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Brace For Impact: In 2010, Demand For US Fixed Income Has To Increase Elevenfold... Or Else
As everyone is engrossed by assorted groundless Christmas (and other ongoing bear market) rallies, and oblivious to the debt monsters hiding in both the closet and under the bed, Zero Hedge has decided it is about time to present the ugliest truth faced by our 'intellectual superiors' and their Wall Street henchman who succeeded in pulling off Goal #1 for 2009 - the biggest ever bonus season (forget record bonuses in 2010... in fact, scratch any bonuses next year if what is likely to transpire in the upcoming 12 months does in fact occur).
If someone asks you what happened in 2009, the answer is simple - two things. There was a huge credit and liquidity crunch, and then there was Quantitative Easing. The last is the Fed's equivalent of band-aiding a zombied and ponzied corpse, better known as the US economy. It worked for a while, but now the zombie is about to go back into critical, followed by comatose, and lastly, undead (and 401(k)-depleting) condition.
In 2009, total supply of all USD denominated fixed income, net of maturities, declined by $300 billion from $2.05 trillion to $1.75 trillion. This makes sense: the abovementioned crunches stopped the flow of credit from January until well into April, and generally firms were unwilling to demonstrate to the market how clothless they are by hitting the capital markets until well into Q2 if not Q3. What happened was a move so drastic by the Fed, that into November, the worst of the worst High Yield names were freely upsizing dividend recap deals (see CCU) - the very same greed and stupidity that brought us here. Luckily, so far securitization and CDOs have not made a dramatic entrance. They likely will, at which point it will be time to buy a one-way ticket for either our southern or northern neighbor, both of which, in the supremest of ironies, transact in a currency that will survive long after the dollar is dead and buried.
Back to the math... And here is the kicker. Accounting for securities purchased by the Fed, which effectively made the market in the Treasury, the agency and MBS arenas, but also served to "drain duration" from the broader US$ fixed income market, the stunning result is that net issuance in 2009 was only $200 billion. Take a second to digest that.
And while you are lamenting the death of private debt markets, here is precisely what the Fed, the Treasury, and all bank CEOs are doing all their best to keep hidden until they are safely on their private jets heading toward warmer climes: in 2010, the total estimated net issuance across all US$ denominated fixed income classes is expected to increase by 27%, from $1.75 trillion to $2.22 trillion. The culprit: Treasury issuance to keep funding an impossible budget. And, yes, we use the term impossible in its most technical sense. As everyone who has taken First Grade math knows, there is no way that the ludicrous deficit spending the US has embarked on makes any sense at all... none. But the administration can sure pretend it does, until everything falls apart and blaming everyone else for its fiscal imprudence is no longer an option.
Out of the $2.22 trillion in expected 2010 issuance, $200 billion will be absorbed by the Fed while QE continues through March. Then the US is on its own: $2.06 trillion will have to find non-Fed originating demand. To sum up: $200 billion in 2009; $2.1 trillion in 2010. Good luck.
As we pointed, the number one reason why 2010 is set to be a truly "interesting" year is a result of the upcoming explosion in US Treasury issuance. Fiscal 2010 gross coupon issuance is expected to hit $2.55 trillion, a $700 billion increase from 2009, which in turn was $1.1 trillion increase from 2008. For those of you needing a primer on the exponential function, click here. But wait, there is a light in the tunnel: in 2011, gross issuance is expected to decline... to $1.9 trillion.
And while things are hair-raising in "gross" country (not Bill...at least not yet), they are not much better in netville either. Net of maturities, 2010 coupon issuance will be about $1.8 trillion, a 45% increase from the $1.3 trillion in FY 2009 (and the paltry $255 billion in 2008).
Now everyone knows that the average maturity of the UST curve has become a big problem for Tim Geithner: nearly 40% of all marketable debt matures within a year (a percentage that has kept on growing). In fact, the Treasury provided guidance in its November 2009 refunding, in which it stated that it intends "to focus on increasing the average maturity" of its debt after relying heavily on Bill issuance in H2. Once again, we wish Tim the best of luck.
Why our generous best intentions to the US Treasury? Because unless the US consumer decides to forgo the purchase of the 4th sequential Kindle and buy some Treasuries (and not just any: 30 Year Bonds or bust), the presumption that the Bond printer will have the option of finding vast foreign appetite for its spewage is a very myopic one. We already know that China is a major question mark, and will aggressively be looking at pumping capital into its own economy instead of that of Uncle Sam's - at some point the return on investment in its own middle class will surpass that of funding the rapidly disappearing US middle class. That tipping point could be as soon as 2010.
As for Japan - the country has plunged into its nth consecutive deflationary period. Whether or not the finance minister announces yet another affair with the Quantitative Easing whore on any given day, depends merely on what side of the bed he wakes up on. The country will have its hands full monetizing its own sovereign issuance, let alone ours.
Lastly, the UK - well, with the country set to have zero bankers left in a few months, we don't think the traditionally third largest purchaser of US debt will be doing much purchasing any time soon.
None of this is merely speculation: October TIC data confirmed these preliminary observations. It will only become more pronounced in upcoming months.
How about that great globalization dynamo: emerging markets? Alas, they have their hands full with issuing their own record amounts of both sovereign and corporate debt as well: in 2009 gross EM debt issuance reached an astounding $217 billion, $29 billion higher than the previous record in 2007. Gross EM issuance was particularly high in the last quarter at $73 billion, with October breaking the record for the largest ever monthly gross issuance of emerging market global bonds at $38 billion (January is traditionally the busiest month of the year.) With $81 billion, 2009 was notably a record year for sovereign bonds, while gross issuance of corporate bonds amounted to $136 billion, the second highest level after that of 2007 with $155 billion.
Bottom line: everyone has major problems at home, and is more focused on the supply than the demand side of the equation.
What options does this leave for the administration? Very few, and all of them are ugly. As we stated earlier on, the options for the Fed are threefold:
- Announce a new iteration of Quantitative Easing. This will be met with major disapproval across all voting classes (at least those whose residential zip codes do not start with 10xxx or 068xx), creating major headaches for Obama and the democrats which are already struggling with collapsing polls.
- Prepare for a major increase in interest rates. While on the surface this would be very welcome for a Fed that keeps hinting that deflation is the biggest concern for the economy, Bernanke's complete lack of preparation from a monetary standpoint (we are surprised the Fed's $200 million reverse repos have not made the late night comedy circuit yet) to a forced interest rate increase, would likely result in runaway inflation almost overnight. The result would be a huge blow to a still deteriorating economy.
