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Spin City - San Andreas: Are There Signs From The Bond And Swap Spread Markets That Government Debt Risks Will Derail The Expansion?

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Wed, 03/31/2010 - 21:55 | 282577 ghostfaceinvestah
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It's called the "single point of failure" theory.  The fedgov is taking on any and all risks - the housing market, the student loan market, the muni bond market, small business lending.

Why do we even have banks anymore?  The government is backstopping all lending, why don't they just start taking deposits and setting up ATMs?

Thu, 04/01/2010 - 00:47 | 282738 Return2Sanity
Return2Sanity's picture

The first rule of safety nets is that you need more people standing outside the net holding it up than you have falling into it. Once we allow most people to fall into it, it becomes a trap net.

Wed, 03/31/2010 - 22:12 | 282595 non-anon
non-anon's picture

This is centralized power/command control takeover before our eyes! Are the masses this ignorant or brainwashed by fed public schools to accept this?

Wed, 03/31/2010 - 22:34 | 282622 faustian bargain
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Who do you know, that went to a public school (heck even a private school), who knows thing one about the Federal Reserve, the Treasury, or where US dollars come from? Our schools don't teach, they indoctrinate.

Wed, 03/31/2010 - 22:46 | 282637 ZackAttack
ZackAttack's picture

Oooh! Oooh!

 

I did learn in late 2008 that spending bills originate in the Treasury!

Thu, 04/01/2010 - 08:55 | 282860 Cognitive Dissonance
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LOL

Zack, please don't talk with food in your mouth. Now, we all know that spending bills can only be originated in the House. This is the second time you've made this mistake. I'm afraid we're going to need to escalate those electroshock therapy sessions my dear.

This is going to hurt me a lot more than it will hurt you. Now, bite down on this.

 

Thu, 04/01/2010 - 10:06 | 282925 Assetman
Assetman's picture

All my education on the Fed, Treasury and money creation came from Schoolhouse Rock on Saturday mornings.

Unfortunately, I also learned about how a Bill becomes a Law.  They appeared to have left out the part on corruption.

Thu, 04/01/2010 - 00:15 | 282713 swamp
swamp's picture

As ignorant and as helpless as the Katrina dome "victims". I perpetually hear and read the echo around me (except ZH) "the government needs to do something". 

Thu, 04/01/2010 - 00:28 | 282721 divide_by_zero
divide_by_zero's picture

The few that protest in this country (primarily Tea Party folks) are demonized by the MSM(even some on ZH), might as well throw Glenn Beck in there, no matter what you think of him he's ahead of anyone in the MSM on this stuff. Dylan Ratigan gets some of it but talks White House book otherwise (Global Warming/Carbon Credit(GS/Soros scam), Health Care(tax ruse) etc.

Meanwhile even apparently smart folks on ZH (not the masses) cite HuffPo as a "news" source perhaps not aware of the Soros connection to Arianna, just a mouthpiece. Also talks the GW/HC stuff up), full on progressive spew.

Wed, 03/31/2010 - 22:13 | 282596 Nolsgrad
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GTA much Tyler?

Wed, 03/31/2010 - 22:13 | 282597 Bruce Krasting
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Speaking of tremors, (and well off this topic) I keep hearing about this story from Asia. Now I hear it is in South America.

The mojo is this is the 'big one' coming soon. And we are worried about bonds.

http://uk.reuters.com/news/video?videoId=92027

 

 

Wed, 03/31/2010 - 22:24 | 282610 Nolsgrad
Nolsgrad's picture

interesting. Hopefully Cali will finally fall off.

Wed, 03/31/2010 - 23:16 | 282663 Dirtt
Dirtt's picture

Well Annandale is not an option either.

Wed, 03/31/2010 - 22:24 | 282609 brown_hornet
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We had a 4.0 in flat old Illinois a couple months ago

Wed, 03/31/2010 - 23:40 | 282681 Miles Kendig
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Close enough to the New Madrid seismic zone. 

http://en.wikipedia.org/wiki/1812_New_Madrid_earthquake

Thu, 04/01/2010 - 03:25 | 282794 Arthur
Arthur's picture

Which is why I have earthquake insurance on my house, which is located in Chicago.

Wed, 03/31/2010 - 22:40 | 282629 UnBearorBull
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What expansion? The one shown by the creative statistics?

Seems the only real expansion has been in the equity price bubble they've been blowing.

If this train was actually moving it could be derailed. As it is now the problem is that the railway bed is collapsing underneath of a stopped one.

Wed, 03/31/2010 - 22:41 | 282631 Fritz
Fritz's picture

By "Expansion" I assume JPM is referring to the Federal Government/taxpayer funded wealth transfer.

So the answer is no - interest rates will have no effect.

Interest rates (regardless how high) will not deter the Congress/Fed/Treasury from pissing away taxpayer wealth to prop up GDP until it all implodes into some form of a financial black hole.

Wed, 03/31/2010 - 23:01 | 282647 Nathan Muir
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VAT tax of 7.8%

Coming soon I fear. 

