Moon of Alabama Brecht quote
November 11, 2008

How Will The U.S. Finance Itself?

An interesting piece from Barrons: Uncle Sam's Credit Line Running Out?

The Treasury is set to borrow $550 billion in the current quarter alone and $368 billion in the first quarter of 2009. "Near-term pressures on Treasury finances are much more intense than we had thought," Goldman Sachs economists commented when the government announced its borrowing projections last week.
...
Backshall is not alone in this dire assessment. Scott Minerd, the chief investment officer for fixed income at Guggenheim Partners, a Los Angeles money manager, estimates that total Treasury borrowing for fiscal 2009 will total $1.5 trillion-$2 trillion. That was based on $700 billion for TARP, a $500 billion-$750 billion "cyclical deficit," an additional $500 billion stimulus program and some uncertain amount for the Federal Deposit Insurance Corp.

Minerd doubts that private savings in the U.S. and foreign purchases of Treasury debt will be sufficient to meet those government cash. That leaves the Fed to take up the slack; that is, monetization of the debt.
...
Cutting through the technical jargon, the yield curve and the credit-default swaps market both indicate the markets are exacting a greater cost to lend to Uncle Sam. And it's not because of anticipated recovery, which would reduce, not increase, the cost of insuring Treasury debt against default.

All of which suggests America's credit line has its limits.

Every credit-card has a limit, and the U.S. has stretched its own for some years now. Overdrawn credit cards tend to to require higher interest payments.

Printing money and inducing high inflation is a possible way out of the debt. But there are consequences. If the U.S. inflates too much, the status of the U.S. Dollar as the dominant currency in the world  would come into doubt. If that happens people would sell the dollar which could move an inflation scenario into a hyperinflation one and leave, in the end, no other way out than default.

This would somewhat be consistent with GAEB's prediction that the U.S. will default on its debt in 2009. (Can someone please send me the full GAEP report?).

Is this likely? I do not yet think so. But it is now a genuine possibility. To discuss such, or even a serious inflation scenario, would have been seen as pretty much out of wack by the mainstream just a few month ago. But today Barrons, one of the leading Wall Street papers, is printing the above.

Even with a decent background in economics I have now too little trust in the various models to predict the outcome of this crisis. There are myriad factors to consider. The yield curve and CDS spreads the Barrons piece emphasizes are more the result of opinions than of efficient markets and they may be quite wrong.

No model I know of fits anymore. Depression, deflation, stagflation, inflation, hyperinflation, default - all seem possible now.

What are you expecting?

Posted by b on November 11, 2008 at 21:20 UTC | Permalink

Comments

More interesting than the scale of the indebtedness, even more interesting than its new crappy quality, is its deteriorating maturity structure. Short term debt requires more gross financial flow for any given net flow so as the debt grows it gets harder and (nonlinearly) harder to roll over. Long before defaulting we will have a highly entertaining Kindleberger Crisis on our hands, just like the sorriest tinhorn banana republic.

Posted by: ...---... | Nov 11 2008 21:35 utc | 1

The only thing I allow myself to expect is that human life will go on. Corollary to this and vis à vis entropy, as reader Plushtown has said, certain material goods will get more valuable no matter what. But precisely what the pecuniary warlocks are going to do to everyone's paper and when, I would not deign to guess.

Posted by: Cloud | Nov 11 2008 22:23 utc | 2

If we have "... $700 billion for TARP, a $500 billion-$750 billion "cyclical deficit," an additional $500 billion stimulus program and some uncertain amount for the Federal Deposit Insurance Corp..." doesn't that make the total much greater, as some amount of existing debt comes due and needs to be rolled over (it isn't all long-term, is it?)

Posted by: Tosk | Nov 11 2008 22:34 utc | 3

Personally, I rather tend to see which will be the obvious and logical outcome, and try to guess, once the conclusion and end of current cycle has been found, which process could lead to such an outcome. And as far as I'm concerned, the way this ends is pretty obvious, though I can't say exactly how and when it'll happen.

