USA Going to Get Downgraded-Karl Denninger
By Greg Hunter’s USAWatchdog.com
Financial analyst Karl Denninger says, “If you keep raising the debt ceiling willy nilly, you’re going to get downgraded.” Denninger thinks the latest talks in Washington will only kick the fiscal can down the road. He says, “The truth of what we have to do is still politically impossible.” Denninger contends, “All you are seeing now is the tap dance around the fact we have to accept a 7, 8 maybe 10 to 15% fiscal contraction in GDP in order to come back into balance.” Denninger says the sooner you take the hit, the better it will be because “the damage you take today is always less than the damage you will take if you kick the can and wait until tomorrow.” Don’t expect politicians to do the right thing–yet. Denninger says, “There is no stomach to put their jobs on the line . . . We need statesmen who will say I will get fired over this. . . . That’s the price the country has to pay.” Join Greg Hunter as he goes One-on-One with Karl Denninger of Market-Ticker.org.
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About the Author
Greg Hunter
Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.
Karl Denninger – is just extraordinary. This guy has his mind around so much, and so far: yet he is down-to-earth and lays things out clearly. Someone THAT smart you would think planets and atoms revolve around his head -but he really simplifies a large picture plainly. By the way, the “math” problem is actually a “moral” problem with mathematical criteria. Good interview to you both.
Thank you Charles for the kind words and comment.
Greg
A macro view. http://soundcloud.com/lsepodcasts/the-rise-and-decline-of-the
Good morning Greg
I was just wondering if for a moment we could drop the conservative/liberal (divide and conquer) labels long enough to define the real problems?
http://www.youtube.com/watch?v=jL3qdeKOxVc
Like the alcoholic who thinks a better job, wife or more money will fix them, we can’t begin to fix anything until we see the real problem. Most of my adult life I allowed myself to be labeled a Ronald Reagan Conservative until a few years back realizing it is more important to be a member of the human race. I’m certainly not a Liberal either, just a guy who believes nothing will really change until we know who we are and what we have allowed to happen to us. Still not sure about the solutions but at least the problem is much clearer. It’s a start. Kicking the same old can down the road accomplishes nothing.
Either what Peter Joseph discusses is truer than what we are lead to believe o0r it’s not.
Thank you Jim for the comment and the content.
Greg
Jim H: I listened to the 1:45 min teaching you posted. I learned a lot. In conclusion Peters ideas overlook the human factor of greed, control, and the power of an oligarchy. The teaching was well worth the time of listening. A man without a dream is like a tree without roots. thanks for the link. jc davis
IF we are to believe the numbers… and that is a very large IF in my humble opinion, the Debt to GDP being accumulated is far greater than the 7% to 15% Fiscal spending reduction presented here.
The Annual Budget Deficit is Factually well north of $5 Trillion during 2012 and as John Williams has suggested it is as high as $7 Trillion – this changes the math substantially to 40% to 50%.
“Taking the hit today” appears to be a non-starter for our “Statesmen” as it is an untenable chasm politically or otherwise. I have never voted and stopped pretending Washington DC did anything much but accept payment for favor some 37 years ago. It is a brilliant illusion, but ask yourself and be honest, what has changed… has prosperity gained a foothold and expanded or has growth at increasing cost in Debt been our path.
The answer is simple and direct.
There is really no limit to which “Credit” can be expanded to meet obligations, it is axiomatic the resulting “Crack Up Boom” will be the grandest Bubble ever witnessed and at some point on the curve… our currency and ability to create credit will be ruinous.
The complacency is frankly indescribable as it is disturbing.
Mr. Denninger understates the scope and scale of this issue in such dramatic fashion as to render his solution far less probable as well as possible.
There has been and appears to remain no real solution within the current system(s), simply more of the same pretense, illusion and disdain with little to no real action in addressing what is actually wrong.
By many accounts, it is far too late as we crossed the Rubicon over 40 years ago.
The Crack Up Boom meanders along until something breaks and when it does… it will be beyond comprehension for most, and that is probably for the best at this point.
Many “Unspeakable” events appear closer with each passing day.
I tend to “react” in terms of things my family will need… the rest appears to be noise in the grand illusion.
The Latvian “miracle” must be looked at through a wider lens. Latvia had about 2.7 million people living within their borders at the fall of the Soviet Union. Since that time, the population has dwindled to an “official” figure of 2.08 million. I say “official” because the Latvian government allegedly includes citizens that had emigrated, but not taken up citizenship, in the EU. Unofficial estimates of the remaining population are in the 1.8 to 1.9 million range.
