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That train already left the station…

December 14, 2010

The author’s point in Bloomberg is that the tax deal is bad for growth – not because it reduces payroll tax, etc. But because it ultimately could put at risk a ‘contract’ in the form of Social Security and…

Enduring growth comes when there is more trust in contracts. Certainly foreign investors, who buy bonds and currency, view the U.S. that way

Oopsie. That train already left – remember GM?

Thanks to a generous share of GM stock obtained in the company’s 2009 bankruptcy settlement, the United Auto Workers is well on its way to recouping the billions of dollars GM owed it — putting it far ahead of taxpayers who have recouped only about 30 percent of their investment and further still ahead of investors in the old GM who have received nothing…

The generous share of GM stock given to the union trust fund under the White House deal puts it not only ahead of the Treasury but on a par with secured creditors such as banks, which normally receive the most favorable treatment from bankruptcy courts

Somehow Social Security being changed sends a bigger message to foreign bond holders about the US Government honoring contracts than the GM – Union – Bondholder triangle? Really?

Oh, wait – not in spite of – BECAUSE of that deal the US should honor the “contract” that really isn’t a property-rights, lien type contract with the American taxpayers.

In its Social Security component the new tax deal honors the precedent set when the federal government sacrificed bondholders and creditors to unions in the recent auto bailouts.

Herein lies the problem. When you have no money, and no options – what happens to the contracts that were signed under the assumption you do? From “Seeking Alpha

what if the Irish go to the polls in a few months and vote in a new government that repudiates the current agreement (for Irish taxpayers to back Irish bank debt that is owed to German and French banks), and then when the ECB and the Germans tell them no one will buy any new debt they simply say, “Fine, we won’t pay you on anything.” Think that wouldn’t throw a wrench in the gears? Can you 100% assure me that it won’t happen?

While there are lots of protests – what exactly are they protesting against? That the Ponzi schemes ran out on them, instead of on the next generation…

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