Posted by: CluelessJoe | Nov 11 2008 22:36 utc | 4

You quote the article "... the yield curve and the credit-default swaps market both indicate the markets are exacting a greater cost to lend to Uncle Sam..." and if you read the Barron's article the author is greatly exercised by the increased spread between short- and long-term rates. I don't see this, what am I missing here? The spread looks greater to me because the short-term rates have decreased significantly while the long-term rate has decreased slightly. It doesn't look like Uncle Sam has to pay more to borrow... in fact as the global economy tanks borrowing it is easier/cheaper for the U.S. because it's (or at least it has been, historically speaking) one of the safest places to put money... Folks will only be reluctant to lend to the U.S. when they have good alternatives, which at this point they don't!

Posted by: Tosk | Nov 11 2008 22:57 utc | 5

How Will The U.S. Finance Itself? on the backs of the poor, blood sweat and tears, as always...

Posted by: Uncle $cam | Nov 11 2008 23:00 utc | 6

The US cannot pay its debt, and cannot solve a financial crisis which stemmed from centralised inflationary conduct with more centralised inflationary conduct. This is why the US will experience a hyper-inflationary depression far worse than than the Great Depression.

Posted by: Al | Nov 11 2008 23:50 utc | 7

(Prior to the onset of this hyper-inflation a requiste short-term period of deflation will occur)

Posted by: Al | Nov 11 2008 23:54 utc | 8

This verbal exchange took place on CNBC yesterday. I recommend watching the entire video.

Posted by: Rick | Nov 12 2008 0:12 utc | 9

I can't read the Barron's article w/o subscription, but this Time article offers another snippet on CDSs:

According to data provided by Bloomberg using a model devised by JP Morgan, the price of this insurance [credit default swaps] currently implies that the odds of banking giant Morgan Stanley defaulting in the next five years are 45%. For Citigroup, another financial linchpin, they're 21%.

Posted by: Alamet | Nov 12 2008 0:17 utc | 10

On a smaller scale, how will California finance itself, considering...

Goldman Sachs urged bets against California bonds it helped sell

Goldman, Sachs & Co. urged some of its big clients to place investment bets against California bonds this year despite having collected millions of dollars in fees to help the state sell some of those same bonds.

The giant investment firm did not inform the office of California Treasurer Bill Lockyer that it was proposing a way for investment clients to profit from California's deepening financial misery. In Sacramento, officials said they were concerned that Goldman's strategy could raise the interest rate the state would have to pay to borrow money, thus harming taxpayers.
(snip)


Only tangentially related, I know, but it was too symbolic to miss.

Posted by: Alamet | Nov 12 2008 0:23 utc | 11

I just spent the weekend with a retired aerospace engineer--in fact a brilliant French mathematician who directed all the research conducted by a large and successful corporation. I brought up the subject of hedge-fund modellers trained in mechanical physics, and he became very animated--hot with exasperation and disdain. He gave me to understand that mathematical modelling is a fetish in our culture--an object of bad fascination and mystical thinking. As best I could tell, the only value of models, in his opinion, were the failures that showed their limitations.

Posted by: alabama | Nov 12 2008 0:55 utc | 12

From rick's #9 (I also highly suggest you guys see this...

Hennecke says that somebody high up at 'Standard and Poors' (there's a hell of a name if I ever heard one) actually is the one who made the statement that the U.S. could go bankrupt. And his co-correspondent almost had a emotional break down at the mention of the loss of AAA ratings.

In order to solve or stem the economic slowdown, Hennecke suggested the US would have to radically reduce spending across all sectors and recall all its troops from around the world.

Nice comment here:

Obama, are you listening? No more wars, ok? And lots and lots of sacrifice at home, ok?

Posted by: Uncle $cam | Nov 12 2008 1:29 utc | 13

Alamet,

I was able to read the Barron's article without a subscription.

Posted by: Rick | Nov 12 2008 1:53 utc | 14

#12 Alabama:

Did you perhaps catch this NYT article by Mark Buchanan? Another opinion that I picked up in one of my engineering trade rags seems to say that economic modelers is looking at the wrong thing.