- Engineer a stock market collapse. Recently investors have, rightfully, realized there is no more risk in equities, not because the assets backing the stockholder equity are actually creating greater cash flow (as we demonstrated recently, that is not the case), but simply because taxpayers have involuntarily become safekeepers for the entire stock market, due to Bernanke's forced intervention in bond and equity markets. Yet the President's Working Group is fully aware that when the time comes to hitting the "reverse" button, it will do so. Will the resultant rush into safe assets be sufficient to generate the needed endogenous demand for Treasuries is unknown. It will likely be correlated to the size of the equity market drop.
If the Fed decides on option three, we fully believe a 30% drop (or greater) in equities is very probable as the new supply/demand regime in fixed income becomes apparent. We hope mainstream media takes the ideas presented here and processes them for broader consumption as indeed the Fed is caught in a very fragile dilemma, and the sooner its hand is pushed, the less disastrous the final outcome for investors. Then again, as Eric Sprott has been pointing out for quite some time, it could very well be that the US economy has become merely one huge Ponzi, and as such, its expansion or reduction on the margin is uncontrollable. We very well may have passed into the stage where blind growth is the only alternative to a complete collapse. We hope that is not the case.
Merry Christmas and Happy Holidays to all readers.
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The banks are currently building capital from the interest accrued but this will take time. FR injected liquidity and that's it. It can't ask for it back since the banks source or means to build capital will then be depleted.
Here's a great article
http://www.debtdeflation.com/blogs/
Correct me if I am wrong, but if banks buy Treasuries rather than holding cash, this has no impact on capital ratios (this is what the Greek banks are doing and pissing off the ECB by abusing the purpose of the special liquidity facilities). The risk weighted assets methodology has a flaw as it misses the fact that borrowing short term to buy longer term fixed rate assets creates massive rate risk. However, there are plenty of solutions using derivatives, including the Fed entering into swaps with the banks.
The Fed has three choices: 1) a QE 2 announcement soon, causing a plunge in already low Democrat popularity ahead of the mid-term elections;
Tyler, when did QE become a political liability? Seriously, those with economic lteracy already are dissapointed with Obama. Per Bloomberg, Ben's reappointment is a done deal (although I don't really believe this). Why will a QE extension create a political problem?
Somewhat wishful thinking there, me thinks. Kinda makes me wish I could print money. I'd be a very popular guy, on the whole.
Not with those already holding your money, for you'd be devaluing their holdings! But, for those with NO money, yes, you'd be popular, until, that is, you turn the crank for the next person...
Yeah, but as long as I wasn't sticking it to the Big Dogs, I could run it long enough to live the life, baby . . . and by the time the jig was up, I'd be fully reallocated and relocated, my posse sharing my good fortune.
Dang, that sounds eerily familiar.
I come in here everday, and I hear about one statistic after another that assures certain doom. Yet, every day, day after day, nothing happens in the real world around me, or in the stock market. After all this crying wolf, even though logically you are correct, it just seems like the surreal life may continue forever, oblivious to the facts.
Economic gravity can be defied for far longer than people could imagine possible. But one thing is certain - eventually reality reasserts itself. ALWAYS. Human greed and fear is no different now than they were in the time of the South Sea bubble, Tulip mania and financial crashes throughout history.
Because of our modern communications systems, the crash will come VERY fast. Faster than you can react to it. Be prepared now, don't be one of the sheep who will be devoured before they can do anything about their situation.
You may be assured that it will continue until, one day, it doesn't.
"When there is a gap between perception and reality, it is only a matter of time until the gap is reconciled. But since reality is so stubborn and tolerates no gamesmanship, it is impossible for reality to rise to meet perception. So it follows that perception must decline to meet reality. Après moi le déluge."
- From the book "Supermoney"
Or, my favorite:
"Mother Nature Bats Last"
The Bernanke game plan. He will restart QE as necessary. If foreign governments begin to balk at our monetization, he will buy THEIR paper.
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm
I've got to agree with those claiming that QE will not be a political liability. 95% of Americans are too damn stupid to understand it until gas hits $5/gallon.
Good one, my bets are also on QE2 and buying everything that's fixed or not.
Anything, just to keep the music playing.
In the meantime, it would be an idea to feed the denial with patriotism which will blind any critical thinking. So expect a "shock and awe" event in jan or feb 2010.
A war would be a good one, "initiated" by a nuclear offensive strike by Iran on Israel. Everyone would then understand Nobel prize winner O. to create a few mushroom clouds.
Or what about "finding" nuclear arms in Venezuela and a subsequent invasion? Close by, cheaper so less carbon footprint ;)
We will know soon when MSM starts beating the patriotic drums.
"Playing for time" is the motto, hoping that the green shoots will eventually pay for the mess.
ZH must keep a close eye on "das Endspiel" on the stock exchange as I am sure insiders are silently preparing themselves for the inevitable.
Good work ZH.
Make that $20/gallon.
Or higher.
People will be seeking loans to buy gas.
Book it.
Shortages come to mind also.
That would be a very smooth and easy workout for all countries under pressure to finance massive "stimulus" programs; with all boats floating on the same sea, relative positions of the players is the only thing that matters to them (not water level) as long as they can essentially continue to manage PR. That seems to require a lot of faith in the strength of our negotiating position and enforcement abilities (not to mention the rest of the world's desire to maintain the status quo) but, hey, our overlords may be up to it for a while. Only a relatively short-term solution, of course, but kicking the can down the road until . . . whatever does seem to be the name of the game.
I am sorry, but I just do not see world synergy with the aggressive policies (war) of the Obama administration. We are not floating on the same sea. We are sinking to the bottom, and the US needs the largest amount of ballast.
Obama, may wage military war, but the rest of the world can fight a currency war against the dollar, and it is the President's misguided fiscal policies, and by extension the FED, which make the nations currency vulnerable.
In war machines the US is militarily strong, but war (guns) has to be financed just like food stamps (butter), and for the US that means through issuance of debt. In some instances, I see parallels to the Russian collapse, more so than Argentina. That is, government collapsing from within while we attempt to squander more money on "police" actions abroad. It is perhaps ironic, that our most recent large military action, like the former USSR, plays out in Afghanistan.
Mark Beck
Yeah, I don't really see it working either, but I can see the delusional fools trying. Agree also with your recognition of our actual vulnerability in an all-out economic war. I hadn't thought about the Afghanistan parallel--very ironic indeed.
