Friday, July 29, 2011


In the last week or so I've had to continue rereading my own posts to ensure that I am clear as to where I think we are heading.  As I stated last week this whole debt ceiling is an odd affair that is more like theater rather than an exercise in leadership, although this is exactly the kind of result I was looking for, going through it is frustrating.  As readers know I suggested that the drama would unfold and the participants would use the tension to drive markets lower and add to the urgency to get "any" deal done. 

Unfortunately we received the exact prescription I ordered.  The market for its part has handled the mess pretty well as it has been conditioned to believe that any close call will be met with the not-so invisible hand of the Fed, Treasury, or President Teleprompter each time.  I hate to admit it, but the President and the Democrats have this game of politics quite in hand and they have managed to make the Republicans negotiate against themselves and the RINOS have looked fragmented, unpolished, and inept.  While I don't believe the US should default and feel like a deal could have been cobbled together in a better manner, the Republicans have simply looked like amateurs.  Reading this you may feel like I'm bashing the "Tea Party Faction" of Congress, but you'd be wrong.  These are the only folks that have stood for a reasonable approach through this entire mess.  They have clearly laid out their expectations and have continually restated their demands.  As usual the press and everyone else has blasted them as unreasonable and part of a fringe, however they are the folks that have been on the leading edge emphasizing their position from the beginning.  I think Boehner and the President and the Democrats simply assumed that they would come in line just like all politicians do.  I think what all of the power players are finding is that the rookies are actually principled and mean what they say.

Remember, the Republicans got burned during the last set of negotiations, so it isn't so weird to think that they remember passing a bill with the expectations that billions were to be saved only to find out that nothing was actually cut.  If I was embarrassed like that, I would be demanding a pound of flesh this time.  My point in describing this issue is that I think it is the miscalculation by the Republican leadership, Democrats, and the President that has gotten us to the brink of a "default".  They expected a different outcome and therefore played their hand.  Now I will praise Boehner in all of this because he is a classic politician and he is weaker than previous Speakers because he promised that the Republicans would not add any earmarks to bills, in other words he'd stop the process of bribery that we've seen all too often.  (Remember Obama and his promises to the Nebraska leadership on healthcare?).  Because he isn't using this tool, he doesn't have the carrot to get our dirty little congressmen to come along with his crummy deal. 

As a final update on this, it looks like Boehner and Cantor have added the tea-party requirement that there must be a balanced budget, and it appears like this will pass the house.  It is absolutely necessary to send this over to the Senate because this puts Senator Reid and the President back on the hot seat.  They have talked about not passing this bill, but will they actually kill the bill knowing that THEY caused the default?  Who knows, but it will be interesting and it puts pressure on them.  At this point Boehner and Obama are famous for doing nothing on this issue.  Essentially they are non-leaders and that is clearly my feeling about the President.  While he likes to talk a lot on TV and use that teleprompter, he has little substance.  He postures and relates how things should be done, but never follows through.  Where is the President's plan to cut spending?  He has none.  If he doesn't get his way he vocalizes how its not fair.  At this point the President, Reid, Pelosi, and Boehner remind me of the world's most famous tennis player, who by the way never did anything.  She wasn't any good, never won a tournament, and never competed strongly at the highest levels, but she clearly was the most famous tennis player for years.

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These times demand that our leadership reign in spending and come up with real solutions that are lasting.  Cutting $100 Billion each year for 10 years is a complete waste of time.  S&P told us we needed to cut $4 Trillion in spending, where is the disconnect between this dire circumstance and what these hacks are producing?  The Keynesian experiment where we blow out all budgets to stimulate the economy with massive government spending has failed, today's GDP revision has proved that.  If deficit spending failed there is only one solution left, to cut spending.  Our leaders need to get to work on their craft and stop working on being "famous".


Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at

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