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Guest Post: Houston, We've Got A (US) Problem

Tyler Durden's picture





 

Via Dr. Constantin Gurdgiev of True Economics blog,

2013's biggest Grey Swan might be not China's slowdown or Euro area's continued debt crisis (although both are pretty much still on the books, although the former is less likely than the latter). It might not even be the Japanese economic implosion (albeit Japan is sick beyond any repair)... oh, no... the real Grey Swan of 2013 might be the markets starting to take a closer look at the US.

This might sound bizarre during the weekend following Friday, when the VIX index collapsed 39.1% - more than in any other trading day in its history, and when the US markets have ended the first week of the year with total gains almost equivalent to what some are projecting for the entire 2013... and yet... as some would say: "Houston, we've got a problem!"

The problem is best illustrated in the following three sets of chart, all comparing US fiscal performance to the peers.

Structural Deficits:

 

 

As the two charts above highlight, the US Government structural deficits are massive. Since 2011, these are shallower than those of Japan (and Japan's figures in charts above are likely to become even worse following the latest Government appointment and their commitment to debase/in-debt the Japanese economy out of existence) but they are the worse in the entire G7 group save for Japan. More ominously:

  • The IMF is predicting the structural deficit to worsen once again starting in 2015
  • The above projections by the IMF do not reflect the disastrous consequences of the 'Fiscal Cliff' deal struck on December 31, 2012 (see here).
  • In 2013, US structural deficit is projected to be around 5.49% of GDP against the G7 average of 3.04%
  • In 2010-2017, according to the IMF projections, the US cumulated structural deficits will add up to 44.84% of GDP - against Japan's 58.53% and the G7 average of 24.97%. For 2013-2017, the same figures are: US 21.43%, Japan 33.31% and G7 average 10.48%. In other words, things are going to get worse in the US compared to G7 average in 2013-2017 than they were in 2010-2012. They will be worse still in Japan, but everyone expects Japan to remain the sickest member of G7, so there is little surprise or repricing that can be expected before the US risks are repriced.

Primary Deficits:

 

 

Ugly picture for the US vis G7 counterparts continues with primary deficits as well. Per above:

  • The US is the second weakest link in G7 in terms of primary deficits
  • In 2010-2017 period, the US is expected to generate accumulated primary deficits amounting to 37.65% of GDP and this is against Japan's 52.42%, but G7 average of 15.99%. In the period from 2013 though 2017, the US accumulated primary deficits are expected to come in at 14.21% of GDP against the G7 average of 3.54% of GDP and Japan's 25.73% of GDP. Once again, relative to G7 average, the US performance is expected to worsen in 2013-2017 compared to 2010-2012.

 

A table to summarize the above two sets of charts on a longer time horizon scale:

 

Government Debt:

 

 

The US is positioned as the third weakest G7 economy in terms of levels of Government debt it carries - after Japan and Italy. However, this analysis neglects the fact that according to the IMF projections, the US debt situation is expected to continue worsening through 2016 (when US debt is expected to peak at 114.19% of GDP), while Italian situation is expected to improve from 2013 peak of 127.85% of GDP into 2017. Similarly, compared to G7 average, the US debt dynamics post-2013 are unpleasantly convergent to the higher G7 average (driven by Japan's debt levels).

Stripping out Japan from debt analysis:

  • In 2001, US debt to GDP ratio stood at 11.83 ppt below G7 (ex-Japan) average. By 2012 this number has reversed into US debt overshoot of G7 average by 10.06 ppt. By 2017 the same overshoot is expected to rise to 19.57 ppt.
Table below summarizes the long-range view of the charts above:
 
 
To summarize the above evidence, the US debt levels are not sustainable in the long run, even though current growth (above debt financing costs) and funding costs (exceptionally low yields on Government bonds and the printing press effect on these yields) are delivering short-term sustainability. However, as shown above, the US primary deficit ius huge and not abating fast enough. This implies debt to GDP ratio will be rising into 2016, if not after. Which, in turn, implies rising susceptibility of the US to risk-repricing in the markets.
 
It is worth contrasting the US case with that of Italy and Japan. In Italy's case, there is significant surplus on the primary balance and overall deficit due to high cost of funding even higher debt, compounded by economic growth well below the cost of funding the state debt pile. In Japan - there are severe problems across all parameters: high primary deficits, growth well below the cost of debt funding, and debt pile so large that structural deficits are alarming.
 
