David Walker = FAIL

Here it comes!

I was extremely skeptical when Walker went off and made his IOUSA movie.

Today, I have made my call: EPIC FAIL.

Here's an article in National Review Online that illustrates why:

"Walker, who currently works on these issues as the president of the Peter G. Peterson Foundation, says, "Deficits and debt levels are going to go up significantly in the short term, and there’s no way of avoiding that, so we’re not saying there shouldn’t be a stimulus. We’re saying that for the nation’s long-term fiscal health, we need to start treating the disease and not just the symptoms. The discussion should focus not just on how to revive the current economy, but on how to put our economy on a more sustainable path for the future."

FAIL, period.

There is a way of avoiding that.  It is to, once again:

• JAIL the fraudsters, including those in Congress, Treasury and on Wall Street.  Bluntly - if we can find a predicate felony to nail you with in this mess, off you go.
• REMOVE all of the overseers.  This includes The Fed.  Set up a new agency that is charged with enforcing all of the laws related to the financial system including The Federal Reserve Act, and empower them with subpoenas.  Direct that they must act and operate "in the sunshine", with everything published on The Web.  You do an evil thing, the public sees it.  They try to hide it, the public sees it.
• DEFAULT all the bad debt.  Yes, this "booms" a lot of banks.  Tough.
• SET UP new banks.  Take the remaining $350 billion and capitalize ten banks with $35 billion each.  IPO them to the public.  By law no officer, current or former, of an existing public bank may serve on these firm's boards.  Now we've got the means to replace the credit creation the boomed banks can't do any more.

This clears the system and requires no stimulus spending.

Yes, it results in plenty of pain and bankruptcies.  Those are coming whether we like it or not.  We can either choose to take a small amount of pain now or a huge amount of it in the VERY near future.

There is no solution to this problem that does not involve clearing the excess debt from the system. 

Walker is right in that we must fix entitlements.  Where he's wrong is that he, like all of the other pigmen, refuses to admit in public that the math is clear - we cannot recover in the economy until the debt to GDP ratio is reduced, and there is only ONE way to make that happen as we have reached the point where the exponentially-increasing debt load is constraining GDP faster than we can grow it through technology and other productivity improvements.  This process can ONLY be halted by defaulting the excessive debt.

This debt will default.  Our choice is to do it now and have it suck badly, or to try to avoid it and have it suck catastrophically.

Oh by the way, if you're wondering how far off that "catastrophically" is, the answer might be right about now.  How come?  Treasury today ran a T-bill auction that had only 18% indirect participation.

"Indirects" are foreign central banks and investors, mostly.

18% eh?  Is that "screw you" I hear echoing around the Treasury Department - in Mandarin?

Or is it the rumor flying around that one or more FHLB system banks may be at risk of imminent seizure by The Fed?  My guess would be Atlanta, which is likely choking on all the bad Countrywide Financial advances they wrote last year - an act that caused public alarm from Congress (and with good cause!) but which has not been corrected as near as I am able to determine.

A disorderly event of this sort, as opposed to "lock 'em up Danno and be prepared with newly-capitalized banks to replace the boomed ones" will almost certainly result in a Treasury Market dislocation that immediately translates into the short-term corporate market.

Those who think this leads to a hyperinflationary "poom" are wrong - it leads directly to a deflationary collapse, as all private debt is indexed off Treasuries but the private market is much larger.  As a consequence the spike in coupon that the dislocation causes renders hundreds of very large companies immediately unable to roll their short-term debt or re-issue further out the curve and they suck all the dollars out of the system trying, with most of them imploding into bankruptcy and throwing their employees out of work.  We're talking GM going "boom" times ten - at least.

This is precisely how you get a Depression folks and we're running out of time to stop it.

Obama, Walker and the rest of these clowns need to stop the crap and come clean with Congress (who clearly doesn't get it) and The American People.