Congressional Budget Office

Paging Ken Rogoff: CBO Revises Budget Deficit Higher By $1.2 Trillion, Says In 2020 Debt Will Be Over $20 Trillion, Debt-To-GDP At 90%

It's Friday after the close - time for the government to sneak one past traders, who are already on their fifth moqito. And sure enough, the bomb today comes from the Congressional Budget Office: The CBO, in an annual analysis of the White House budget proposal, said today that under Obama’s plan deficits would never shrink below 4 percent of the economy between now and 2020. The cumulative deficits would total $9.76 trillion, and debt held by the public would amount to 90 percent of the nation’s gross domestic product by 2020, the CBO said. In other words, the CBO has just confirmed that America has, at best, 10 years before it is officially bankrupt. That's about 9 years of multi-trillion bonuses for Goldman Sachs. Congratulations fellas.

Rep. Paul Ryan Gives Barack Obama A Lesson On How To Avoid Smoke And Mirrors, Double Counting And Ponzi Schemes "That Would Make Bernie Madoff Proud"

Rep. Paul Ryan slams Obama's healthcare reform in one of the most concise critiques of the proposed plan. Furthermore, he observes some of the critical flaws in the Obama plan, which contrary to the President's frequent appearances on TV discussing the "lies" promulgated about his proposal (and even misguidedly allowing citizens to temporarily rat each other out in witch hunts straight out of the Stazi or Sekuritate playbook), is in fact itself full of - inconsistencies, for lack of a better word.

Republicans Pushing To Count GSE Debt Toward Statutory Debt Limit May Be Surprised To Find Real Debt-To-GDP Ratio Is 130%, And That Greece Is Amateur Hour

A new proposal by House Republicans, lead by Rep. Scott Garrett (R., N.J.), is seeking to address changes to Fannie and Freddie accounting, along the lines of what has been previously proposed by Zero Hedge, and to not only include the GSE's losses as part of the Federal budget, but to also count the debt from the two mortgage zombies toward the nation's total statutory debt limit. As we stated previously, it is only semantics at this point which distinguish the GSE obligations from other Treasury obligations. Yet it is not just us, but the administration's very own Peter Orzsag who was pushing for consolidated GSE accounting two years ago. Yet with GSE debt most recently at $6.3 trillion, or about half of the existing Treasury debt, this would mean total US debt would not only explode by 50% overnight, but the recently increased debt ceiling would be immediately breached and America would find itself in technical default (where it really is right now for all technical purposes).

Coming To America: The Greek Sovereign Debt Crisis

Yesterday we presented our views on why Europe's decision to tip over the first of the bailout dominoes will be inherently a catastrophic one in the long term, and will ultimately transfer the peripheral liquidity risk into funding, and ultimately, solvency (and once again, liquidity) risk to the very core. Today, Niall Ferguson joins in, in this latest Op-Ed in the Financial Times. "It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate." In other words, Marc Faber 1, CNBC talking heads, 0... as usual.

smartknowledgeu's picture

Today, casinos have much more integrity in their business dealings than do banks. In general, casinos have more cash and more transparent business dealings with their clients than do banks. That's why it's so ironic that most large commercial banks, as part of their "moral code", do not allow private bankers to do business with casinos. It appears today, that the bankers got that one entirely wrong.

CBO Scores Own Goal

After a fashion, one has to feel sorry for the Congressional Budget Office. Except not really. Though the organization is supposed to be "non-partisan," it faces a dilemma that much resembles that of the Federal Reserve. It is intended, by design, to occasionally throw itself in front of moving freight trains and, despite whatever manic political momentum has built into velocity and pure mass of pages, occasionally stop them cold in the face of intense pressure, public and private. It has singularly failed in this mission since about 2001, and has, in the last few years, become merely a rubber stamp regularly gamed to extract its endorsement to flaunt in the satirical play that is the courting of public opinion.