A very merry Christmas
And a happy New Year
Let's hope it's a good one
Without any fear - John Lennon
Great article, Tyler! I've been saying the same about the EM, which has gotta include Sovereigns once widespread worldwide drought this crop season sets in motion major domestic financing challenges for all "undeveloped" countries that wish to avoid popular revolutions (and even financially impacting politically stable China and India, I expect.)
Damn, very thought provoking article, TD. I've been sitting here typing and retyping in reply to your arguments for the past half-hour, but continuing rechecks of the article force me revise/cut everything I write . . . and, at this point, I'm gonna just give it up and stew a while. It takes really good shit to do that, man. Thanks.
Will TBT skyrocket or get cancelled?
When OBL gets a nuke in Pakistan not only will we gladly give over two Trillion we will support drafting a million of our kids.
Now that's what I call brace for impact.
They have to wag the dog hard enough so that we don't question the system.
There is a good chance that a "double dip" makes the non-Treasury 2010 estimates too high. Blowing out credit spreads pulls down IG and HY supply and sans QE MBS spreads impact on affordability index shuts down MBS supply.
It does not take an equity crash to motivate a few hundred billion into fixed income. Yes, looming supply is scary but a deflationary flight to quality dwarfs these numbers.
OBL ?? Osama bin Laden?? you are kidding right. TROLL
http://www.thepeoplesvoice.org/TPV3/News.php/2009/12/11/after-years-of-deceit-us-openly-accepts-
Pimco will buy everything.
Umm, not exactly:
http://www.businessweek.com/investor/content/dec2009/pi20091217_105749.htm
His Grossness is just waiting for the agency MBS QE to
be over so he can buy it all back cheaper.
He might have to wait awhile though because the GSE
Christmas eve portfolio expansion will buy proxy extend
the QE till Oct. 2010.
The dollar rally I forecast some months ago continues to trend UP.
The weekly and monthly dollar chart suggests this may be a MULTI YEAR rally.
U.S. TREASURY 10 YR daily trend is bearish - suggesting higher interest rates.
http://www.zerohedge.com/forum/market-outlook-0
The graph looks just like back in February, and then along came March, and BLAM! down she went. It's now got a slight downward crook to it, could very well be the Ides of March again...
this is true .. 'ba-hut' as FatAlGore would say before announcing more lies, go back a bit to 1988 when the $USD came barrelling down from 160 then spent the next 8 yrs in the 100-80 band, 4 lows, 3 highs ... 1988 yield curve peak of the day,, 2009 yield curve record high?? yes then again if the dollar carry trade gets momentum you could see the dollar up at 110 - there's an inverse h&s [left shoulder 2005, head 2008 clear possibility hiding in plain view becoming a probability at USD 88-89 then up she goes bringing damnation to ponzibond salesmen & destitution to 401ers. besides the yield curve is more likely to follow 1931-1935 pattern w/ some major volatiles ... demolition team on the way ... PMs should do OK beyond the turmoil .. & OK up to it. the dollar has a habit of rising brifly at peak yield curve & gold down as now, for a few weeks
>>Bernanke's complete lack of preparation from a monetary standpoint to a forced interest rate increase, would likely result in runaway inflation almost overnight. <<
Could someone explain to me how, with housing still dropping and a 2nd slaughter with increased rates coming, and the cost and competition for money driving small businesses to close and unemployment going WAY UP, that you think inflation will occur with higher rates? One can have a depression with high interest rates. There are the Rich and the Broke(n). The so-called excess dollars have a negative velocity rate. Cash is going to flood into matresses, not assets. Higher rates will bury the economy. If they thought they could have inflated their way out of this they'd have done it a long time ago.
Socrates
So far, no one is able to explain how rates pushed higher due to the demands of the buyer because of A-continued volume of sales behindtheir purchases, and; B - risk of default, will cause the inflation of good and services to occur when the consumer is the ones who is losing buying power.
Anyone really think we will see inflation as rates rise while unemployment rises and housing prices drop?
Socrates
I flunked my econ101 in college. Would some please in simple language explain what Tyler is saying. What he is saying is important so I want to understand it well.
Is he saying that for 2010 US need huge borrowing and in order to get that, Gov. will orchestrate stock market crash to divert the money to the treasury market. Did I get it right ? Thanks
I'm not certain that anyone really wants to "crash" the markets. But, it has to do with which patient is bleeding the most.
Think of this as the world's biggest juggling act. Stocks/equities got tossed up and now the govt is falling down (looming debts) and will need to be pitched upward. And with each re-thrust the pieces are getting bigger and bigger (bubble proportions), requiring more energy to hold aloft. Meanwhile, mother nature is saying that she won't suspend gravity no matter what...
Thanks for playing!
Hey Tyler (and everyone else), check this out if you really want to know whether defaulting is or isn't in the cards:
This Time is Different: A Panoramic View of Eight Centuries of
Financial Crises
http://www.puaf.umd.edu/news/This_Time_Is_Different_04_16_2008%20REISSUE.pdf
I flunked my econ101 in college. Would some please in simple language explain what Tyler is saying. What he is saying is important so I want to understand it well.
Is he saying that for 2010 US needs huge borrowing and in order to get that, Gov. will orchestrate stock market crash to divert the money to the treasury market. Did I get it right ? Thanks
Yep, that is basically right.
Yes, that would be the option behind Door Number Three.
Treasuries are a tradition safe haven in times of distress, as they are assumed to be money-good. So to prevent loss of capital in times of distress, money would flow from equities to Treasuries, supplying the demand needed to meet the boost in supply.
Of course, inherent in this is the assumption that the US Government and the dollar are stable.
If not, it would not work, at least in the long run, especially if stock market weakness is due to perceived / real weakness in the US as a whole, and government / dollar in particular
My personal theory is the dollar will continue to weaken, then some event will boost it in the short-term (war, economic distress, etc.), but then it will dramatically reverse as problems in the US economy become more apparent and the government's response becomes even more erratic and desperate than it is now.
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Ok so my comment will probably be lost in all this but I will proceed. First thank you all for educating me further.Yes I am probably considered a sheeple only because I trusted my financial advisor to know what the hell he was talking about since my only option for retirement was Wall street - "las vegas on the east coast" but once my 401k became a 201k I opted via my employer to buy my own stock and I made back in 5 months 3/4 of what I lost......enough my point is continue to educate and...what are you going to do to make change besides blogging? HMMM we marched and marched and marched when no one else cared and we made an impact in civil rights, vietnam, abortion rights, and womens rights. So many of the things that are taken for granted by you we fought for....granted we were in the minority but we made a change...so I will hold a sign and march against the banks, wall street, my congressman, senator .....AND WHAT ABOUT YOU? WE ARE ALL SHEEPLES IN ONE AREA!!!