All of which means that all three economies can be severely tested by the markets. As long as global economic environment remains that of subdued economic activity, so that risk aversion remains high and monetary policies remain extremely accommodative, the US is out of the investors' crosshairs and Italy is in. Should these environments change, all bets are off for the US - at least in the medium- to longer-term.
 


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Sun, 01/06/2013 - 17:06 | Link to Comment max2205
max2205's picture

Didn't you notice the can was kicked last week....

Sun, 01/06/2013 - 17:37 | Link to Comment ricky2
ricky2's picture

CHARTS, bitchez!!!!

Sun, 01/06/2013 - 17:44 | Link to Comment kaiserhoff
kaiserhoff's picture

Right about the States, but the vix will always collapse after a big up day, and go nuts on a big down day. 

You have to be careful about that chart porn.

Sun, 01/06/2013 - 17:59 | Link to Comment Xibalba
Xibalba's picture

In the future - Zim dollars will be used as collateral for US dollars 

Sun, 01/06/2013 - 18:10 | Link to Comment unrulian
unrulian's picture

WOw look at Canada...we're only super fucked....however you're completely Super Fucked

Sun, 01/06/2013 - 18:20 | Link to Comment caShOnlY
caShOnlY's picture

When your sole existance as a nation is dependent on the US consuming your products, I'd say your super completely fucked beyond all hope.  And when you decide to use your secret "tar sands" weapon, you'll see the 3rd Marine division already got there.   There is a benefit to NAFTA after all, great friends and trading partners!!!

Sun, 01/06/2013 - 18:26 | Link to Comment Snakeeyes
Snakeeyes's picture

Why do you think they are talking about trillion dollar platium coins? THE GAME IS ALMOST OVER! We are living on hyper spending and hyper debt.

http://confoundedinterest.wordpress.com/2013/01/06/pennies-40-ton-trilli...

Sun, 01/06/2013 - 21:48 | Link to Comment Mercedes
Mercedes's picture

I don't follow.  Canada has the lowest structural deficits and has actually reduced their debt as a % of GDP. 

Mon, 01/07/2013 - 00:19 | Link to Comment Nage42
Nage42's picture

Well that's fine, but the entire Canadian market is "dirty pegged" to the USD via NAFTA clusterfsck so when the USSA Titanic finally realizes that the water it was taking on has started to soak the bed linens, then the little dingy chained to the back of it (Canada) will prolly already be getting mulched up by the propellor... what a depressing and yet strangely accurate image...

 

 

Sun, 01/06/2013 - 18:20 | Link to Comment stocktivity
stocktivity's picture

It's all Bullshit anyway

Mon, 01/07/2013 - 03:39 | Link to Comment Seer
Seer's picture

Nothing like dropping acid and looking at colorful squiggly lines! (always looking for value!)

Sun, 01/06/2013 - 17:39 | Link to Comment mt paul
mt paul's picture

what will amerika do

when some homeless guy

recycles the can 

they've been kicking ...

Sun, 01/06/2013 - 18:20 | Link to Comment nmewn
nmewn's picture

Must-Protect-Can.

Sun, 01/06/2013 - 18:39 | Link to Comment BoNeSxxx
BoNeSxxx's picture

Howdy nmewn. Happy New Year to you.  Been a while...

Cheers to a memorable 2013 :-)

Sun, 01/06/2013 - 18:24 | Link to Comment Getting Old Sucks
Getting Old Sucks's picture

Get a nickle and make a profit of about 1.5 cents.  Do it now.

Mon, 01/07/2013 - 03:41 | Link to Comment Seer
Seer's picture

"what will amerika do"

Same as it always does, arrests the guy and blames him for all the ills.

Sun, 01/06/2013 - 19:08 | Link to Comment ball-and-chain
ball-and-chain's picture

How long have we been listening to this shit?

The collapse isn't coming.

We're in for endless Japanese-style recession.

Nuclear winter is already here.

http://www.angrysinner.blogspot.kr/2013/01/saturday_7.html

Mon, 01/07/2013 - 03:48 | Link to Comment Seer
Seer's picture

How long do I have to listen to people claim that it isn't coming?

