Tea party supporter and CNBC on-air editor Rick Santelli on Wednesday threw another one of his signature tantrums because President Barack Obama’s administration was pursuing “socialism” instead of what he said were “pro-growth policies” like tax cuts and austerity.Even Steve Liesman shakes his head.
What an ignorant statement!
Santelli never ceases to surprise. I hope CNBC is getting their money's worth insofar as ratings go from this guy, because they certainly aren't getting any useful information or insight for their audience.
Santelli started his morning rant by making the idiotic statement that we often hear that every child born in the USA comes into the world with a debt of $50,000. That's according to the debt clock, he says. First of all, what's with this debt clock anyway? Does anyone realize that 500 years ago the world went to double entry accounting? That means the way we account for things is as follows: for every debit their is a credit, for every liability there is an asset and for every debtor there is a creditor. So the debt clock is also an asset/savings clock.
Asset Clock! (h/t Matt Franko)
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This is an inarguable accounting FACT (unless you're Santelli, I guess). Once you understand this then every time someone mentions the debt clock they are obligated to state that whatever's on the debt clock ($15.2 trillion), is balanced by an equal amount of assets. This is not opinion or conjecture or wishful thinking. It's a fact.
So let's look at the debt (assets). What is it? What is it comprised of and more importantly, whose debt is it?
The debt is the debt of the government. How do we know this? Because the debt mongers themselves tell us. Not a day goes by without some guy like Santelli or Pete Peterson or David Walker or some other member of the Debt Doomsday crowd admonishing us that the government has to cut its debt. They point to it. They actually say, "Look...look at the $15.2 trillion of debt that we have." The number they are pointing to each and every time happens to be the amount of U.S. Treasury securities outstanding. By the way, as long as we're talking about Treasuries, what are they, exactly? Asnwer: Treasuries are nothing more than dollars with a term and a coupon. The government printed up those $15.2 trillion dollars (in excess of taxes collected) over the past 234 years and paid them to people for goods and services or transfer payments. The dollars now sit in Treasuries because they earn some interest.
I've just answered my second question: Who holds the debt? People hold the debt. People were paid that money when the government spent it. (The government also owns some of its own debt. That's like my right pocket owing money to my left.) The point is, people OWN those dollars. It's not a debt to them, it's an ASSET!
You don't think so? Tell ya what...go into a bank and ask for a loan. The banker will probably ask you to to fill out an application where you will need to list your liabilities and your assets. If you own Treasuries I'm sure you will be putting that down under the "asset" column.
And what about Santelli? What does he think? I wonder if he even owns any Treasuries. If he does, does he consider that a debt? A burden? Hey Rick, if those Treasuries are a burden to you I'd be HAPPY to take them off your hands! And while I'm at it, I'd be happy to take Warren Buffet's $40 bln burden of Treasuries off his hands along with Apple Inc's $100 bln burden. In fact, to show you what a nice guy I am, I will take the whole, $15.2 trillion off everyone's hands right now.
You see, the $15.2 trillion debt of the government is an asset to the non-government. It represents a portion of the financial assets denominted in US dollars that we own. That's right...it's not what we owe, it's what we OWN! It's part of our wealth.
That baby that Santelli talked about at the beginning of his rant is not born with a $50,000 debt, but rather, with a $50,000 asset. Maybe not directly owned in the form of a Treasury, but owned indirectly in terms of his or her share of national national wealth. Telling young people to "vote against that" as Santelli did, is pure stupidity. But, hey, what did you expect from him?
It’s amazing how CNBC allows Rick Santelli to rant on and on each and every day achieving levels of cluelessness that have never been seen before. If I were running the network I’d be really embarrassed.
Earlier today Santelli was ranting about a Treasury proposal that is being considered whereby the U.S. would start issuing floating rate notes.
For those not familiar with floating rate notes, the interest rate paid “floats.” That means if interest rates go up, the interest paid on the notes increases.
Santelli was sounding the fire alarm as usual, saying, “If interest rates rise, then the government will have to pay more interest. It will be horrible, terrible, the end of the world, etc. blah, blah, blah.”
The one thing Santelli seems to forget (as he often does) is that the government (the Fed) sets rates. So, why would the rates necessarily rise? The Fed could easily decide to keep rates low like its doing now and the whole question of interest rate risk is moot. Anyway, the whole question of interest rate risk for a sovereign, currency issuing nation like the U.S. is moot anyway because it has a monopoly on rate setting.
But let’s say rates do rise because the Fed raised them. Why would that be so terrible? Since the government is a net payer of interest, a rate increase (which, again, could only happen via the Fed) would be equivalent to a rise in transfer payments (government payments to people) to the private sector. What’s so bad about that? It’s giving people money, and just another form of deficit spending. By the way…the largest component of the Reagan deficits was interest on the debt and…you guessed it…we had an ECONOMIC BOOM largely because of that.
Santelli is totally clueless. He’s ranting about things he doesn’t understand. On the other hand, my 11 year old son can understand this stuff.
By the way, if you think Santelli is clueless, what about Geithner? Presumably, he’s the guy proposing floating rate notes? Can somebody please tell Timmy that the government sets the rate it pays, so floating or non-floating, it’s all the same thing.
I often allow these comments to drive me crazy as you can see. Then I calm down and realize that it's all about television ratings, and it has nothing to do with real information of any kind. Many people don't realize that. They don't realize that it's ALL about ratings. They think it's real information. If it were about real information then people like Rick Santelli wouldn't have a career on television.
Then it hits me...if it's all about ratings, why are we allowing a stupid, ratings-driven business to affect our policy, our country and our lives?
Then I get crazy again.
Santelli says the problem is spending, but in reality, the problem is his understanding...period.
That's because you can play the same numbers game on the spending side. If the government cut spending by $225 billion (as opposed to taxing those millionaires), then you removed $225 billion in incomme from some group of Americans in the private sector. Same thing as that tax he hates so much, only it probably hits different people, like the very blue collar workers that Santelli purports to stand up for.
Santelli believes the debt is catastrophic to his kids. Well, he's the bond expert, right? I wonder if he would feel poor if he had $1 million in Treasuries? If his accountant prepared his financial statements wouldn't he list those $1 million of bonds as an asset? Of course he would.
I'd love to see his response to that question. His debt rant was an embarrassment.