What happens in the future when you are missing a large segment of your demographic population? These young people have said they will not return, and are being assimilated into the larger EU community. These are hard working, well educated in the maths and sciences, multi-lingual youth.
We have seen in America and Japan the problems with an aging population. It may be kicking the can down the road in a different manner.
Hey Greg,
Its not only the elected officials that dont want to lose their power and their job. Its the masses of people who have been taught that government is the answer to all of their problems. What do you do with the millions of Americans who think it’s the job of government to feed and house them? Getting back to a smaller government means that people will need to care for themselves and many have lost that ability and would turn to violence if their government money was stopped or reduced. I dont see a way that this ends well for our nation.
Stan,
It doesn’t and there will me many families wiped out for a generation or two (financially speaking.)
Greg
Gregg: It’s intersting that Karl says that we need statesmen to cure our problems. If that’s the case, then we are terminal. Instead of statesmen we have exceptionaly corrupt and self-serving pawns doing the bidding of those that are incrementally destroying this once great country for their own economic benefit.
Amen AndyB. We have bag-men not statesmen!!
Greg
Do we not recall that the ratings agencies have always misrepresented
valuations of any and all securities held by the Rothschild
conglomerate? The notion that any ratings agency reflects true value,
or is the voice of reason , is laughable… of course they’ll continue to lie.
The one thing that would bring this crashing to the ground is precious metals appreciation…
Paper gold and silver, combined with HFT equity supression, continue
supporting the green asswipe…
when the supression fails, we’ll wake up to a planet of wall to wall
war.The -90 IQ American idiot is about to get a Phd in the college of
hard knocks.
Matslinger,
love this line in your comment: “The -90 IQ American idiot is about to get a Phd in the college of
hard knocks.” So very true and most will never know what hit them until it’s too late. Thanks for adding your perspective.
Greg
Greg, another great plain english interview. We know the problems and we know some of the anwers but taking the medicines necessary to change directions is not likeable. Taking Codliver oil has never been like drinking a Coke.
Thank you LGC, Tony and Shawn for weighing in here. All good comments and points made.
Greg
Good interview. Alas, I think it will be lost of on most Americans. My personal view is that most Americans simply refuse to accept you can’t spend more than you make forever. We’ve been doing this now for what? 40 years? Anyone old enough to have been a working adult last time we were responsible is now on Social Security. Anyone younger has never lived in a system where we dont borrow. So I think nobody wants to rock the boat.
Eventually, something will break. Question is just when or why.
Central banks have the power to destroy what remains of the economy at any point in time.
They have demonstrated not only their ability, but willingness to use their power.
The Greek Debt Crisis is an excellent example, as was/is Argentina – the Banking Cartel used their absolute power time and again.
If our FED Chair were to suggest the Republicans accept an unlimited debt ceiling… they would obey.
No politician, however principled, would want to have the finger pointed at them for having caused an economic/financial collapse. It is simply untenable to both sides of the same coin of favor.
Under the present paradigm, the Global Banking Cartel can/will selectively initiate collapse, blame the US Congress for failure to act in order to prevent said collapse… blaming Congress which has a 6% approval rating… could not be easier.
It is difficult to imagine the “Crack Up Boom” continuing unabated throughout 2013 as is presently being suggested in mainstream media. It can certainly get a great deal sillier as this truly is an “All or Nothing” gambit at this point.
Yet there are “things” the Federal Reserve and Central Banks around the Globe cannot control, although they may attempt to shape sentiment, they cannot create energy, grains, water and other vital resources out of thin air. Certainly they can manipulate their prices via the futures markets, but eventually the emperor has no clothes and people end up walking away from the King and the systems which lay broken, busted and non-functioning in the destructive wake.
All of this is to be expected of a nation deep in debt, history has shown time and again how this plays out, a rhyme here, a rhyme there… as out nature or anthropology never truly changes.
The banks absolutely own us all and they will elicit their power to extract any remaining wealth by any means necessary. This is ongoing, all one needs to do is look around the Globe and witness what has transpired.
Talk of “fixing” or “making adjustments” to this system only further serves to enslave us to the Debt Masters.
Thank You Karl and Greg, I don’t see how we can avoid default. The numbers point to it no matter how high we raise taxes.
Can we reduce government spending since it makes up 50 percent of GDP?
Greg, meaningful cuts … LMAO, I’ll believe it when I see it.
The FED has gone from “bubble economics” to “can kick’in” economics….
Mitch,
We could but it would be very painful so looks like we crash instead. It is only a question of when.
