that the Federal Reserve has been printing the greenbacks?

Lew said in a letter to Congress: “If the government should ultimately become unable to pay all of its bills, the results could be catastrophic”. Firstly the whole country is indebted and has been borrowing like mad, so there won’t be any heartfelt sympathy from the people. Secondly, they knew it was coming and have done for years so they could have slowed down and eased up on the Quantitative Easing way back.

Washington needs to cut the spending, but it won't.

Washington needs to cut the spending, but it won't.

The Republican House Representative spokesman for Speaker John Boehner stated that Jack Lew’s comments were: “another reminder that we need to work together soon on a bill that raises the debt limit and deals with causes of the debt by cutting Washington spending and increasing economic growth”. Wasn’t that what was said the last time that the debt ceiling was raised. We really do need to cut Washington’s spending. But, we never see it getting done. How many reminders are needed before we just throw in the cards and leave the table to drown our sorrows in the bar? Whatever happens in Washington stays in Washington. That’s a new slogan for us all!

President Obama has stated that he will not sit down and negotiate over the debt ceiling being raised with the Republicans, nor will he negotiate over the Treasury’s borrowing possibilities. It’s always good to see negotiating win-win techniques being used in real-life situations. You come to understand what you learnt about giving and getting to have been just text-book drivel that wasn’t going to get out into practice.

Lew stated that there would only be trouble if there were a great debate about the debt limit yet again in repeat of what happened in 2011 when the US got a downgrade in their credit rating. But, why should the opposition have to pay for the increased debt limit in the US by the present government? Let them default on payment and the people will suffer however, not the government.

But Lew was wrong and right at the same time when he made that statement. If the government should default on its bills, the results could well be catastrophic for the US. The government is of little worry. They are just the pawns in the process that will be replaced with someone else that will have to deal with the problem. But, it’s not going to happen, it’s here and now. It’s happening. The situation is already catastrophic; we don’t have to wait until October 17th. When a government defaults on paying into federal workers’ pension funds then it sounds as if the catastrophe has already knocked on the door Mr. Lew. That’s the only way the administration in the US has managed to get by since May by taking those temporary measures to skimp and scrape.

I would advise President Obama and Treasury Secretary Lew to pop down and see what they might be able to pawn at Uncle’s. 

 

 

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tothetick

Professional team of writers/analysts analyzing the financial markets.

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