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« Preview Of PBS Frontline: 'Breaking The Bank' Airs June 16 (Video Now Includes Complete 1 Hour Broadcast) | Main | Bailout By The Numbers: Total Fed Committments Now Total $13.9 Trillion...All Of Which Must Be Borrowed »

The President Admits The Obvious: The United States Is Flat Broke

The pink elephant gets some love as Obama admits: "Well, we're out of money NOW." 

Given the previous story, we felt it was appropriate to present this much-discussed clip from the President's recent appearance (May 23) on C-Span.  It's obvious to readers here, but I presume the majority of Americans either aren't aware or don't completely understand that everything we've committed to fixing the financial crisis has to be borrowed.

So, it makes for a stark 'gotcha' moment when we hear our President admit so casually that we're flat broke and almost busted.

If it weren't for overly-lenient, sailor-drunk creditors all around the world, our time at the table would have long ago passed.  Yet, because of the Dollar's pre-eminence as THE reserve currency and the lack of a safe alternative (you really wanna wade into Gilts or Bunds with your hundreds of billions?), our creditors are being squeezed from both sides.

So they continue holding Dollars and buying our Treasuries, thus funding our silent rape of future generations.  It's a pretty ugly picture, but it could not be more real.  Video and transcript are after the jump. 

See also:

The United States Of Insolvency

Land Of The Free And Home Of The Broke



In a sobering holiday interview with C-SPAN, President Obama boldly told Americans: “We are out of money.”

C-SPAN host Steve Scully broke from a meek Washington press corps with probing questions for the new president.

SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?

OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we’ve made on health care so far. This is a consequence of the crisis that we’ve seen and in fact our failure to make some good decisions on health care over the last several decades.

So we’ve got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it’s putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.

So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don’t reduce long-term health care inflation substantially, we can’t get control of the deficit.

So, one option is just to do nothing. We say, well, it’s too expensive for us to make some short-term investments in health care. We can’t afford it. We’ve got this big deficit. Let’s just keep the health care system that we’ve got now.

Along that trajectory, we will see health care cost as an overall share of our federal spending grow and grow and grow and grow until essentially it consumes everything…

SCULLY: When you see GM though as “Government Motors,” you’re reaction?

OBAMA: Well, you know – look we are trying to help an auto industry that is going through a combination of bad decision making over many years and an unprecedented crisis or at least a crisis we haven’t seen since the 1930’s. And you know the economy is going to bounce back and we want to get out of the business of helping auto companies as quickly as we can. I have got more enough to do without that. In the same way that I want to get out of the business of helping banks, but we have to make some strategic decisions about strategic industries…

SCULLY: States like California in desperate financial situation, will you be forced to bail out the states?

OBAMA: No. I think that what you’re seeing in states is that anytime you got a severe recession like this, as I said before, their demands on services are higher. So, they are sending more money out. At the same time, they’re bringing less tax revenue in. And that’s a painful adjustment, what we’re going end up seeing is lot of states making very difficult choices there…

SCULLY: William Howard Taft served on the court after his presidency, would you have any interest in being on the Supreme Court?

OBAMA: You know, I am not sure that I could get through Senate confirmation…



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Reader Comments (8)

Guess it's getting close to time for the Nationalization of EVERYTHING. The good news for the Admin. is that they really don't have to go much further to complete the task....Bad news for us.....Work Camps and Welfare......SUCK!!!!!!
Jun 17, 2009 at 10:06 AM | Unregistered CommenterAin't Bullshittin'
Why does Obama think that he has the magic bullet to every solution? Who taught him that? Is it all the pot and frustration talking? Is it the anger that he and his wife hold onto from their youth. Does he have misplaced empathy? I hate when he says, I don’t want instead of the government doesn’t want to take away your choices. Obama keeps looking for the game-changers when he should be looking to trim the appetite of our government.

Obama has very little knowledge of business and constantly misuses business terms. He says at one point, “if we don’t reduce long term healthcare inflation substantially, we can’t get control of the deficit.” But he does not look at inflation as the problem within the healthcare industry. He thinks the problem is inefficiency and bad decisions. I think he means long term healthcare costs, not inflation. Inflation is not caused by any of the good or bad decisions within the healthcare industry.