Perhaps we march to different drummers.
my point is continue to educate and...what are you going to do to make change besides blogging? HMMM we marched and marched and marched when no one else cared and we made an impact in civil rights, vietnam, abortion rights, and womens rights. So many of the things that are taken for granted by you we fought for.
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Markets will correct 20% in US and more worldwide...
if demand for these treasuries is actually fulfilled, that is.
Given the US market is overpriced compared to most worldwide markets, and has no real growth prospects why would it correct less than worldwide markets? mmmmm.
US market is toast.
Option 4: Cut US federal spending by $1trillion annually. The Defense budget will be reduced by 50%, saving over $300billion. NASA will effectively be shut down (not exactly a high priority item) - saves $19billion. We'll shut down Medicare fraud ($60billion per year), unemployment fraud ($9billion per year), Social Security fraud (I can' find a figure online), 7% cut in all government salaries above $100,000, and otherwise a 7% cut in all other federal government spending. You reach $1trillion in annual savings quite quickly. This is do or die for America now.
Defense spending cuts: you're dreaming. The US economy is not high on the list of defense department priorities, unless as a rationale to expand their powers towards the use of troops in the "Northern Command", as they like to refer to the US.
And the Federal government reduce fraud and take pay cuts? This is not bizarro planet. I guess I could see NASA go down the toilet, though we will probably keep the division in charge of pushing climate change/new trading opportunities for Goldman Sachs.
I bet the market will drop via an extrinsic event. Maybe, as some have said, having to do with Israel and Iran or, something else but, something seemingly not having to do with, or being the fault of, the U.S. economy will be happen and be the cover for letting Cerberus...the three-headed dog guarding the gate of Hades... loose on the economy. It's seems war or some sort of violent event is how the U.S. extricates itself out of recessions or depressions.
your predictions of armageddon are simply outlandish.
what will most likely happen is another covert program will be established by the fed: banks will be able to purchase treasuries across the curve and borrow cash against them from the fed at locked interest rates. thus the debt will be monetized, rates will be kept low and the con game will go on for a few innings longer.
I guess it depends on what you think had more influence on getting us out of the Great Depression, the WPA or any of those other programs/bills passed during the 1930's or the attack on Pearl Harbor. Whether you think the attack on the World Trade Center caused the markets to go down and the next bubble to begin or it was a faite acompli that only needed a catalyst/excuse to begin. You can go back to every economic downturn, "panic," "recession," "depression," whatever you want to call it and find some form of violence (mostly war) being the catalyst/excuse for digging us out of the economic hole we were in. You, like most people, do not see or want to see that connection/solution which is one part of why it is always used. The other part is...it's about the only way left at the point it is executed.
Im a little confused. The fed bought $200 billion in 2009. Why cant the same people-entity- that bought the remaining $2 trillion buy it again in 2010? Thanks in advance.
"We very well may have passed into the stage where blind growth is the only alternative to a complete collapse. We hope that is not the case."
I'm afraid this is exactly where we are -- and Bernanke knows it. 'Up' is the only way to go because 'Down' is a rocket ride down to the flames of hell.
Unfortunately, it's getting harder and harder to go 'up' every day.
But I have to take issue with the sense of "imminence" that your post conveys, Tyler. Your analysis is 100% correct in terms of the current set of forces at work. But I think you grossly underestimate the ability of the world's central banks to "extend and pretend".
2012 is going to be more than just a Mayan apocalypse, iumho. But 2010 is likely to be another year where smart investors pull out their hair and wonder why on earth we're still floating 'Up'.
Found myself about to qoute the same TD passage. Unfortunately, the last year in particular does indeed seem to have brought us to just this point. They can keep this ponzi running quite a while longer . . . question is only when it will end. But another year or even two of illusory expansion seems realistic enough, considering what we've seen to date. They may be crazy, but they ain't stupid.
Excellent post, Tyler. One question: why would QE be met with popular disapproval? To me, it's falling stock markets (option 3) that would be met with disapproval.
Lastly, the UK - well, with the country set to have zero bankers left in a few months, we don't think the traditionally third largest purchaser of US debt will be doing much purchasing any time soon. Tyler, could you expand this for an intellectually challenged UK citizen. Does this mean that you expect the remaining UK banks e.g. HSBC/Barclays to go under? Or is this central bankers who are shortly going to be extinct? Or both.
I always wondered whether the US and UK would be involved in some kind of smoke and mirrors where one country would monetize to buy the other one's bonds.
Doomed, there was some talk of a "confiscatory" tax on U.K. Banker's bucks recently, and concomitant counter-threats of an Exodus of british banking "talent" in that event....
The real question here is this....
It is not if China , Japan and other countries will buy US debt....but the question will be CAN THEY ?
As Julian Robertson has pointed out....if they cannot.....
Then the US Govt. may have to offer much much higher rates in light of lack of demand with respect to sheer volume needs.....ie 15% interest rates....
Who says the US can control this ????
When the US is not the one with the REAL money ????
And fabrication/monopoly money will suffice ????
Yes.....2010-2012 will be full of surprises....
Even with very high interest rates, the gov't will use the funds for non-productive war, tranfer payments, entitlements, welfare, and interest.
Do we really want to draw the world's capital away from all the productive global pursuits in order to feed a bloated corpse that is destined for death anyway?
Of course we will. And the suffering shall be profound.
Big change for the US. Bonds at 0% are effectively just dollars. Restrictions on foreign ownership of US assets. World forced to buy US goods or commodities or worthless paper or go elsewhere. Retaliatory confiscation, e.g. nationalization, of US foreign holdings. Obama should be ramping up the US military if he wants globalization to continue. I can't believe that China, Russia and India will be kinder than the US to the emerging countries. FUBAR is here,
I would suggest all you financial gurus learn some survival skills.
When this show drops, all this babble will be wasted breath (finger strokes).
Even this old dumb redneck has been seeing this coming for a while and altho I may not be 100% prepared for whatever happens, I can and will feed my family and protect myself from those who cannot.
As he proudly thumps his chest from a bunker in Dresden.
What is that hum? Lancasters and B-17s? Uh-oh.
c'mon.
red aint no hitler....a country boy will survive.....
i doff my coonskin cap to ya stranger!
PERS in the State of Oregon quickly purchased ("Humphrey one of the new into place quickly, 2007, buyer for PERS") BlackRock Credit Investors Co-Investment Fund L.P (BlackRock) a "hedge fund" owned and operated by JP Morgan Chase and Goldman Sachs, et al. New Jersey was quickly dumping it and PERS of Oregon purchased the fund to ...
