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« Rand Paul: 'I'm Thinking About Running For President' | Main | National Debt Goes From $16.5 To $16.6 Trillion In JUST 8 Days »

DEBT BATTLE ROYALE: Santelli Vs. Dean Baker: 'We're The NEXT Greece!'

We're already Greece, the bond market just doesn't know it yet.

Friday on CNBC.  Great clip.  Transcript is below.


The U.S. Debt Machine rolls on, borrowing $50,000 per second.


Rush Transcript

stan druckenmiller sounding the alarm on our government's debt and spending expenses warning on this program yesterday that a bond crisis could still be at hand. you know, the bond market is a funny thing. in greece the bond market was perfectly fine until february of 2010. not moving. not doing anything, and then in two weeks it was over, but if we don't deal with it in the next four or five years, the same thing is going to happen. we're going to wake up. interest rates are going to explode and the next generation, they are going to have a very, very tough time and it's so unfair. no surpr that our rick santelli agrees with druckenmiller but dean baker is not worried. he says this isn't and will not be greece. dean, where do you think druckenmiller is going wrong then? we've been hearing these things for four years and i'm three big differences between the united states and greece. first, we're a huge diversified economy, not a little country dependant on tourism. secondly, people in the u.s. pay their taxes, you know. greece had a deficit of about 7% of gdp. that wover $1 trillion a year in the united states before the collapse. we have a very different story. the third is a huge diff. we have our own currency. greece is like arkansas. the reason why its interest rates went through the roof. everyone thought that. i think the point he was trying to make in that that if we don't do something about this the market will figure out that we have a credit problem in the country. the markets are smarter than that. when you normalize interest rates, right now they are really manipulated, if you normalize interest rates, you're talking about $500 billion going out the door every year just on interest expense. that's just paying the interest on the debt. you think that's sustainable? that's a lower interest expense than what we had relative to our economy in the early '90s. we could live with that. we lived with that in the early '90s and the economy did great in that decade?

rick, what do you think?

i think that we have so many os stritches i don't think we have enough stand. whether it's mr. druckenmiller or barron's this week. dean is pretty clear, we aren't greece, but we can be. the math is the same, at least on its trajectory and he's hit all the highlights of why we bury our head in the sand. we're the reserve currency. we're right. we pay our taxes, he's right, except not everybody is required to pay federal taxes. i won't argue that point. according to the greek debt clock, every citizen is responsible for about 41,000. according to the u.s. debt clock everybody citizen is responsible for 50,000. according to baron's, if you look at public debt, okay, and i understand we're not counting underfunded lights which even bill gross said in 2011 makes our problem way worse than greece, we're at about 75% of gdp. they are at about 150%, but the trajectory at the current rate means in 22 years we will be them, and i -- that's a little wacky trajectory there, buddy. what's wacky? dean i calling you wacky. that assumes we have huge rises in debt. i hope he lives 22 years to tell his grandkids they are wacky when they are chasing them. my grandkids will tell me i'm whack if we follow the prescription of cutting the deficit and raising the unemployment rail even higher and putting their parents out of work. and that's what makes us different than greece. we can afford to pay to put people to work as opposed to people working in the private sector carrying their own load. just look at the infrastructure bank they are proposing. it's freddie and fannie. they are propose creating another freddie and fannie and what's worse, dean, it's going to be off balance sheet like wall street was doing in '07. had very good success with infrastructure. in the new deal they dealt lots of infrastructure we're still using today years later. that's what we need to do again. you're right. the private sector is not hiring these people. that's why the depression wouldn't have ended if it wasn't for the war. i see am tie scla's version. it's hard to take seriously. because it doesn't fit the plan you're trying to sell. if you can have growth with war and spend money on create jobs and have growth. why am i saying war? do you think i have any problem cutting the defense baby. you say we got out of the depression because of world war ii. okay. then let's put out the infrastructure toed bying, cut out all unions that basically put the guy in power and let's start there. you want to play it that way? we're a democratic country. can't get out unions. might not like them. people shouldn't join them. sorry, we're a democratic country. all that stuff is shovel ready, didn't we see this movie in 2009? we didn't need shovel ready as it turned out h.a lot longer recession they were betting on. you know what, dean? forget building bridges and building hoover dam, just get all these people to get teaspoons and pay them $20 an hour to move the sand from l.a. to new york and then back that's the same thing you're suggesting. at least they wouldn't be unemployed. if you think that's the answer, who you calling whacky. not my top answer, buddy. if you're not going to let me do something productive, i would rather pay them to move sand. we want to do something productive. we want government to quit controlling the treasury market and quit controlling the equity market and the quit controlling the economy. i think you've got a conspiracy theory. it's not a conspiracy. the markets are shot. you don't even get a signal like stan said. interest rates should be at 6:00 and then all of this would stop. i've been hearing this for four years. dean, are you saying we should not worry about the debt and it should not be a priority in terms of slowing down the spending? saying that as clearly as i possibly can. how can you say that? very easily. i just did. had a very small deficit going into this. how irresponsible is that? it's irresponsible. how come you folks weren't talking about the housing bubble in 2004, 2005 and 2006? i was. greenspan was. you're ignoring them now. greenspan was saying there was no double. what was barney frank saying? he wasn't going to pop it but recognized it was developing. it was his job to pop it. we agree on something. we're going off on a tangent, as fun as wonderful as this conversation has been, we seem to be going off on a tangent, but interest take there, that you don't think cutting spending should be a priority at all right now, dean. zero. even though there are expectations that the $16.5 trillion debt is going to 22 trillion very quickly in the next few years. yeah, and that's -- that's going to take us back -- our interest payments relative to the size of the economy will be lower than they were in the early '9 as. because the fed has trillions of dollars of treasuries, dean. it's a ponzi scheme. other people are holding those treasuries voluntarily. do i have a vote whether the fed keeps buying them? where do i go to stop the program? very important points you both made. see you soon. thank you so much, guys.