He refuses to take ownership of the situation which he somewhat inherited and somewhat perpetuated. He continues to see two options, doing nothing (meaning the government) or looking for those game-changers (within government - new laws, policy, and/or government intervention). Now, he knows that we are broke so he wants to go after the profit margins of the remaining successful businesses. When he drives those companies into the red and into the hands of foreigners, what next? He says in this interview, that all the drug companies have committed to him, really, committed to him and not the American people. He is an egomaniacal guy. I think he is wrong, the short term problem, his decisions, are now dwarfing the long term problems.

“ The historical experience of socialist countries has sadly demonstrated that collectivism does not do away with alienation but rather increases it, adding to it a lack of basic necessities and economic inefficiency.” Pope John Paul II
Jun 17, 2009 at 2:20 PM | Unregistered Commentergobias bluth
@gobias bluth

Didn't you know? Obama is going to be the next FDR (and he thinks that's a good thing). Of course he has magic bullets, because that's how history works. When he says "I" instead of "the govt.," that's the political understanding of history talking. It doesn't matter in his world view, nor in that of the sycophants who always surround our presidents, that he personally, as an individual, knows next to nothing about markets or economics. It doesn't matter that he knows next to nothing about history or geo-political realities. (This hardly distinguishes him from his predecessor, of course.) But even the media are happy to frame the news within this narrative of the Big Man with his Big Ideas. It was "Obama's" stimulus (sic) bill. It is "Obama's" health care plan. It's "Obama's" AfPak initiatives, etc. Any sane, intelligent person knows that his personal involvement in the development of these plans is limited. Unlike Bill Clinton, I think Obama actually believes in The Narrative. We aren't the only ones who have noticed this tendency. The New Deal, contrary to myth, was a tragedy down to the requisite hubris. And we know what Marx said about the tragedy of history.
Jun 17, 2009 at 2:38 PM | Unregistered CommenterJames H
JPMorgan, Goldman Sachs Among 10 Banks That Repaid Rescue Funds
By Josh Fineman and Michael J. Moore

June 17 (Bloomberg) -- JPMorgan Chase & Co. and Goldman Sachs Group Inc. are among 10 of the nation’s largest banks that repaid $68 billion to the U.S. Treasury in a step toward shedding government restrictions on lending and compensation.

My questions...

How much did the Federal Reserve give these banks and are they using that money to pay back the TARP loans?
If these banks are now "healthy", will the government make them return to the fair market value calculations of the past which more appropriately value their troubled assets?

Again, this is a shell game to buy more time.
Jun 17, 2009 at 5:20 PM | Unregistered Commentergobias bluth
You're not broke as long as you still have checks in the check book. Doesn't this guy know anything.
Jun 17, 2009 at 8:00 PM | Unregistered Commenterspeed racer

Interesting post on the cult of Obama.


You asked:

How much did the Federal Reserve give these banks and are they using that money to pay back the TARP loans?
If these banks are now "healthy", will the government make them return to the fair market value calculations of the past which more appropriately value their troubled assets?

Besides TARP funds, these banks benefited in several other ways--selling FDIC guaranteed debt and thus saving big $ money on interest payments on this debt---they also got money through the bailout of AIG as they were all counterparties who were paid in full---and finally they are receiving support from the various Fed facilities from TALF ond own the line.

To your 2nd question: NO. there will not be a return any time soon to fair-value accounting....this accounting change is a HUGE part of the rosier outlook since many fewer writedowns must be made now....hell WFC had a $5 billion dollar accounting gain from teh change in FASB 157, the fair value rule.
Jun 17, 2009 at 10:50 PM | Unregistered CommenterDailyBail
Level 3 "assets" really give me the banking blues.....
Jun 18, 2009 at 4:12 PM | Unregistered CommenterAin't Bullshittin'
Nothing is getting fixed on the balance sheets. We will simply whistle by the graveyard until we no longer are able.
Jun 23, 2009 at 12:40 AM | Registered CommenterDailyBail

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