.... drum roll PLEASE - fill all the losses of subprime toxic weapons of financial mass destruction with HOMES that have been sliced, diced and who knows what happens when this bubble bursts.
HOWEVER, I have yet to see any tracking and tracing of the RETIREMENT PORTFOLIOS IN AMERICA.
And the JUDGES ALL RETIRE AUTOMATICALLY ON THE SYSTEM.
Thus, how can the RETIREMENT FOR WELFARE RECIPIENTS (BIG GOVERNMENT) last when there is only GOVERNMENT INVESTING IN GOVERNMENT.
Well other than all the TRANSNATIONAL CORPORATION GOODIES FOR MILITANT-POLICING right here, too:
Red Saber Pepper, Taser International, Corrections Corporations of America.
The trading in retirement portfolios is more than a hoot to track and trace to GOLDMAN SACHS, JPMORGAN CHASE.
And can anyone say PAEDOPHILIA as well as INCEST of what was once America's systems of "modern?!"
PERS in the State of Oregon quickly purchased ("Humphrey one of the new into place quickly, 2007, buyer for PERS") BlackRock Credit Investors Co-Investment Fund L.P (BlackRock) a "hedge fund" owned and operated by JP Morgan Chase and Goldman Sachs, et al. New Jersey was quickly dumping it and PERS of Oregon purchased the fund to ...
.... drum roll PLEASE - fill all the losses of subprime toxic weapons of financial mass destruction with HOMES that have been sliced, diced and who knows what happens when this bubble bursts.
HOWEVER, I have yet to see any tracking and tracing of the RETIREMENT PORTFOLIOS IN AMERICA.
And the JUDGES ALL RETIRE AUTOMATICALLY ON THE SYSTEM.
Thus, how can the RETIREMENT FOR WELFARE RECIPIENTS (BIG GOVERNMENT) last when there is only GOVERNMENT INVESTING IN GOVERNMENT.
Well other than all the TRANSNATIONAL CORPORATION GOODIES FOR MILITANT-POLICING right here, too:
Red Saber Pepper, Taser International, Corrections Corporations of America.
The trading in retirement portfolios is more than a hoot to track and trace to GOLDMAN SACHS, JPMORGAN CHASE.
And can anyone say PAEDOPHILIA as well as INCEST of what was once America's systems of "modern?!"
Thus, how can the RETIREMENT FOR WELFARE RECIPIENTS (BIG GOVERNMENT) last when there is only GOVERNMENT INVESTING IN GOVERNMENT.
Good rhetorical question.
“You only have power over people so long as you don’t take everything away from them. But when you’ve robbed a man of everything, he’s no longer in your power -- he’s free again.” –Aleksandr Solzhenitsyn
The Soviet Union and its failed communist economic system with its slave-labor force only survived as long as it did with the help of the United States.
Said Solzhenitsyn, who was there: “It is American trade that allows the Soviet economy to concentrate its resources on armaments and preparations for war. Remove that trade, and the Soviet economy would be obliged to feed and clothe and house the Russian people, something it has never been able to do. Let the socialists among you allow this socialist economy to prove the superiority that its ideology claims. Stop sending them goods. Let them stand on their own feet, and then see what happens.”
If America falters, there will be no United States to come to America’s aid to provide the banker oligarchy and its central planners and supporters the luxury of keeping their collectivist cake, while eating off the fruits of capitalism. Communism does not work, except temporarily at the point of a gun, because there is nothing in it for the individual. The bankers exported more than America’s manufacturing base and her capital to China; they exported Western capitalism.
Did you know that the federal government has the authority to raise taxes? In fact the Bush tax cuts will expire in 2010 and the marginal tax rate for everyone making over $250,000.00 will see additional taxes on top of the tax rate increase. How does that figure into you forecast?
Did you know the Federal government can cut spending? Do you know what spending cuts are in store for the military? http://www.foxnews.com/politics/2009/04/06/gates-calls-cuts-high-tech-we...
Youse finance guys really need a broader base of information, your painting yourselves into a corner of your own narrow view of the world as finance centric.
Your comment shows that you are over your head. The budget that is proposed by Gates in your article states that his budget proposed is $534,000,000,000. That is half a trillion. We are talking many trillions of debt up to $150,000,000,000,000. He cut very little out the budget. You are also not getting the gist of the article, that is the debt is 555% of GDP, and:
"...we are screwed by an order of magnitude more than we thought we were".
You are missing the point, in that entitlements and the Health Care BIll, and the Crap and trade and all the rest of the crap with TAPR, ARRA, and all the bailouts and all the money printing, and all th....
Do you get it yet????
"Government can cut spending" my ass. If they had the will to cut spending, they'd have done it before now - and even if they get around to it eventually, they're already too late.
And yes, they can raise taxes - which decreases tax revenues, which have already plunged as it is.
Cutting a few mil programs and trying to strangle out a few more tax dollars in the face of this mountain of debt is just pissing into the wind.
Sounds like someone needs a "broader base of information"; you're painting yourself into a corner with your own narrow view of the world as being simple, linear, and only a matter of decreeing that numbers on a balance sheet shall match up.
This was a great read.
Governments in gridlock are unable to address a serious issue. Kicking the ball down the road is the only concept they have. Whenever they attempt to fix anything they just make it worse. Everyone sees the truth as the enemy instead of as a friend and the ultimate weapon. Here are my guesses:
American Idol & Survivor every night
CNN running non-stop "Children being kidnapped" news.
A huge ramp-up in the "War on terror" (your neighbor may be the enemy).
Global Warming will us all in 30-years, H1N1 or avian flu or something is lurking just outside your door.
The public is easy to scare - keep em scared - then the financial problems only hit on xmas eve..
OHH - this is what's already happening.
Tyler: By far the best read of 2009! Thanks. Merry Christmas, Happy Holidays.
PS Bernake refinanced out of his Arm into a fixed. Looks like he is planning on door #2.
After a little cogitation I feel "the extend and pretend" camp has some merit after all lets keep kicking the can down the road.....absent an externally driven Taleb styled event, perfect storm etc. The level of the general population's complacency is generally high and now so more distracted by the general day to day "rat race". "The average person is not very smart, by definition, 50 percent are even dumber than that" Robert Anton Wilson. I vote on the suspension of disbelief and the hope and a prayer approach mixed with some push to patriotic UST buying. Path of least resistance.
while you were sleeping (no it wasn't a nightmare)
FT's Person of the Year: Lloyd BlankfeinMaster of risk who did God’s work for Goldman Sachs but won it little love
"This is not an unalloyed endorsement of either Mr Blankfein or Goldman, which the FT has sometimes criticised in the past year. Instead, it is a recognition that Mr Blankfein and his bank have taken the leading place in the world of finance, while others have fallen by the wayside." (emphasis applied.) JHC.