Observations On Financial Heroin From Don Coxe

"A year ago, we thought that recovery for the financial system and the
economy would be characterized by massive, sustained deleveraging. The
Crash had starkly shown the devastation that runaway deleveraging at a time
of shrinking liquidity could inflict on financial assets and the economy.
The fragility of the financial system in 2007–8 came, in large measure, from
the migration of a model of financing from the so-called shadow banking
system into the daylight version. The new stars of the Street were overlevered
hedge funds and private equity firms. They drove the bull markets in complex
new mortgage products, flawed-model derivatives—and in compensation
for the brashest bettors. So profitable were they, that they were able to hire
elite investment bankers and traders from the Big Banks—and to supply the
justification that the big bonuses paid by the big banks were necessary to
keep their biggest producers.
In retrospect, Wall Street should have tried to follow the advice of the Tenth
Commandment, rather than of Long-Term Capital Management and Enron." - Don Coxe

Zero Hedge Announces New Partnership With Google

As you will no doubt be aware, a large portion of our energies here at Zero Hedge are devoted to developing new products and services for our readers. In this tradition, we are pleased today to announce a new partnership with Google.

Why The "Output Gap" Inflation Model May Be Fatally Flawed

Could it be that the fundamental economic indicator that is gospel not only to Goldman Sachs, but to Ben Bernanke in estimating and determining monetary policy, the output gap, provides a flawed reading of the economy? As a reminder, Ben Bernanke has repeatedly expressed little regard for either commodity inflation or US dollar exchange as having an impact on overall US inflation. As Askari and Hochain state: "according to [Bernanke's] theory, inflation was related only to the output gap. As long as the output gap was negative, that is, if actual gross domestic product was below potential GDP, the economy was at no risk of inflation. Hence, he argued that the central bank had to adopt an aggressive money policy until the output gap closed. Such is the policy prescription from what is called the Taylor Rule or the Phillips Curve. Because potential GDP is not a measured macroeconomic variable, it can be estimated in millions of ways. There are, therefore, millions of ways for estimating an output gap, making the concept difficult to use as a policy tool." The problem with these millions of estimations, is that especially courtesy of the Greenspan created bubble over the past 20 years, the American economy is, ironically, not a true representation of itself. And thus, the output gap estimates need to be normalized for a "bubble free" GDP environment. It is precisely this issue that none other than the St. Louis Fed addresses in its latest paper: "Has the Recent Real Estate Bubble Biased the Output Gap?" The conclusion is startling: based on a production function output gap normalization (an approach "based on a relation between available productive inputs (such as capital and labor), their current utilization rates, and aggregate production"), Bernanke could be fatally wrong about the economy's "capacity for inflation" courtesy of the CBO's overestimated output gap, and that his loose monetary policy could end up being a disastrous precursor to rampant (and not distant) hyperinflation, due to his blatant avoidance of simple logic when interpreting the economic output gap.

Analyzing The Economic Conditions Needed For Persistently "Exceptionally" Low Rates

One of the key departures by the FOMC yesterday in comparison to prior rate statements, was providing a glimpse into what the specific economic conditions are that warrant continued "exceptionally" low rates. Among these the Fed outlined "low rates of resource utilization, subdued inflation trends, and stable inflation expectations"- so long as there is no perceived change to any of these, expect rates to persist in the 0-25 bps zone. Goldman provides some valuable insight on how to interpret these three key considerations by the Fed.

Guest Post: Bucking The Trend

Watch gold and its price reaction in the post recession environment to come. It’s in the divergences relative to historical experience, if they occur, that the important messages will be found for the current cycle. In fact, this is one of our primary focal points of the moment – divergences. Gold just may become quite the very meaningful macro economic character marker that few seem focused upon for this reason. But if indeed gold tells us something very different is afoot in the current cycle, it will also have direct implications for equities, fixed income assets, etc. and the investment community in general that have been trying to discount a typical post recessionary outcome for a good number of months now already. Gold as the very important report card? Exactly.