Posts Tagged ‘Federal debt’

Kyle Bass With David Faber: Bernanke’s ZIRP Is An ‘Inescapable Trap;’ Muni Bond Bloodbath Beckons But “States Will NOT Default”

Courtesy of The Daily Bail  

CNBC Video – Kyle Bass with David Faber – Feb. 16, 2011 

Visit msnbc.com for breaking news, world news, and news about the economy

Video – Part 2

Source – CNBC

Municipal bond defaults on the local level are likely and investors would be better off avoiding them, according to Kyle Bass, managing director of Hayman Capital.

Bass said he generally agrees with the call by famed banking analyst Meredith Whitney, who said as many as 100 defaults are likely that will cost more than $100 billion in damage.

Though Whitney’s call has prompted substantial backlash from her colleagues in the industry, Bass said the question is more a matter of degree.

"There are going to be a number of muni defaults, but it’s where you draw the line.  Will states be allowed to default?  Will legislation be introduced to allow states to restructure?  I don’t believe that’s the case.  I believe states will not default." 


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CBO Director: A Somber Warning

CBO Director: A Somber Warning

Courtesy of Karl Denninger at The Market Ticker 

File this in the "no, really?" box:

With U.S. government debt already at a level that is high by historical standards, and the prospect that, under current policies, federal debt would continue to grow, it is possible that interest rates might rise gradually as investors’ confidence in the U.S. government’s finances declined, giving legislators sufficient time to make policy choices that could avert a crisis. It is also possible, however, that investors would lose confidence abruptly and interest rates on government debt would rise sharply, as evidenced by the experiences of other countries.

So let’s see…. if you buy bonds today there’s a chance you could lose some of your money, or there’s a chance you could lose a whole lot of your money.

That sounds comforting, doesn’t it?

But it’s the next sentence that ought to make you sit up in your chair:

Unfortunately, there is no way to predict with any confidence whether and when such a crisis might occur in the United States.

Right.

This is what history tells us.  It is also what I have been trying to amplify now for the past three years.  The reason is this graph:

What I find amusing is that the CBO is flapping its jaws over only the government’s liabilities.  It, by the way, is also looking only at the debt held by the public (and not the games played with FICA and Medicare):…
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Krugman vs. Greenspan on “That ’30s Feeling”; Calculated Risk Sides with Krugman, I Side with Greenspan

Krugman vs. Greenspan on "That ’30s Feeling"; Calculated Risk Sides with Krugman, I Side with Greenspan

Person's hands along side a turned out pocket

Courtesy of Mish 

Courtesy of Calculated Risk here are a pair of articles, one from Krugman and another from Greenspan on the limits of debt.

That ’30s Feeling

Paul Krugman has That ’30s Feeling

Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s.

Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.

But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.

What’s the economic logic behind the government’s moves? The answer, as far as I can tell, is that there isn’t any. ….

How bad will it be? Will it really be 1937 all over again? I don’t know. What I do know is that economic policy around the world has taken a major wrong turn, and that the odds of a prolonged slump are rising by the day.

U.S. Debt and the Greece Analogy 

In sharp contrast to Krugman’s position, Alan Greenspan compares the US to Greece in U.S. Debt and the Greece Analogy 

An urgency to rein in budget deficits seems to be gaining some traction among American lawmakers. If so, it is none too soon. Perceptions of a large U.S. borrowing capacity are misleading.

Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.

How much borrowing leeway at


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About The Jobless Recovery ….

About The Jobless Recovery ….

Courtesy of Jesse’s Café Américain

For the first time we had a ‘jobless recovery’ after the tech bubble bust thanks to the wonders of Greenspan’s monetary expansion and the willingness (gullibility?) of the average American to assume enormous amounts of debt, largely based on home mortgages, the house as ATM phenomenon. Not to mention the large, unfunded expenditures of the government thanks to tax cuts and multiple wars.

household cash less liabilities

national debt
 

Now the pundits are talking about the hopes for another jobless recovery.