US Treasuries, strangely enough, are currently viewed as an island of safety, national debt and deficit notwithstanding. I suppose one could invest in a country with no national debt, say, Russia, but I wouldn't advise it.

Posted by: Obelix | Nov 12 2008 2:05 utc | 15

I would appreciate any MOA’s reader’s comment on this article about gold/precious metals.

Uncle $cam, this seems to be specifically up your alley, so I am curious of your opinion. I have no solid information on this but it sure seems plausible and it does seem unusual that all of a sudden it is hard to buy gold coins/bullion unless one is buying in the six or seven digit figure range.
(Hat tip to economicrot.blogspot.com for this and my earlier post on this thread.)

Posted by: Rick | Nov 12 2008 2:22 utc | 16

Obelix,

This flight to 'safety' is temporary, as people and companies scamble to deleverage & dump stock.

Like I said: the US is bankrupt, as in right now, actually bankrupt. Of course news, finance and political outlets wont say this.
I'd concentrate on securing a dependable supply of food and water, not Russia...May I remind everyone that EVEN Greenspan admited the bottom is AT LEAST a few months away. People seriously need to engage with reality and stop kidding themselves. Tis situation will literally evolve into every man for himself soon.

Posted by: | Nov 12 2008 2:23 utc | 17

Rick,

Gold is being artificially held down. Gold will hit 2000$ easily when the lid is taken off. Do some research on the recent rush to gold by 'very, unusually big investors' as one gold buillon distributor recently said. This isn't measely $200 million players buying up. We're talking the higher echelons of the billionaire club.

Posted by: | Nov 12 2008 2:27 utc | 18

It will not be suprising to those in the know if the value of the US dollar depreciates 50%+

Posted by: | Nov 12 2008 2:40 utc | 19

Gravity. Remember gravity?

Suppose you fall out of an airplane, with all kinds of baggage. A lot of things seem to be happening at once. Shoes, toiletries, books, suits, and underwear all over the sky, all of them trending in a generally Earth-ish direction.

Never mind the confusion. Just step back a few, mentally, and look for the laws that govern such situations. You will be able to predict what is coming. Things tend to organize themselves around whatever Newtonian laws apply. Gravity will soon enough indicate to you that all is well, and all will be well.

Until that sudden stop that's coming steadily closer, more and more in focus.

Our economy is like that. What's immutable in all the talk of deflation, inflation, recession, recovery, bailout, flim flam, and fraud flying every which way including into the fan is this --

our currency is worth 3% of what it was when the Federal Reserve was founded in 1913. The work of the Fed has been to create money out of thin air by issuing loans, by issuing new debt instruments called dollars.

This taking of value out of the dollar is relentless. Every new dollar issued (above and beyond replacing worn out bills) makes all previously issued dollars worth a tiny bit less. Trillions of tiny bites add up after decades.

This printing of money that has no basis in real production or real assets, that is tied to nothing whatsoever except imagination, is what the Fed does for our economy, and it has increased in the past 8 years to seven levels beyond mind-boggling. It is increasing this fall of 2008 at eleven levels beyond mind-boggling. One trillion dollars was imagined into existence, and loaned out to financial institutions on Paulson's List, in just 23 days during October.

Like gravity acting on a falling body, this dilution of buying power in the world's reserve currency will organize the American dollar more and more precisely around complete worthlessness -- which is that sudden stop that is coming along relentlessly.

So, never mind the confusion out there. Just watch things settle out.

There will be a bit of wild volatility in the stock market, and in asset prices, as people chase a parking place for value, but relentlessly and inevitably value will leave off the dollar entirely, moving instead to real things like land, buildings, machinery, tangible commodities actually in hand, valued skills, and any means of production in your neighborhood.

Americans will find, within five years, that about five thousand individuals own virtually everything valuable in America, and many of those five thousand are not even Americans. This is where all the value in our currency will go to. The current winners of the capital collecting game will use the dying dollar to buy every damned thing in sight.