Barry O the Prince of Peace, Lloyd the Savior of Global Finance. I guess we're pretty hard up for Heroes.
I doubt that anything the FT says is "unalloyed" which makes Mr. Blankfein a fitting symbol as the FT's Person of the Year.
My vote is for door #1: much more QE in 2010. Option 2 is a shortcut to default; option 3 won't happen because the insurance companies would need a bailout if the market fell too far.
How does 40% of $7 trillion in treasury debt maturing in 12 months = $702 billion?
does this not = 2.80 trillion?
I looked at debt maturity fiscal year 10/09-09/10 = $2.696 trillion
And calendar year = 1.457 trillion
If you add in expected deficit for fiscal year 2010 Oct 2009 - 09/2010 this is
1.5 trillion + 2.696 trillion = 4.196 trillion
Anyone know what tax receipts were in 2007 and 2008 and 2009?
I see projected interest expense to be about 509 billion for year end 2009. any estimates for 2010 year end?
So when does the revolution begin?
And when it is finished, do we bother with trials os do we go straight to public hangings for Clinton, Bush, Obama, Rubin, Geithner, Paulson, Greenspan, Bernanke, Graham, Frank, All SEC heads for the past 20 years..., etc, etc
Go LONG pitchforks, torches and ROPE.
Ah! boiled rope. Good for hanging and eating. As we're full of passionate intensity for vengeance but ignorant of our own part, or that we willingly partook of a poisoned well.
Welcome to your ample share of hell.
A Nuremberg style tribunal is required. The gallows will be inside the arena and operate non-stop.
$89.95 per day on pay per view or $499.95 for the "season ticket"
Alternative 1, yes. Flying it politically depends only on how it's presented to the average tv viewer, who knows nothing of finance. Make the average person think he's getting something out of it, and he'll demand it.
#2, no. Interest payments too high, can't do it.
#3, just equitize (is that even a word?) the bond market. Ya want derivatives, we got derivatives. Puff stocks and bonds at the same time. Sell Treasuries to the primary dealers, who package them and peddle them on the stock market, (supported by the plunge protection team.) Combine it with a tax on pure stock transactions, but with Treasury-backed derivative securities tax exempt. Let's see, combine one million $ Treasury security, with a billion $ in subprime mortgages, and one share of GM, and dump it on the market as a share of GM stock! Yah, that'd work.
what is really scary is that i read this post and i understood everything in it. now that is scary....
ok
how about option 4
currency devalutation, and reset?
problems solved.....
whatever option is taken
just remember. as chumba says
its gold bitches. its gold....
"...When the incompetents in the pentagon can't even handle Afghanistan or iraq?"
Who said the war isn't going as they would like?
Evens on debt default.
Whenever anyone in power or authority has to come clean, they would much prefer to move the goalposts. After all, maybe they can rationalise that it was someone else's fault before them.......
Default it is then,
No, I think we do hold some power with our ability to fight with weapons OR our actions. We just have to do it! Think about it, we the people are SICK of the powers that be, we are ready for change. This change is NOT coming from our new administration, or any for that matter. The people at the top don't want us to stop making them filty rich, and whether we have a national STRIKE, or an all out guerilla revolution, there "control" would be lost if even for a day. I think this NEEDS to happen, to shake the dust off of our ourselves and rattle their thrones. They think of us as tax paying/consumer sheep. They keep us busy fighting eachother, thinking that Republicans or Democrats have teh anwers over one another. This could actually happen as more and more higher level people get fed up as well. Imagine if a few generals or even retired generals were to convince the military leaders to take this country back. Then we wouldn't have to fight the government, it would be on our side. Go to www.oathkeepers.com they are on our side, and that's a start!
Thoughtful and informative.
"So what" does a small investor do with savings in this troubling environment?
Many mistakes in the past. Would appreciate learning from others before repeating "history".
Thank you.
Buy gold and silver on the dips. Physical, not ETF's
short , sweet and true. Gold , silver , shotgun, food.
This article is just what I have been wondering about. Thanks for the numbers and analysis!
I'm mostly bored these days with questions about what the gov./voters etc. should do and prefer to focus on what I can do to protect me and my relatives and neighbors.
Still, all this tripe about the war is tedious. We only spend about $100-150 billion annually on the war out of federal outlays of $3.5-4 trillion, so it's a non-factor in the big picture. The welfare state is unsustainable. (See the GPO or CBO sites for federal budget figures) The other rich countries have the same basic problem exacerbated by aging populations. We brought the financial day of reckoning forward with asset price bubbles.
Absent QE, the Treasury will need to offer higher rates to sell all the bonds needed to fund the gov in FY10 as I see it. It seems to me that would reinforce the deflationary trends already present. I don't know what to do in that ciurcumstance other than to horde savings. More likely, I think, is more QE which means the $ must deline in value as the quantity supplied soars. We might not see the decline versus the Euro or yen, because they have similar problems, but we'll see the dollar buying less oil, iron, soybeans, etc. Then we try to own those....and try to survive the increasing civil disorder!
All of the thousand cuts through which we now hemorrhage seem inconsequential and each special interest fights vigorously for its sustenance and the reduction of others.
This system is inflexible, there will be no remedy. The only way it will resolve is a hard, hard stop.
Brace, brace, brace.
We only spend about $100-150 billion annually on the war out of federal outlays of $3.5-4 trillion, so it's a non-factor in the big picture.
You really believe that this covers ALL the expenses? Wrong! VA hospitals, future wars (blow back). No, this is a naked number, not respective of the true costs. I also shouldn't have to mention opportunity costs (to ecnomic types)...
Thanks for playing!
Of all the comments this is my fav - There is a ultimate weapon of choice - we stop supporting the system. It's called "Faith based system" for a reason. The moment 'fate' is gone - the system is down too. #174819 by narlah on Sat, 12/26/2009 - 04:54
So, we have a FATE based system! “That which we do not bring to consciousness appears in our lives as fate.” C. Jung
It's called letting go of the shore. And, for continued success in this departure it is essential to take up a position of "no gods, no masters."
Anyone thinking that we can clean up the system and have it work for "us" missed the fact that it was borne out of the hearts and minds of rich white men who, at their core, meant the "us" to be "them."