You're paying attention to shit written on paper! (staring at shit-stained toilet paper?)

Japan has been able to coast because the rest of the world has continued to feed it PHYSICAL resources.  We're now at the point of realizing that it's all paper and that now it's a shift toward PHYSICAL (concentrating on commodities, which Japan has none).

No, Japan is going to crack -SOON, and when it does That will trip up US Treasuries, which in turn will hit the big switch on the US economy (as the debt will start sucking in all available capital).

If you're tired of hearing this shit then perhaps you ought not be hanging out here?

BTW - I'm not interested in reading your blog. If you have an ager problem then maybe you should look in to anger management...

Sun, 01/06/2013 - 17:08 | Link to Comment Rustysilver
Rustysilver's picture

Everything was fixed last week. No news here.

Sun, 01/06/2013 - 17:21 | Link to Comment Bluntly Put
Bluntly Put's picture

That's right, if all else fails we can mint up new 1 ounce, platinum $1012  coins.

Sun, 01/06/2013 - 18:30 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

We could kick $Trillion Dollar Platinum beer cans down the road...

Sun, 01/06/2013 - 17:34 | Link to Comment Never One Roach
Never One Roach's picture

when Timmy sells The Tuna everything will be fixed.

Sun, 01/06/2013 - 18:13 | Link to Comment unrulian
unrulian's picture

From hell's heart I stab at thee; for hate's sake I spit my last breath at thee. Ye damned Trillion dollar Tuna.

Sun, 01/06/2013 - 17:12 | Link to Comment ebworthen
ebworthen's picture

Problem being that U.S. markets are propped by the FED.

There seems to be no limit to how far they will go to prop the banks, bankers, and Wall Street.

I wouldn't doubt they are buying equities and doing currency swaps off the books; and simply giving "money" (binary digits) to their banking rulers such as J.P. Morgan Chase, Wells Fargo, and Citi.

It would not be a large leap after rewarding the oligarchs while punishing individuals who work and save - as the government at large ignores the rule-of-law and allows blatant thieves such as Corzine to escape justice and impose fines rather than jail time for MERS, Libor, subsuming bondholder rights, and other open crimes against the individual.

Sun, 01/06/2013 - 17:17 | Link to Comment TrustWho
TrustWho's picture

Central bank printing has never been a long term strategy and every nation who printed thought they were addressing a short term problem that always required more once started.

All Fed board members should be treated as criminals as their bank friends.

Sun, 01/06/2013 - 17:28 | Link to Comment BoNeSxxx
BoNeSxxx's picture

The printing can continue as long as oil is traded for dollars...

When that changes, so does life as Americans know it.

Knowing this should help explain why our military is spening so much time in desert camo...

Sun, 01/06/2013 - 17:57 | Link to Comment TerminalDebt
TerminalDebt's picture

That is a dangerously wrong belief.

This causes the US to export inflation to all consumers of oil, but they all perish together.

 

Sun, 01/06/2013 - 18:36 | Link to Comment BoNeSxxx
BoNeSxxx's picture

LoL... yea, I thought the danger was implied.  You are correct.

It is ABSOLUTLEY the reason the FED has the CTRL+ALT+P option.  16 Trillion is beyond fucktard when you really comprehend how much debt that is... it's more than the US could EVER hope to repay. Sooooo... Petrodollar to the rescue.

In a FAIR resource based economy, evey inch of Saudi would look like Dubai.

But, it doesn't... same reason every square inch of America doesn't look like Newport RI.  

Lords and peasants, oligarchs and cattle, winners and losers.  It's the system we were born into and will most likely die in.

Sun, 01/06/2013 - 18:39 | Link to Comment Getting Old Sucks
Getting Old Sucks's picture

What inflation?  The Bernank says there's no inflation.  I shop for chop meat now insted of steak.  Same same right?  Opps, chop meat just went up 2 bucks a pound.  Could he be fibbing to us?  Nah, they would never do that.  I must be looking at something wrong.  HEY BEN, YOU WOULDN"T BE KIDDING US NOW, WOULD YOU? 

 

Sun, 01/06/2013 - 18:53 | Link to Comment garcam123
garcam123's picture

This is revealing to me.  I don't own PMs so I have to eat common food.

