Dan Weintraub for Vermont State Senate

MONETARY CONSERVATIVE, SOCIAL LIBERAL, POLITICAL INDEPENDENT

Dear Citizens of Windsor County:

The single most important issue facing our nation and our state today is the issue of DEBT.

It is time to chart an entirely new legislative course in state and local politics. Our nation---and by extension our states and cities and towns---stands on the brink of fiscal disaster. If we continue on with business as usual, we will wake up one day to receding horizons from which we may not recover.

In four short decades, the U.S. has gone from being the world’s greatest producer and creditor nation to being the world’s most profligate consumer and debtor nation. How did this happen?

As we know, most of our recent economic “growth” was magically conjured through the trading and sales of fraudulently priced and marketed securities and derivatives. False growth was created through the adroit manipulation of unspeakable amounts of debt. And now the American consumer is saddled with trillions of dollars in credit card, student loan and home mortgage debt, and our banking and financial systems are virtually insolvent. Our political and financial leaders have chosen to borrow and spend trillions more in order to keep the ship from taking on too much water. Trillions of dollars in bank bailouts and stimulus have allowed the nation to “push the pause button” with regard to the arrival of profound and ongoing fiscal contraction. But arrive it must. To not prepare for the inevitability of economic contraction would be criminal. It is incumbent upon Vermont’s political leadership to focus all of their energies in developing and supporting local systems and programs that will help Vermonters weather this coming storm. If our legislators do not wake up to the coming peril caused by the tens of trillions of dollars in unserviceable debt that currently poison our economy, Vermonters will suffer.

It is critical to understand that any claims of economic recovery that do not account for the amount of systemic debt that must either be serviced or defaulted upon are false. We have entered a period in time in which there is so much debt in the system, that we have become entirely dependent upon government spending and 0% interest rates in order to delay the arrival of steep economic contraction. But delay is the best we can do. We cannot avoid eventual contraction. At some point, our tens of trillions of dollars of public and private debt---and the exponentially increasing interest burden that accompanies this debt---must either be serviced or defaulted upon. And when that happens, economic contraction will result. There is simply no avoiding this reality.

The issue is debt. And until we confront that singular issue, and accept the fact that forty years of excess and fraud have left us mired in a terrible financial hole---a hole from which we will only emerge when we accept the need for massive deleveraging and accompanying contraction--- we will not experience the economic recovery that we all desire.

Vermonters must plan for the inevitability of economic contraction. It is up to our elected representatives in Montpelier to take the lead. It is time for the Vermont legislature to honestly face our ongoing financial crisis and to prepare the state for years, if not decades, of economic contraction.

Sincerely,

Dan Weintraub, Norwich VT (Windsor County)

The Issues:

I Support:

I Oppose: 

More About Debt:

“…The path we have chosen for the last 30 years in this country is clear, convincing, and impossible to continue upon. THE MATH DOES NOT LIE. We have not created GDP growth through final demand procured as a consequence of production - that is, people like you and I working with our hands or minds to produce something, then spending the fruits of that labor to buy the things we want and need. We have used financial leverage to present to ourselves and the world a false belief and "visage" of prosperity that in fact did not and does not exist, with the continuation of this charade absolutely dependent on the unending ability to forever take on more and more debt compared to growth in actual economic output…” (Karl Denninger)

“…Unsustainable growth in debt…has finally reached an apogee from which it will fall. As it falls (by an unwillingness to lend by bankers and [by an unwillingness] to borrow by businesses and households, by deliberate debt reductions, by default and bankruptcy) aggregate demand will be reduced well below aggregate supply. The economy will therefore falter, and only regular government stimuli will revive it. This however will be Zombie Capitalism. The private sector’s reductions in debt will counter the public sector’s attempts to stimulate the economy via debt-financed spending. Growth, if it occurs, will not be sufficiently high to prevent growing unemployment, and growth is likely to evaporate as soon as stimulus packages are removed. The only sensible course is to reduce the debt levels….” (Steve Keen)

"...While prices of primary products such as crude oil and foodstuffs may initially rise, there is no purchasing power in the hands of the consumers, nor can they borrow as they used to in order to pay the higher prices much as though they would have liked to do. The newly created money has gone into bailing out banks, and much of it was diverted to continue paying bloated bonuses to bankers. Very little, if any of it has “trickled down” to the ordinary consumers who are squeezed relentlessly on their debts contracted in the past. It follows that price rises are unsustainable, as the consumer is unable to pay them. As a consequence the retail and wholesale merchants are also squeezed. They have to retrench. Pressure from vanishing demand is passed on further to the producers who have to retrench as well. All of them are experiencing an ebb in their operating cash flow. They lay off more people, aggravating the crisis further as cash in the hand of the consumers is diminished even more through increased unemployment. The vicious spiral is on..." (Antal Fekete)

"...Going deeper in debt with ridiculous Quantitative Easing and Keynesian stimulus efforts did not cure deflation in Japan and it will not cure deflation in the US either. Instead, it will drag the problem out, while increasing national debt. I find it amusing that people believe debt can be inflated away. They ignore the fact that an increasing amount of interest is needed to service that debt. You can see concerns in the US already with tax increases [by Obama]...Eventually interest on the debt will consume all the tax revenues. That holds for both Japan and the US. Both countries will be in real trouble when interest rates rise..." (Mike Shedlock)

"...The value of credit is only as good as the promise that stands behind it, and when that promise cannot be kept, value abruptly disappears. Essentially, the gargantuan edifice of leveraged debt that has been accumulated during the years of credit expansion can be described as an inverted pyramid. Its point rests squarely on those at the bottom – for instance the subprime mortgage holders who’s relatively modest debts have been leveraged into trillions of dollars worth of derivatives. Each dollar of subprime mortgage debt probably underpins at least a hundred dollars of additional debt, and these loans will go into default en masse once the ARMs begin to reset in earnest. The leverage that has magnified gains on the way up, will magnify losses in a debt implosion on the way down..." (Stoneleigh from TAE)

"...Our colleague Rob Arnott, who always does terrific research, wrote in his recent report that "at all levels, federal, state, local and GSEs, the total public debt is now at 141% of GDP. That puts the United States in some elite company--only Japan, Lebanon and Zimbabwe are higher. That's only the start. Add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP, not even counting off-balance-sheet swaps and derivatives) and our total debt is 557% of GDP. Less than three years ago our total indebtedness crossed 500% of GDP for the first time." Add the unfunded portion of entitlement programs and we're at 840% of GDP. The world has not seen such debt levels in modern history. This debt is not serviceable. Imagine that total debt is 557% of GDP, without considering entitlements. The interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt. It assures a period of economic devastation. In a last, desperate attempt, politicians at the federal and local levels will raise taxes to astronomical heights to raise revenues. And that only assures destruction of the economy. Forget the fable of economic recovery. Unless there is a change in Washington by next year's election, there will be no way to turn back..." (Bert Dohmen)

Past Endeavors:

Please email your questions to: dan@weintraub2010.com

Thanks!