Maybe the American people will take every damned thing back, and throw the five thousand out onto the street with the American people.

Prolly not. Sheep are often revolting, but do surprisingly little actual revolting.

Americans will have a new currency in a year or two, probably a mix of Canadian, US, and Mexican buying power called the Amero, and it will be issued at some small fraction of the last dollar in existence, on its last day. Ten bucks for one Amero. Twenty? It will hardly matter. When the dollar has turned to toilet paper, you won't really care.

You can't fall out of an airplane without hitting the ground. The parachute you have or do not have is mere detail. You will hit the ground at some speed or another.

You can't print money not based on real things, fiat money, imagined money, and keep your currency. You will lose your currency, at some speed or another.

The historical path of fiat currency is always the same -- it looks like a hockey stick viewed on its side. A long handle sloping gently upward, followed by a sudden nearly right angle turn straight up. This sudden tangent is the final few percent of perceived value suddenly departing the currency. It is the point where compound interest suddenly goes into hyperdrive.

Try it. Put one grain of rice on one square of a chess board. Put two on the next one, four on the next one, eight on the next one, and keep doubling like that to square 64. You won't believe how the pile gets out of hand in just the last few squares.

That's where the dollar is now. Square fifty-nine. Hyperinflation is as inevitable as the ground rushing up below a parachute-less parachutist.

Posted by: Antifa | Nov 12 2008 2:58 utc | 20

I think we can expect deflation in financial assets of all kinds, and a continuation of inflation in the CPI.

RGE, the Economist, Makin, practically everybody is saying "Just Print It". In fact, the Fed is already printing money hand over fist (see this chart). The question is whether their promise to mop it up once the economy begins moving again is credible. In general, to do that they sell Treasuries but they don't actually own that many any more. If they sell what they have instead (toxic mortgage waste) then those markets (and banks) take another hit. If investors don't believe that the Fed really will mop the cash up then long rates skyrocket, and bond portfolios (much larger than equity portfolios still) get slaughtered.

In the immediate future the financial bailouts don't need to be financed - the money 'injected' is simply put back on deposit with the Fed. But the operating deficit - the normal red ink of government eg. Iraq - does need to be financed by either new domestic saving (which comes out of consumption making the recession worse) or new foreign saving (from their increasing trade surpluses). The amount of cash being printed (40% increase in monetary base this year!) leads me to believe the trade deficit is falling (foreigners no longer want US dollars?) and consumer savings are not enough.

I would own real things that people can use, and un-leveraged companies that provide them.

Posted by: PeeDee | Nov 12 2008 3:09 utc | 21

What Antifa said.

Posted by: PeeDee | Nov 12 2008 3:12 utc | 22

From the time Christopher Colombus first arrived on American soil, to the day the slave owners declared their declaration of independence, the general 'standard of living' of slaves had improved quite dramatically. If your 'standard of living' improves according to the IMF, does that necessarily mean that you are not a slave?

Posted by: Al | Nov 12 2008 3:31 utc | 23

FOR SALE: One Barrel of Oil. Asking 1 gross eggs, 2 hens, 1 rooster.

Posted by: jim p | Nov 12 2008 3:45 utc | 24

This is how I understand the current financial situation. Correct me if I am wrong. As I understand it the financial markets are right now somethink like:

Company A owns company D billions, that debt is insured by company B.
Company B owns company C billions, that debt is insured by company A.
Company C owns company A billions, that debt is insured by company D.
Company D owns company B billions, that debt is insured by company C.

Suddenly everyone has realised that no one has the billions. Oh, and they do not either know exactly how the others debt/insurance situation looks. Their assets are the loans to the other banks, and their liabilities loans from the other banks and their insurances of the loans. It is obvious it will collapse, but before that they all milk the taxpayers for what they are worth and all hope that when it all hits the fan, they might be the last bank standing.

While the banks play their cards very thightly, they do not trust each other. Remember, they are waiting for the other banks to collapse. Thus that which depends on the banks as credit intermediaries are dying. You know stuff like production and trade.