Did I already tell the group about boxed mac and cheese.  It used to be 3 for a dollar, now it's $ .95 per box.

I expect the food riots aren't far off.

We need to start killing bankers.

Mon, 01/07/2013 - 04:04 | Link to Comment Seer
Seer's picture

"Opps, chop meat just went up 2 bucks a pound."

And then they'll point out that steak is down! (which it will be, but it'll still be too expensive for most)

I can afford $4/lb.  Steak goes up to $7/lb.  The data shifts to reporting on stew meat at $3/lb.  Stew meat goes up to $5/lb and steak drops to $6/lb.  Since the inflation shows up under stew meat they now start reporting that prices have dropped because steak has dropped (which, is STILL not AFFORDABLE, but that's not the point they care about)!

Mon, 01/07/2013 - 03:57 | Link to Comment Seer
Seer's picture

I'd even go so far as to make it more generalized by stating that the USD is only good as long as PHYSICAL is traded for it.  The USD has gone entirely VIRTUAL now.

During the GW Bush administration the push was to secure distribution channels for oil (oil being THE key resource- it is, after all, POWER!).  The next necessary step was to keep the skids greased such that oil could move; the "skids" being the banking system (enter the Obama administration); the "grease" being the various bailouts to shore up the books (which are supposed to legitimize operations- we can now look in to them and proclaim that all is well!).

Sun, 01/06/2013 - 17:55 | Link to Comment sessinpo
sessinpo's picture

ebworthen: "Problem being that U.S. markets are propped by the FED."

 

Actually, the problem being is that the public (often ignorant) allows it to happen.

In other words, that specific problem, as you call it, is only there because it is ALLOWED to be there by the public. And they will go as far as they can as long as they are ALLOWED.

 

Another way to interpret what I say is: They power is with the FED because the the public ALLOWS them to have that power. The real power is with the people, but the people is either to ignorant or lazy to take that responsibility. Another way to interpret this thought, which I have expressed before is: The Fed and the FRB are symptoms of a societal problem (liberalism). You would have less bloated government and not such liberal ideas of centralized planning if we did not have such a liberal ignorant population.

 

Quite frankly, I'm sick of the same old games as most of us at ZH are. But I'm not going to lay the blame on these criminals when we all know who they are and what they are doing. But the public ALLOWS them to get away with it. That is the down fall of western society. Despite all that one individual might do to combat it, you are going against the grain, fighting millions of sheeple. All you can do it try to protect yourself, which the Federal government is in the process of making harder to do.

Sun, 01/06/2013 - 18:22 | Link to Comment ArkansasAngie
ArkansasAngie's picture

The steeple don't know

The propaganda served by MSM is very effective

Cover-up after cover-up

Sun, 01/06/2013 - 18:38 | Link to Comment secret_sam
secret_sam's picture

      The Fed and the FRB are symptoms of a societal problem (liberalism). You would have less bloated government and not such liberal ideas of centralized planning if we did not have such a liberal ignorant population.

That's false and stupid.

"Liberalism" does not assert the virtues of centrally-planned economies OR of totalitarian State-power.

Sun, 01/06/2013 - 20:59 | Link to Comment klockwerks
klockwerks's picture

You have just made his point.  I think you are one of the ignorant liberals he spoke of and your statement just proved it. DUH

Sun, 01/06/2013 - 21:27 | Link to Comment ebworthen
ebworthen's picture

Liberalism and Conservatism are two sinpes running about the grounds of the Capitol.

TPTB make people believe they are members of one or the other, so they spend their time vociferating on radio and in the streets, while both Demicans and Republicrats - who purport to be one or the other or in-between - act and vote to maintain the kleptoligarchy.

The snipe hunting is a waste of your time; tearing down the non-functional status-quo establishment through violent revolution is the only way; though the sheeple will need to be starving and have their T.V.'s and Internets shut off before that happens.

Mon, 01/07/2013 - 00:29 | Link to Comment secret_sam
secret_sam's picture

There ARE real meanings to the concepts, but most folks aren't interested.  I only point out the obvious stuff now and again. 

It's worth calling out bullshit that's deliberately intended to deceive people about history and to maintain the current tribal jingoism.