Greg
Greg,
Read a good article by Jonah Goldberg, the conservative writer, on why the Republican movement has loss the support of the people. It is a salutary lesson on why the movement needs to move away from the unyielding voices of the hard right and embrace the concerns of the greater majority. At a time when the country needs a strong, middle ground Republican we have instead a party dominated by the narrow interests of a few.
A pertinent quote from http://www.nationalreview.com/articles/337755/myth-impure-gop-jonah-goldberg
“The movement has an unhealthy share of hucksters eager to make money from stirring rage, paranoia, and an ill-defined sense of betrayal with little concern for the real political success that can come only with persuading the unconverted.”
Keep up the good work in calling out the financial system.
RB
Balance can be achieved without the economy being the sacrificial lamb. Raise the trade value of the currency but without defaulting to the concept that the currency must be the USD. Gold is a currency too and now that gold trades in real-time, there is nothing to stop a book balancing by way of a higher gold price. Did you know that when debt-free gold circulates in order to add much needed economic support (liquidity) , it does so without the addition of new debt? That allows older debt (dollars) to find the hands that need it to service existing debt and have it removed. This is how modern day free floating real-time gold-as-money helps to purge fiat based debt right out of circulation. Gresham’s Law, as it has HISTORICALLY been applied to bullion based money, was always applied in the context that gold had fixed trading value, not free floating value as it does today. Remonetising bullion was all about setting the trade value free to rise according to monetary market demand. The end of Bretton Woods was a watershed event in the remonetizing of bullion in Real-Time. You cannot pour new wine into old wineskins.
therooster: If Gold was raised to the value of the dollar would there be anyone to buy it other then a few elite that have trillions to dispose of at will.?
I don’t understand.
Greg can you help me understand what Therooster is saying, and would it work?
JC Davis,
I think he’s talking about hyperinflation but let’s let “therooster” answer for himself.
Greg
Thanks Greg . Please comment when I indicate the “hindsighted obvious”, after this post. Gold is money and always has been regardless of legal tender BS. Gold needs no such crutch to give it value. It’s a market currency for market applications.
Having said this, there’s been a historical problem with gold-as-money in the past. The problem was not the bullion but the underlying trade value & distribution system that goes directly to the concept of liquidity. We need economic liquidity but if we rely completely on debt, we are going to run into a brick wall at some point…. maybe soon
Now that gold trades in real-time (and can rise/float in value), we can support increasing amounts of needed liquidity without adding any new debt. Beyond that, bullion (in circulation) can support liquidity to the point of having existing fiat based debt-dollars purged from circulation on the basis that the fiat is freed up to find the indebted hands that need it to have the debt retired and go back to nothing, from whence it came. In goes the bullion (circulation) , out goes the debt. Keep in mind that this reversal of Gresham’s Law, as applicable to historical gold money systems of the past, was applicable only because gold has traditionally had FIXED trade values, not floating values as it does today. Real-time gold-as-money combined the debt-free store of value that is classic to gold, but it also shows the features and benefits of any instantly liquid currency of the 21st century. You cannot pour new wine into old wineskins …. so my friend tells me.
Therooster,
Thank you for your involvement in this site!
Greg
I get it now.http://en.wikipedia.org/wiki/Gresham%27s_law
Great point Rooster ! Wow ! We all seem to fall into the trap that debt is our only means of liquidity.
There is a great deal of information you provide to discern and understand the true scope and scale of the issues we face, thank you again Greg for making this information available to the public.
Thank you JRMFL for all your commenta today.
Greg
Hi Greg!
All things are moving into place very quickly now. Japan will be the first big player over the debt/currency cliff with with war as a back drop. Then the rest of the world will follw with sovereign debt in hand all to the table to bargain away our freedoms to the system. Seven regions melding into one global beast.
In CHRIST! Rob
There is a solution for our deficit and debt problem. I do not know what it is but there are solutions available.
My belief is that a solution will not be found and implemented by Washington. The solution will be imposed on us by outside forces.
A further belief is that the solution will be imposed as a result of at least 2 or more somewhat unforseen events. One of them will probably involve a credit downgrade. The other(s) could be anything from major terrorist strike, earthquake, disease epedemic, etc. Any unforseen occurance that paralyzes a portion of our economy.
The third leg on this stool will be the willing and purposeful actions by another nation or nations who want to see us suffer financially and cripple us.
Time will tell if I am correct. I believe we are exceedingly vulnerable now.