Heaping money on the banks will not solve anything. Depending on the size of the problems, nationalisation of collapsing banks might not help either. If the tangled obligations are deemed larger then what the state could stand paying, you have just moved the problem.

As I see it, transparency is the key to restore confidence. This could be done by b´s suggestion of declaring all of these exotic obligations null and void. It could probably be done in other ways too, I am no expert on finance, nor do I really know how entangled the system is. But apparently no one knows that, which is exactly why everything is freezing.

As it has become apparent that this financial web and its faults span every nation, a multinational solution would be necessary. Again b´s solution would fullfill that, there might also be other ways.

But what we can know is that constructive, multinational solutions for the good of the people - and against the wishes of the banks, the greed-is-good think tanks, and others who stand to loose - is very unlikely. Thus trade and production will slow down untill it gets so bad that new solutions look worthwhile.

I would say we are looking at a 1930ies depression scenario globally.

Posted by: a swedish kind of death | Nov 12 2008 4:02 utc | 25

As always, I will take a contrary view.

First, inflation is adjusting down. Prices for oil and commodities are falling. Oil broke the $60 level today and closed below that mark. Sixty dollars was the support level. Oil will hit fifty and maybe go to thirty dollar per barrel. Food inflation will start to be reduced by the end of next year. Copper, natural gas and all other commodities are falling including gold. Hedge funds are selling under pressure and the false commodity inflation is being unwound.

You cannot have inflation when commodities are falling or during a deflationary period. Printing money does not cause inflation. The ability to raise prices causes inflation.

We can print all the money we want during falling prices. Its after the next economic up cycle starts that inflation could start. Taxes will need to be raised and debt extinguished by sucking the money back out after growth gets back to about 3%.

I believe you'll see much more work on the fiscal side instead of the monetary side in a new administration. Certain sectors of the economy must be nourished, other wasteful parts, hedge funds, money players will be quelled. It is my belief just through hints in the media and on CNBC a shift in elite thinking id taking place and the financialization of the economy has been determined a mistake. CNBCs noon program is actually hostile knowing the changes will reduce Wall Street influence and theirs to boot.

Mine is an optimistic scenario but I do think printing money is safe for now. My worst case scenario is the US defaulting which could happen, but with commodities falling and consumers basically getting a back door tax break from it, homeowner balance sheets could get healthy quickly.

Posted by: jdp | Nov 12 2008 4:16 utc | 26

a swedish kind of death (love the name, man):

"As I see it, transparency is the key to restore confidence". Most people, myself included, would agree with this comment, which is why it is an absolute disgrace that this news has just been swept aside to the periphery like its some unimportant sports score:

Fed Defies Transparency Aim in Refusal to Identify $2 trillion+ in taxpayer Loans to Banks:
http://www.bloomberg.com/?b=0&Intro=intro3

Where is the outrage, I ask?

Posted by: Al | Nov 12 2008 4:35 utc | 27

JDP,

- inflation is decreasing
- oil and commodities (including gold) are decreasing

In one - two years, you will find that in both cases the reverse will be true. All economists who, from 2003-2007, correctly predicted that a financial crisis would emanate from the sub-prime mortgage market agree with me in this regard.

“You cannot have inflation when commodities are falling or during a deflationary period”, you state. Regarding commodities this is not true, due to demand from other areas, and regarding deflation I stated previously that, “prior to the onset of this hyper-inflation a requisite short-term period of deflation will occur”, which is concordant with modern day finance history.

“Printing money is safe for now”
“Homeowner balance sheets could get healthy quickly”

…?

Posted by: Al | Nov 12 2008 4:52 utc | 28

Andy Xie agreesAs the technical factors run their course, speculators will come back into energy and gold. Real interest rates are already negative, and rate cuts could accentuate this. With paper currency depreciating in real value, it is rational for investors to buy value-preserving commodities like energy and gold. The bullish story for energy and gold may last for a decade. Of course, they will fluctuate, as the current trend demonstrates. But they will remain good assets in an era of inflation.
...
With the US’ budget deficit likely to be 4% of GDP in 2008 and an astonishing 6% of GDP in 2009 — without counting the bailout costs — it may have to issue USD 3 trillion of new papers into the Treasury market. If the market cannot absorb this, and the Fed steps in to buy, it is equivalent to printing money to fund fiscal spending.