In case you missed it yesterday:

Debt Goes From $16.5 To $16.6 Trillion In JUST 8 Days



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Reader Comments (13)

Question for Daily Bail. I read you, I read Yves, and I listen to a lot of economists from PERI and UMKC. And my opinion of Santelli comes from Matt Taibbi's Griftopia. He's an apologist for the rich. I have a high regard for Baker. When progressive economists say that debt should be considered as ratio --- debt over GDP --- and you decrease debt by increasing the denominator of the fraction, do you disagree? Because this is the underpinning for why I don't agree with a lot of your site.

If I understand them correctly, Krugman, or Robert Pollin, is saying you increase the denominator of the fraction through massive deficit spending to boost demand. And the reason why we can just borrow is that we have our own currency and will always be able to pay our debts in our own currency. Where does the rebuttal go from here?
Feb 25, 2013 at 5:24 PM | Unregistered CommenterKevin
Glad to [see] you back LL!
Feb 25, 2013 at 6:11 PM | Unregistered Commenterjohn

Where do higher interest rates (they are coming) and nominal GDP growth put us?

Do you suggest hyper-inflating our currency to pay the debt load?

Not a pretty picture...

Pain is inevitable. Denial gets us nowhere. Like a cancer, debt eats away at us. Denial is not a remedy for cancer. Treatment is hard and must be aggressive. Keynesians don't get this...
Feb 25, 2013 at 6:23 PM | Unregistered CommenterJosie

Krugman and other Keynesian have been saying deficit spending would solve our problems for the past 5 years. We've added 6 trillion to the debt and we have nothing to show for it. Look at what Krugman says when he thinks no one is listening.



"Obviously, things are not good. If you had polled people at this meeting three years ago, I think a majority would have thought by now we would be talking about this great economic crisis in the past tense. But it still goes on."

So among friends Krugman admits he thought the massive deficits would have worked by now. We have a debt problem in the economy, and the Keynesian solution is always more debt. Earth to Paul - it's not working.

As far as Santelli, Taibbi is wrong. I have watched him essentially every day for 10 years or so. Santelli gets a bad rap from certain knee-jerk blowhards vexed by his infamous Tea-Party rant against a bailout for homeowners, who don't realize that he's been against EVERY BAILOUT in the last 5 years, including TARP, and the Fed's ongoing stealth bailouts.

Just last week he was telling Republicans to cut defense spending..

SANTELLI: 'Republicans Need To Be Like Eisenhower And SLASH Spending For The Military Industrial Complex!'



One more thing, the UMKC crowd believes in MMT, which is a similarly dangerous can of worms. It's just another excuse to spend without limit, the dollar be damned.
Feb 25, 2013 at 6:30 PM | Registered CommenterDailyBail

Regarding debt-to-gdp ratios, of course they matter, and of course I understand Keynseian theory. Though to give credit to Keynes, he DID advocate running surpluses during growth periods, which is not something that has ever really happened in the U.S. My point is that deficit spending (stimulus) won't work this time - there is just too much debt already out there. I've been saying it for 4 years and I've been right. Here's an example of NOT doing things the Krugman way.

WHAT WOULD KRUGMAN SAY -- A Fresh Look At New Zealand's Success SAVING Their Way Through Recession

Feb 25, 2013 at 6:39 PM | Registered CommenterDailyBail

Here's more on Brad Delong (Krugman cohort) and his fantasy.