Thanks, TD, for yet another on-target and brilliant analyses!
Nothing can be truly added ---- except to mention that people still wonder why that gentleman, the career accountant who was promoted to CFO (or was it CEO) of Freddie committed suicide!
I believe it was because he was one of the honest ones....
You guys ROCK!
Coordinated bounce from late-Feb/early-Mar began when 1) too-big-to-fail bank chiefs jawboned about business being good, 2) President Obama talked up stocks with "buy stocks now" recommendation, and 3) lawmakers strong armed FASB into proposing new guidance on mark-to-market.
FINVIZ screen of 6 metrics illustrates where money has flowed since late-Feb/early-March coordinated effort. Screen creates two populations, “Bad” and “Good”.
1) Return on Equity: Less than 0% (Bad); Over +25% (Good)
2) Debt/Equity: Over 0.4 (Bad); Under 0.1 (Good)
3) Gross Margin: Less than 5% (Bad); Over 15% (Good)
4) Price: Over $5 (both)
5) Average Volume: Over 500K (both)
6) Country: USA (both)
Screen produces 17 “Bad” companies and 16 “Good” companies. Stock prices speak for themselves:
4-1/4 years prior to 3/9/09:
Bad companies: -75% average; -81% median
Good companies: +36% average; +26% median
9 months since 3/9/09:
Bad companies: +735% average; +184% median
Good companies: +76% average; +54% median
WAR! Huh! (good God yall)
What is it good for?
#3! (say it again)
We could always invade China...
Tyler, all sarcasm aside, we did $2.16t in 2007 and $2.05t in 2008, why would it be outlandish to think that we couldn't do 2.2T in 2010? The bid-to-cover in every single auction has been atleast 2.0x, even on the long end of the curve with massive supply.
Personally, I think we won't see the 2.5x bid-to-cover anymore in the auctions, but I don't think we'll see a failed auction any time soon. That'll be too damaging to the market and the primary dealers know that. They'll just bid on the auctions and then work something out with the Fed behind the scenes.
I can't name you one person I know in real life that knows what QE is, and most likely won't know what QE 2.0 is all about. And as I said before, new episodes of Lost begin in February, and then new season of American Idol kicks off in the fall. And if that doesn't work, throw in another H1N1 2.0 scare and mass vaccination campaigns to scare the living bejeezus out of everybody.
Stand fast, do no harm, fear not, the Truth is not a choice and the meaning is ... love offered by the sustaining Cause in agreement with salvation, mercy, life, freedom, liberty and justice for all.
My friends, DIVEST NOW. Do not think to buy sell or trade this new world order lie, this pathetic market, it is the picture of a whore riding a self devouring beast that has aborted The Constitution, The Host of the law, for the sake of the offer of the strong delusion of short term gain and the claim of dominion offering to be above The Truth. The 2009 market start of the closing door, the sealing, the casting of lots. If you are not chosen by The Truth, you shall reap the whirlwind of deception and the alter flames of care shall proclaim your conviction. Fear not, judgment cometh.
Get your dusty arse out of the prophetic City of Babylon now!!! Just get out... but, realize this, there is no place to go in a global market trap but where you are, so leaving the city behind means something that this world has never witnessed.
Where's the Amero? I thought it would be our savior.
We need Al Queda to be found in Mexico.
Everyone will freak out and forget about the economy.
Start the new Amero printing press and print our worries away, well sort of until the next administration then blame them for the problem. Mean while any money you had would be sucked up into the Dollar - Amero conversion. banks are rich, your poor perfect.
Excellent writing.
Thank you
I fully agree. I have worked for hedge funds in the US and now in emerging markets. Timmy, the pet is a complete nut and Benny, the chief thief knows very well what he is doing but alas the last thing on his mind is the welfare of American common man. He is more interested in piling it on via debt issuance.
The sad thing is where is the money going??
Fresbee
Investing contrarian
The Third Seal is open. Now, we just wait for the back-draft to vaporize the "average" person'spersonal economy.
The Third Seal is open. Now, we just wait for the back-draft to vaporize the "average" person's personal economy.
If I repeat myself. it's because I have nothing else to do.
There is $1 trillion in excess reserves sitting at the Fed earning 0.25%. The banks can easily buy long term treasuries earning 4% with that money.
This won't be the beginning of the end. Perma bears missed a big opportunity in 2009. Don't be a Perma Bear.
There's nothing so useless as a Fed incapable of generating positive inflation - its like a diseased, ruptured appendix.
Hyper-inflation is a mirage. There's just no way to get money into the hands of people. The Government is going to save the banks - not the people. If they were serious about generating inflation and taking the ankle-weights off of those treading water, they'd be talking about massive debt relief and tax relief programs to get cash back out into the economy.
That is NOT what they're doing. A controlled deflationary collapse provides a bid under USTs, and it allows the banks and taxing authorities to foreclose upon assets of those trying to fend off bankruptcy. The TBTF banks can then buy up failed assets at pennies on the dollar - using taxpayer money to do it.
Watch the money supply fall toward zero in 2010. Pay attention to what the Obama people are doing - not to what they are saying. "Stimulus" is a mirage designed to get people to invest and to maintain market participation. The reality is that they're looking for new ways to DRAIN MONEY FROM THE PRIVATE ECONOMY. Tax increases, bankruptcies, foreclosures ... these are all deflationary forces. FRNs will strengthen as they continue to become more rare.
As more and more Americans lose their incomes and find remaining income taxed out of existence, the Asians will run out of new cash to "invest." That's when things will get interesting. For a while, there will be private capital across the globe seeking a safe haven. Eventually, most of that money finds its way into UST - and just when its clear that the consensus strategy is to buy safety in US Government bonds - the entire super-structure of debt covenants, rents, bonds, and government "obligations" will collapse - due to a lack of + cash flow.
A ponzi scheme works until it does not. Once the credit-pie-perpetual-motion-machine breaks down, the money supply in a fiat system vaporizes. The ponzi pyramid must either collapse completely or double in size and scope and morph into an even bigger pyramid scheme. This too works until it doesn't. Its a pyramid scheme upon a pyramid scheme upon a pyramid scheme ...
The only viable long term solution is a radical reduction in the size and scope of government and a dramatic reduction in taxes. And that's just not going to happen. There are too many personal and business interests that directly benefit from "Government" - which has turned into a crime syndicate running a global extortion and protection racket for a handful of bankers and well-connected corporations.