When it comes to the “inflation or deflation” debate, we should consider who Fed chairman Ben Bernanke is. He has spent his lifetime researching ways to stop deflation, i.e., finding new ways to print money. When push comes to shove, he will do anything to stop deflation. With Bernanke at the helm of the Fed, we should worry about inflation, not deflation.

The creative monetary measures ahead could stabilize the business sector, but won’t prevent a recession.

Posted by: b | Nov 12 2008 12:07 utc | 29

It is my belief, and i could be wrong, that oil will remain low into about 2011 and then maybe go to as high as $90 per barrel. Natural gas will avergae $7-8 per MCF. Go to www.wtrg.com and look at price trends. The Dems will bring the wars to a close and pressure on prices will recede due to the war premium coming out of the market. Also, policy changes in filling strategic reserves will put less pressure on oil (less hoarding).

Going back to 1970, oil and other commodities are always lower due to more focus on the real economy. Speculatve money doesn't go into commodities during democratic admins. The only exception is Carter and we could be having another Carter era, I don't know for sure. I guess we will see what happens but the Keynesian model, which people seem to have forgotten will work totally different than supply side.

Anyway, we'll see, I been wrong before.

Posted by: jdp | Nov 12 2008 14:15 utc | 30

I think this is required reading:

Dominique Strauss-Kahn: "I will propose a global regulation strategy to the G20"

The world appears to be changing now at breathtaking speed, and not always for the better. -Rick

Posted by: Rick | Nov 12 2008 14:58 utc | 31

jdp #30,

I disagree with your conclusion and reasoning but I doubt we will have to wait very long to see what happens.

Posted by: Rick | Nov 12 2008 15:07 utc | 32

Rick @ 16:

I would appreciate any MOA’s reader’s comment on this article about gold/precious metals.

IMO, very very speculative and highly dubious. For those expecting the worst and hunkering down accordingly, I'm sure some of this stuff is going on. However... at least as I see it, w/post election circumstances there is enormous opportunity to redirect US focus, human energy & expertise and material resources to very much needed development which "the market" has entirely ignored (another foundation of Reaganomics proved false BTW).

I think this plays out as response to BO's econ initiatives or lack thereof. Personally, I wish BO would get off the pot.

I also think there is WS push to try and survive this through another round of insular bubble wrap. I've read/watched all kinds of utterances from various hedge & fund managers suggesting moving paper around, writing off debt and clearing balance sheets will solve everything. Charlie Rose did interview last night with Bill Ackman | Pershing
Square Capital Management
(video not up as of now) which reinforced this notion. He thinks we've got plenty of equity on US shores, a notion I've heard from others in his position. Incredibly (at least to me) he cited US gov's +/- 33% equity in US economy as "reserve", the source of which is taxes.

For me anyway, the absurdity of this position needs no explanation. I mean, please... we're now down to dependence on US taxpayer as last resort equity source?

I think his entire premise is a mirage.

Prior to congressional break/election, I watched a ton of C-SPAN hearings on various aspects of all this. If anything stood out, it's fact that very few lawmakers understand width/breadth/scope of our financial mess, much less reasoned appropriate responses.

Whatever underlying, baseline value/equity exists (or not) on our shores, I think of more concern is vapid lack of critical mass intellectual capacity... at least in the positions of power/influence that moves things along.

I mean, lets face it... we're broke. And I see this morning lawmakers (Sen Baucus) now rolling out plans to finance univ health care. Really, what are they thinking?

Hmmm... maybe if I went out and bought a new Ferrari it would make me feel better through this troubled time, no?

Anyway, if gold becomes currency of the day, it's probably going to follow a $USD collapse IMO. If you read Roubini regularly, he's sure worried about it... and he's not alone.