Keynesians are more politician than economist as they advocate massive spending as a means to win elections, all notions of fiscal sanity be damned. They are more dangerous to your children than any other form of human species. They would gladly sacrifice $6 trillion to keep their party in power.
Feb 25, 2013 at 6:43 PM | Registered CommenterDailyBail
Kevin who wrote:

My opinion of Santelli comes from Matt Taibbi's Griftopia. He's an apologist for the rich.


A few last thoughts on Santelli - if you watch him every day, you will see that there are really only 2 major themes to everything he says:

1) Get the Fed out of the markets - End QE and end the stealth bailouts.

2) Stop bankrupting future generations with endless deficits - Get to a balanced budget.

Everything else is just tangential. Santelli has a 22 year-old daughter and he talks about young people all the time. It really is generational rape to add all this debt to their bill. As you know from reading this site, I do not support either party. The only thing I really care about are ending bailouts and getting to a balanced budget, both parties be damned.

And that's why you see so much Santelli on this site. And it's the same reason you used to see so much Dylan Ratigan, before he retired. And it's why I post David Stockman and Chris Whalen with frequency as well. I choose to highlight media pundits and economists who have abandoned the false left-right paradigm in favor of budget sanity.
Feb 25, 2013 at 6:56 PM | Registered CommenterDailyBail
Amen, DB!
Feb 25, 2013 at 7:01 PM | Unregistered CommenterJosie

A few more thoughts. I generally like Dean Baker as well. I didn't criticize him in this piece. I've posted several videos and a few of his op-eds over the years. He is right about regulation of Wall Street, the bailouts etc. It's only on deficits that I disagree. Same with Galbraith, Marshall Auerback, Richard Koo and other spend-till-you-drop MMT Keynesians.

And for the record, I was strongly opposed to Bush's 2 attempts at stimulus, both of which failed massively of course, at everything except increasing the deficit.

Last thought and then there's a steak with my name on it somewhere - for $6 trillion in new debt, we basically have nothing to show for it. No big projects, no massive infrastructure improvements, no new highways or airports, nothing we can hang our hat on. And that part really, really pisses me off. It's all been a waste. And our kids will pay the bill.
Feb 25, 2013 at 7:35 PM | Registered CommenterDailyBail
Thanks for the remarks and links, DB and Josie. OK, I will incorporate what you said into my sense of Santelli. Yes, I wasn't aware he wanted to cut the military. A lot of the recent discussion about the across-the-board cuts has had this nod and a wink where someone will say "The cuts will hit both military spending and social spending, but I think we all know that the military will find a way not to get cut. If the constituencies for WIC coupons don't happen to have that type of lobbying power and money- that's their problem. boo hoo." This basic dishonesty and subtext is why I don't trust statements about how pain is hard and we must take our medicine. I mean from Josie I think it's heartfelt belief, but from Simpson, Bowles, Peterson, Ryan or Obama I think it's hypocritical.

Thanks for weighing in on it.
Feb 25, 2013 at 8:04 PM | Unregistered CommenterKevin

Thanks for your response. You probably already know this, but if it were up to me, the entire $1.2 trillion in cuts the sequester requires over 10 years (and again, they aren't really cuts, they are reduction in planned future growth of spending), would come from defense. In case I haven't been clear, the whole reason I support the sequester is that the military will take the brunt of cuts. I do enjoy watching the war machine apologists squirm.
Feb 25, 2013 at 8:22 PM | Registered CommenterDailyBail
Thanks, Kevin. It's heartfelt to be sure as I have 3 year-old twins and no dynasty trusts in place and limited gold holdings. And I am all about reducing spending from all places, especially military, where waste is rampant, as with all large Fed gov't operations. And I take the Jeffersonian/libertarian stance of friends with all, enemies with none, where possible, as it at least saves (and may make) us $$$.

Many say this position is juvenile, not today's reality and puts us at risk. But a quick view of history beyond reality TV and the Kardashians shows us that it's not really possible to choose our enemies or allies over time. Why? Because we cannot control others who do not share the Jeffersonian view. We choose Israel and we piss off the Arab world. Remember, we were allied with the USSR during WWII (my uncles fought in this war), and then poof, no. The Germans were allied with GB in the last century ( the present-day GB monarchy has as much German blood as Anglo), then poof, not...twice. We were allied with Sadam over Iran in the 80s. Then, a decade later, stormin' Norman S-kopf is rolling tanks across the Kuwait border crushing Sadam's "elite" guard.

Choosing is folly...

Choosing sides always places us in peril.
Feb 26, 2013 at 10:44 AM | Unregistered CommenterJosie

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