 

Wed, 03/31/2010 - 23:59 | 282700 doolittlegeorge
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the word on the street is that house flipping is back.  welcome to bailout nation.  your tax dollars=their profits IN CURRENT FORM.   The Governator sends his regards.  Insofar as "swap spreads" go--i'm no bond trader and have no interest in being one given that valuing equities is a far greater challenge--like climbing Everest--where as dealing in government debt markets and valuing them is like a hike in the Adirondacks.  Now as such a layman in government debt especially as it relates to Treasuries what stands out to my trader's eye is the consistently lower lows and lower highs.  in other words "this stuff is dirt" although even dirt has some residual value.  does such a simple "eyeballing of the chart"  mean us treasuries are going to go further down?  no.  but the verdict is in:  treasuries had a terrible year last year and appear to be building a base for what could best be described as "another leg down." now for anyone who believes "we're in a recession" i've got news:  not a single economist agrees with you right now.  tis true:  a double dip could be on the way.  but the more i "listen" to what you all are saying the more you appear to be arguing that their are problems in growth as well.  forgive me if i'm putting words in your mouths.  having said that there are problems in growth as this site so ably points out. the biggest is of course for some the most obvious and yet we all know it to be true:  the problem with getting and keeping a job.  DO NOT LET YOUR EMOTION SWAY YOU.  The fact that you and your friends have no job/lost your job (through no fault of your own of course) is utterly meaningless when it comes to "the market."  remember, this is a nation that had chattel slavery AND a stock market.  and who did the slave fear?  it wasn't the banker.  it was "the man with gun over there telling me i've got to beware."

Thu, 04/01/2010 - 00:16 | 282714 stoverny
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Read the Citigroup Plutonomy memo.  It explains why our economy can continue to recover in spite of unemployment, stagnant wages, etc...

Bottom line, our economy is driven by a very small number of the super-rich.  The rest of us barely even matter.  That is why, in terms of the data, a stock market recovery IS a real recovery.  The superrich own the most equities and so are the ones benefitting from the Fed-driven stock market.

Oil at $100?  Do you think the supperrich care if gas is 4 bucks a gallon?  Unemployment at 10%?  The superrich are living off their investments and can still shop at Sachs just like always. Increased savings rate?  Who exactly is doing the saving?  Most of us can barely pay their bills.  The rich are saving more because they are making such staggering investment gains, they can save more and still live in luxury.

Sad fact.  Most of us don't count.  There are the superrich, and everyone else.  The only thing that can stop the wealth to continue to flow from the multitudes to the superrich, is a revolution or a bond market dislocation that literally turns all of the USA into New Orleans, post-Katrina.

Thu, 04/01/2010 - 00:51 | 282739 Otrader
Otrader's picture

This sounds a lot like Mexico. 

Thu, 04/01/2010 - 01:56 | 282769 divide_by_zero
divide_by_zero's picture

Well, they're pretty much all here

Thu, 04/01/2010 - 00:26 | 282718 joebren
joebren's picture

'negative swap spreads' in a previous existence that always meant 2% or less on the 30 year bond for several years at least, then maybe that hyper stuff, but that's a ways off. I hope everyone disagrees!

Thu, 04/01/2010 - 10:08 | 282928 Assetman
Assetman's picture

No need to worry about the negative swap spreads-- JP Morgan appears to think it's just "noise".

Move along... nothing to see here.

Thu, 04/01/2010 - 00:33 | 282724 knukles
knukles's picture

Must be tryin'-a-scare his Hi-Net-Worth clients out of  munis and into exotic offshore alternative investments creatively structured so's to be systemically immune from US risks, at higher fee rates, uh-huh.

Revenue stream be enhanced through higher fees to atone for past sins of yet to be recovered AUM.  Some-o-them high watermarks not yet been reattained, you know.

Thu, 04/01/2010 - 00:43 | 282735 Segestan
Segestan's picture

All of these problems are and have always been because of the Fault-line of usury. Everything esle is a charade a false fault.

Example:If anyone had lent one cent in AD 1 and charged a 4 percent interest, in 1750 he could have bought gold weighing as much as the whole earth , ( At 5 percent interest it would have been possible as early as the year 1403) In 1990 he would have been able to 'buy' 12,246 such ' Nuggets' . It's the ( economy) interest stupid.

Thu, 04/01/2010 - 07:34 | 282833 mogul rider
mogul rider's picture

The trouble with socialism is eventually the last person not working for the government runs out of money.

it is pretty damn clear that the US will implode at some point here. Real bond buyers are disappearing faster than McCain on election day.

I guess for me the question is.

 

If I get my 2000 dollar gold price, my entire neighbourhood will be in flames and bloodthirsty mobs will be a tmy door looking for stash.It is clear that the elites are draining the system dry and one last orgasmic disply of Roman piggishness and profit,

 

My question is:

 

WHY?

Thu, 04/01/2010 - 07:54 | 282842 docj
docj's picture

Because they think they can get away with it.  Because they think they're smarter, better protected and more agile than their brethren from late-1700's France.  And because late-1700's France is about the only time in Western history when such a bet turned out poorly for them.

They certainly have the fair amount of recorded history on their side.

Thu, 04/01/2010 - 07:35 | 282835 mogul rider
mogul rider's picture

what is the end game?

Thu, 04/01/2010 - 08:26 | 282848 wang
wang's picture

a San Andreas simulation courtesy USGS

 

http://urbanearth.usgs.gov/wp-content/shakeout/scec-shakeout-simulation.wmv

 

(Ground motion for the ShakeOut Scenario earthquake 60 seconds after the southern San Andreas Fault first begins rupturing. Yellow shows the highest amplitudes of ground motion. (Simulation by Rob Graves of URS Corporation for the Southern California Earthquake Center on high-performance computers at the University of Southern California; image courtesy of Geoff Ely, University of California San Diego/San Diego Supercomputer Center.) Windows Media Player application - load time varies depending on connection speed

Thu, 04/01/2010 - 08:24 | 282850 TheMacroView
TheMacroView's picture

You're seeing it already. Rising debt yields aren't necessarily indicating that people expect the Fed to raise rates any time soon, but rather the worries surrounding the influx of supply and the lack of a credible plan by government's around the world to restore fiscal credibility. People arebeginning to rethink the notion that Treasury debt is "risk-free"

The Macro View

http://themacroview.wordpress.com

Mon, 04/12/2010 - 04:48 | 296102 mark456
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