Who is going to go deeply into debt this time? It looks like its the government’s turn. And the expectation is that foreigners will continue to suck up the debt.

growth in public debt

Federal Debt (Percentage of GDP)
 

If you think this explosion of Federal debt will facilitate a stronger US dollar you might be suffering from ideological myopia or some other delusion.

Some years ago we forecast that the financiers and their elites would take the world down this road of leveraged debt and malinvestment, and then make you an offer that they think you cannot refuse. They will seek to frighten you with a collapse of the existing financial order, because that is what they fear the most themselves, for their own unique positions of power.

The offer will be a one world currency, which is a giant step towards a one world government, managed by them of course. Once you control the money, local fiscal and social preferences start to matter less and less.

This theory seems more plausible today than it did then.


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Phil's Favorites

Jack Dorsey's decision to quit Twitter is not a vote of confidence in future of social media

 

Jack Dorsey’s decision to quit Twitter is not a vote of confidence in future of social media

Courtesy of Theo Tzanidis, University of the West of Scotland

When Jack Dorsey made the sudden public announcement that he had quit as CEO of Twitter, it was only ever going to have happened in one place – Twitter itself. It reminded me very much of Elon Musk’s entertaining tweet adventures, as Dorsey tossed his resignation letter onto the social medi...



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Zero Hedge

Biden To Impose Tighter Travel Restrictions On Foreigners

Courtesy of ZeroHedge View original post here.

Update (0900ET): More reports about the new CDC-recommended travel restrictions have hit on Wednesday as the Biden White House has all but confirmed its plans to impose new restrictions on travel despite the WHO's pleas that South Africa not be penalized for warning the world about the new variant.

To be sure, the restrictions being considered by the administration would still allow travelers with up-to-date COVID testing (within the last 24 hours) to enter the country. Presently, vaccinated travelers must get tested within three days of boarding their fligh...



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Biotech/COVID-19

Omicron and market sell-off: don't be surprised if there's more turbulence to come

 

Omicron and market sell-off: don’t be surprised if there’s more turbulence to come

shutterstock.

Courtesy of Arturo Bris, International Institute for Management Development (IMD)

Until the Omicron variant hit the headlines, the signs were that 2021 was going to close with a stellar stock-market performance. Most markets have been on the rise since the beginning of the year, with the S&P500 up about 25% and the FTSE All Share index up by about 10%.

There had ...



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Politics

The first Thanksgiving is a key chapter in America's origin story - but what happened in Virginia four months later mattered much more

 

The first Thanksgiving is a key chapter in America’s origin story – but what happened in Virginia four months later mattered much more

In the 19th century, there was a campaign to link the Thanksgiving holiday to the Pilgrims. Bettman/Getty Images

Courtesy of Peter C. Mancall, USC Dornsife College of Letters, Arts and Sciences

This year marks the 400th anniversary of the first Thanksgiving in New England. Remembered and retold as an allegory for perseverance and cooper...



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Chart School

Gold and Silver still working higher

Courtesy of Read the Ticker

Using Gann Angles from zero we can time the next run up, and it is near.

The last two days gold and silver are down on the back of central bankers talking the US Dollar higher in a attempt to off set inflation. A rising dollar is a form of tightening. Also the talk of a faster 'taper' has sent interest rates higher. But Luke Gromen knows this cant not last.

@LukeGromen Externally-financed twin deficit nations with insufficient external financing (ie the US, not Japan) cannot abide rising real rates for long.


RTT Comments: What this means a higher US Dollar makes it harder for those outside the US to buy the vast quantity of US Treasuries. 


U...

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Digital Currencies

Stablecoins: these cryptocurrencies threaten the financial system, but no one is getting to grips with them

 

Stablecoins: these cryptocurrencies threaten the financial system, but no one is getting to grips with them

Safe as houses? iQoncept

Courtesy of Jean-Philippe Serbera, Sheffield Hallam University

Cryptocurrencies have had an exceptional year, reaching a combined value of more than US$3 trillion (£2.2 trillion) for the first time in November. The market seems to have benefited from the public having tim...



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Promotions

Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options. 

Watch here:

TD's webinar with Phil (link) or right here at PSW

Screenshots of TD's slides illustrating Phil's examples:

 

 

&n...



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Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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