The solution does not have to come from outside forces, but inside forces, bottom-up from the grass roots. Monetization of market gold. Use bullion as currency. It’s debt free while allowing for no added debt in the support of enhanced liquidity. The elite will continue to wack us all with “the stick| of inflation until we wake up. They created the real-time measure. We create the market weight in a new real-time gold-as-money paradigm….. which is already here and growing.
Greg,
Why not, Save $1.6 Trillion Dollars, Don’t Pay The Federal Reserve by 2011 accounting.
The money earned in interest by the Federal Reserve was made by printing the money out of thin air, so why should we have to pay it back? Any thoughts?
SS was funded then spent. I look at as money that will be stolen from me that I will never see (Just one more broken contract) It’s Just-Us and we are not part of the club, that they hit us over the head with to follow their law that they do not.
When our money is debt, debt will only continue to grow PERIOD!
True. The danger is not in making a shift from debt. The danger is in assuming that an asset based currency is going to be a top-down implementation as a matter of elite policy. Real-time gold monetization has to be a market process, bottom-up. It cannot be a top-down process. The USD would crash far too suddenly. The process must be by organic means. Rate of change never had to be a consideration under fixed values but we donèt have that now, so the rules become very different.
The great news is that real-time bullion-as-money facilitators are already operating in the marketplace. Goldmoney.com , pecunix.com , lakotabank.com
Therooster: Im a street silver collector. I have noticed a lot more people holding , and a lot less tradeing with silver in the last month. I agree with your balanced ideas.
Now this a great interview….
That was a good observation on Karl’s part about s.s. taxes likely rise. However, I disagree with his view that we can fix anything here with an 8% (or probably much higher) hit to USA GDP now. Comparing us to Latvia is a huge mistake. They are so small, they didn’t move the world economy with their austerity.
Not only are we 100 times bigger, we issue the world’s reserve currency. The only way out is a controlled restructuring, in conjunction with a new constitution. The present system cannot be saved.
Yes
But surely a small programmed reduction in debt over a few years would be better than a big drop now.
But people need to see the targets and the results.
Getting people back to work would be the best way, more taxes in and less spending out!
Digby,
You are right but in the Presidents’ speech today he said just the opposite in terms of spending. I can’t see how we avoid the crash with the present leadership on BOTH sides of the aisle.
Greg
So what? You don’t think the cb’s will selloff their US$ reserves do you??? Haaaaaa…
Charleston Voice,
They’ve been selling slowly into the market already.
Greg
When S.S. tax was cut , this lost to S.S. was going to be payed back at a later date. I think the S.S. trust had that in the tax cut Bill.
I think some Republican tried to change the pay back in the last couple debt meetings.
I’m just wondering if it’s true.
Is the Mississippi River running higher yet. Peace
Bob D,
No, it was not going to be paid back and if it was taxes would have to be put up to 3% and not back the 2% that was temporarily cut. Remember business was also receiving a 2% cut as well. Sadly the Mississippi is still way down. Pray for rain and snow in the Midwest.
Greg
Thanks Greg for the good things you do, we all need the content you bring to the table!
Now I just turned on the TV & it looks like a parade for some king, am I just seeing things are what?
I just hit a channel & TAP’S came on, I stayed up to watch it, I am glad I did, congress should & the rest of the world!
Peace Greg, I hope men become real men again!
Mickey,
It’s hard to watch TV news after researching on the net isn’t it? Lots of good alternative news sites out there. Happy you come to this one.
Greg
Another downgrade = another nail in the coffin.
Dead as a door nail.That’s what we make of the USD.
Its officially WAR…of the currency type that is…on a global scale.
They can keep playing the same stupid political game to prop up the balance sheets and falsify economic data….until there is no more propping to do.
Starvation , Unemployment and High Inflation are the real issues that require the President’s immediate attention.
Saving face from any such rating’s agency downgrade is pointless.
We all know the truth hurts….and Politicians/Bureaucrats/C Bankers are the weakest of the bunch when it comes to wearing pain.
What is becoming more obvious is that the game is all about deferring /avoiding “their” pain for as long as possible. That means the masses of middle class will get wiped out. You will face a revolution of biblical proportions. Then the STATE steps in to govern/rule and hey presto…NWO. Not happy…
Not to change the subject, but I took a break yesterday and watched the “inaugrual luncheon” held in what is now called Statuary Hall. All our traitorous representatives from both sides of the aisle were fawning on how important Washington DC is, etc. What a bunch of blind buffoons. They exist for their own benefit only! I had to laugh at their excesses, as the rest of the country withers on the branch.