I'm still hoping we can turn things around the right way before that happens... I think it can be done. But needed action not evident anywhere that I see.

...

b @ 29:

With the US’ budget deficit likely to be 4% of GDP in 2008 and an astonishing 6% of GDP in 2009 — without counting the bailout costs — it may have to issue USD 3 trillion of new papers into the Treasury market.

I'm curious where you're getting these #s. I'm also very curious... what are their US GDP estimates for '09? What kind of contraction do they forecast? I think % of GDP likely considerably higher than that given major econ slowdown.

I'm on road 'till Saturday or so (my bookmarks on this @ home), but some pretty good econ bloggers have made the case from which I posit this notion.

If the market cannot absorb this, and the Fed steps in to buy, it is equivalent to printing money to fund fiscal spending.

What's new about that? AFAIC, that's all they've been doing since (at least) '05. It's just accelerating now, and (finally) becoming transparent/visible to Joe-The-Credit-Card-Holder now that all their bubbles have burst.

Well, at least Junior has made the world safer & we're winning the war on 'terra... we are safer, aren't we?

Posted by: jdmckay | Nov 12 2008 15:46 utc | 33

My view is that the day will come when the Treasury simply refuse to redeem their notes - other than say on the basis of a forced purchase to replace - ie a mandate rollover providing perpetual debt... or maybe a liited rollover to lock in the debt. Redem US$1BN and re-lend US$0.95 Bn.... or rollover to US$1.05 Bn with a special terminal bonus of an extra 0.5%.

Or a variation of such an approach.

I floated this idea over 2 years ago to my friends and received a lot of polite smiles ad a mild nodding of heads.

Posted by: ziz | Nov 12 2008 16:48 utc | 34

CNBC reports the US might default, repeat of Rick above.http://www.cnbc.com/id/27641538>link

Jesse has an article on the same topic:

http://jessescrossroadscafe.blogspot.com/2008/11/thinking-unthinkable-is-bond-market.html> ...Are the markets warning of a US debt default?

and here: http://dandelionsalad.wordpress.com/2008/11/07/will-the-us-default-on-its-foreign-debt-interview-with-michael-hudson/> dandelion salad

I read some arguments about inflation vs deflation but like b (and with far less knowledge) I don’t see that as relevant. Then there is stagflation...At least these are happenings that occur on the ground rather than crappy models used for prediction whose function is either to comfort, reassure, or bamboozle, swindle, obfuscate, or simply constructed because the creator likes his cushy job and has his eye on Amanda one floor down.

I expect some kind of default, or other surprise happening, which could take many forms, because the lender (or buyer-upper of toxic sewage) of last resort, the US Gvmt, with all its alphabet-soup tills, simply cannot take on that much debt. A ponzi scheme kicking the debt upstairs, but the buck, as they say stops there, after that there is no place to go. That is ‘old rules’ thinking as well. So who knows. Too many unknown unknowns to even begin grappling with it.

Posted by: Tangerine | Nov 12 2008 16:57 utc | 35

After the dotcom collapse of 2000, we had to go through 9/11 and its aftermath to get the economy back on track.
Considering the scope of the current economic meltdown, try and guess what kind of massive and shocking event would be required.

(yes, my tinfoil hat is doing fine, thanks for asking)

Posted by: CluelessJoe | Nov 12 2008 22:20 utc | 36

Rick @ 14,

I tried with two different browsers, and all I could see was the headline plus an offer for free weeks if I subscribe. It is OK, though, I finally got to read it at the Jesse's Café post Tangerine links to.

Posted by: Alamet | Nov 13 2008 0:18 utc | 37

Greetings from France :)
you asked for Geab, so here's a link for the whole 2008 editions (N°21-28 / January-October) so far...
http://www.mediafire.com/?m5tnmdwsqqe
but this is the french edition, you'll have to rely to a freedom-fries-compliant-friend or use google translation :D
Bye

Posted by: Fonzy | Nov 13 2008 23:10 utc | 38

Thanks Fonzy

Posted by: b | Nov 14 2008 9:23 utc | 39

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