So, they won't go voluntarily. But they will go - involuntarily - because they won't figure out how to get money back into the hands of the people until it is too late. Eventually, a parasite destroys its host. Too many ticks on the dog have finally killed the dog.
Thanks for the great piece . It inspired me too take a little look at it myself;
US Treas Bond and Crude Calendar Spreads
http://www.crudewire.com/2009/12/us-treas-bond-and-crude-calendar.html
Thanks for the great piece . It inspired me too take a little look at it myself;
US Treas Bond and Crude Calendar Spreads
http://www.crudewire.com/2009/12/us-treas-bond-and-crude-calendar.html
Fantastic article.
Fits nicely with my thoughts on 2010...http://www.planbeconomics.com/2009/12/18/thoughts-on-2010/
Real nice article. A good argument, well presented.
"Engineer a stock market collapse. Recently investors have, rightfully, realized there is no more risk in equities".
Timmy has openly admitted that the Treasury will go to any extent needed to save the equity market. With that in mind it's hard to be bearish, but is it your responsibility to be unallocated if you believe in free markets?
Timmy has openly admitted that the Treasury will go to any extent needed to save the equity market
That is not the quote...he did not refer to the equity market. He was referring to banking and credit crisis.
From a community banker perspective, I find the prospects for 2010 to be rather dim. The moment the Fed stops pushing down mortgage rates, through its drug-like crazed MBS buying spree, property values are going to drop like a rock and take down every weak and marginal financial institution down with it. Collateral values have been propped up by the mortgage rates that have hovered for most of the year at below 5%.
Rates and asset values do not reflect the inherent risk associated with the environment right now. They are distorted due to government meddling.
I don't whether to buy a rifle and a bunch of shells at Wal-Mart, or buy as much silver and gold as I can get my hands on.
"The moment the Fed stops pushing down mortgage rates, through its drug-like crazed MBS buying spree, property values are going to drop like a rock and take down every weak and marginal financial institution down with it."
All but the TBTF's.
I would buy both in quantities.
Are you guys serious all this is really going to happen next year ? Obviously dont know as much as you do about the inner workings but could the govt just make people turn their dollars in and give a new dollar that is worth like 60% of what it is now or is that not possible with China and the rest holding so much of our debt ? Man warching the news they keep saying we are on the verge of a slow U shaped extended recovery but unemplyment will just stay high for a little while.
It's important to look broaderly,,
USA doesn't have the cappacity of turning around the anual commercial defficit for the short run because they have exported all the fabrics and productive capacity abroad.
Just elevenfold? Thank you TD you had me scared for a moment.
Of course how much more does it have to increase should the Pirates of the Caribbean be unable to play is the question?
YE 2008 Households only owned $273 billion of UST's.....
While TD wrote about the tb supply for next year well a head of today's Bloomberg article about the same issue,few observation drew my attention. Here are excerpt from that article about MS expectation for next year yield:"Speculators, including hedge-fund managers, increased bets that 10-year note futures would decline more than fivefold in the week ending Dec. 15, according to U.S. Commodity Futures Trading Commission data. Speculative short positions, or bets prices will fall, outnumbered long positions by 52,781 contracts on the Chicago Board of Trade. It was the biggest increase since October 2008.
Edward McKelvey, senior economist in New York at Goldman Sachs Group Inc., the top-ranked U.S. economic forecasters in 2009, according to data compiled by Bloomberg, expects yields to drop to 3.25 percent. Goldman Sachs says unemployment will average 10.3 percent in 2010, hindering the recovery. "
Now what is remarkable,is that GS is the only one who is seeing rates declining for next year(this article starts with MS economist expecting a rise in yileds). So the question becomes:what does the fifth branch knows that almost all other market participants don't know?or is it one of those double reverse psycology issues?What are their plans and intentions?.Don't forget,where GS goes,so does stocks. I will leave that for TD who might be able to answer...
If the Fed has those few options, it is clear what it will do. QE2, then QE3, then QE4..... until a wage-price inflation spiral puts a stop to it. Then all those T-bonds will have to be held by the Fed to maturity, or else the Fed will lose money in nominal dollars. But the Fed is also buying housing bonds, which have significant credit risk. These will only be bailed out by general inflation, which is the plan. Get ready for the 70's to come back on steroids.
I am not sure why you describe a falling stock market as an "engineered" crash? Actually, the opposite is true. The only thing the Fed needs to do to cause a share price crash is slow down the printing of funny-money. The equity markets needed a huge amount of engineering to be pumped up to current bloated levels. They will need no engineering at all to crash to their natural values.
Could we see the day when the panic caused by a series of extremely poor US Treasury auctions scares the market into selling stocks and commodities to buy US Treasuries?
Where do I park my 401(k)? Should I be in cash? Are there TIPS mutual funds to protect against the supposed hyperinflation?
You seem to focus only on the supply of debt while ignoring the demand side of the equation.
Here is the scenario I see playing out:
1. In order for the TRSY to facilitate the buying of notes in the masses they need, two things are guaranteed to happen within the next 3 months. First, interest rates are getting ready to rocket. This is the only way they will get foreign buyers to buy this debt. Second, as clearly as the market pump in 2009 was orchestrated, the demise has already been orchestrated on two fronts. The rise in interest rates will crash the stock market, along with an offensive frontal against Iran using Israel and giving them full support to cripple Iran's regime once and for all. Suddenly, you have no major threat in the middle east and US and allies can set up shop.
2. Expect oil to reach 200$ a barrel in the masses of all this. It will eventually subside back to the magical $90 range where everyone who stands to make a dollar from it wants it to be at.
3. Interest rates on mortgages are going to skyrocket, finishing off the housing bubble once and for all. Who in their right mind is going to buy a home at 13% interest or higher? We will be looking at 80's rates again very quickly.
4. Expect some form of partial hyperinflation. No way around it with the amount of money the FED/TRSY have pumped into the stock market to prop it up. Oh, you thought that money was being lent out to people? Get real. All the stimulus money was used by banks to front run the market to lure the sheep back in to make another killing on them.
When all is said and done, Obama should be impeached, Helicopter Ben and Little Timmy Giethner need to be put in jail for the largest Ponzi scheme and shell game ever created and laid upon man.
There will be a depression in the U.S. bet on it now!!!
As a measure to finance our massive debt, the number is essentially meaningless. Especially, in an environment of massive Government stimulus, skewing GDP. What is key for the US, is to somehow fund our debt without QE in FY2010.
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Instead of the recession there seems to be nob drop in the per csapita incoem and the major factor which detrmined that is the low key incestments in the derevatives which was made even during the time of recession.
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