Sun, 01/06/2013 - 22:12 | Link to Comment Joe moneybags
Joe moneybags's picture

You made a very good point Secret Sam, one a little too nuanced for the knee jerk crowd here to consider. 

Mon, 01/07/2013 - 00:26 | Link to Comment secret_sam
secret_sam's picture

It's not exactly "nuanced."  It just demonstrates the current gulf between understanding and opinion.  No biggie.

Mon, 01/07/2013 - 04:25 | Link to Comment Seer
Seer's picture

Blaming the messengers ain't going to solve anything.  It's the MESSAGE (premise) that's the problem, which is: "perpetual growth on a finite planet is necessary."

The Ponzi pre-dates all the messengers.

This is the Titanic.  Expecting/wishing everyone to run to the same side of the ship is highly problematic.  Most here are expending energy in order to climb to the high side, the high side only being possible because the bulk of people are on one side (which causes it to be lower).  And when you realize that this is what we're doing and that it's little different than the strategy taken by TPTB (who are the messengers), well...

Sun, 01/06/2013 - 17:09 | Link to Comment TrustWho
TrustWho's picture

...and add the American states debts to the federal total.....uh oh!

Sun, 01/06/2013 - 17:11 | Link to Comment apberusdisvet
apberusdisvet's picture

The consistent ramping up of the police state is certainly indicative that TPTB are expecting an event to occur.  Whether it will be a false flag situation or a true economic event is open to question.........but it is definitely coming.

Mon, 01/07/2013 - 04:30 | Link to Comment Seer
Seer's picture

The "event" has been occurring for quite some time.  It has to do with resource shortages.  And given that ALL WARS ARE ABOUT RESOURCES it follows that war(s) are coming.  In the US people are increasingly less gullible about wanting to "spread democracy," so war with external entities is becoming harder to muster up; this starts tilting things toward INTERNAL war (the ramping up of divisional mechanisms such as racism and ideological thought appears to be ramping in this direction).

Sun, 01/06/2013 - 17:14 | Link to Comment tawse57
tawse57's picture

I have given up looking for black swans and in being a bear.

It seems that nothing will allow these markets to dropp 500 points let alone 2,000 or 3,000 points.

I think that as we have now got to the point where we are talking about grey swans shows just how desperate us bears have got.

They are printing to infinity.

Sun, 01/06/2013 - 17:23 | Link to Comment Dick Buttkiss
Dick Buttkiss's picture

They are printing to infinity.

Which is why it is insane to be bullish, as infinity, by definition, cannot be reached, and the economy must therefore collapse at some point.

So get ready -- http://readynutrition.com/resources/52-weeks-to-preparedness-an-introduc... -- and otherwise go about your business, remembering, as always, that

The state can kiss my ass.

Sun, 01/06/2013 - 18:05 | Link to Comment tawse57
tawse57's picture

Yes, it will collapse at some point... but us bears have always expecting it to be next week, next month, next year... and we have been thinking this for years now.

Yes, it will collapse some time but that might be several years and several thousand up points on the DOW away.

We underestimated printing. We should admit it.

Sun, 01/06/2013 - 18:15 | Link to Comment cossack55
cossack55's picture

Some also underestimated a TOTALLY corrupt gubmint and a TOTALLY corrupt media.  Add the printing and you got the Mother Of All Trifectas (MOAT).

Sun, 01/06/2013 - 19:31 | Link to Comment Ima anal sphincter
Ima anal sphincter's picture

You are TOTALLY correct.

Sun, 01/06/2013 - 20:17 | Link to Comment Dick Buttkiss
Dick Buttkiss's picture

Never underestimate the Fed/USG's ability to extend and pretend, meaning stopping at nothing to sustain the unstainable, never mind that the end will be all the worse for doing so.

Expect expanded war abroad, therefore, to change the subject FDR-style, with martial law at the ready, including FEMA camps, to quell the masses as the endgame plays itself out.

And fuck the stock market. It's a computer-run casino for whom retail investors are digital mince meat.  

And besides, you've got more important things to do.

 

Mon, 01/07/2013 - 00:24 | Link to Comment SmoothCoolSmoke
SmoothCoolSmoke's picture

Long 3x SP....use the profits to buy silver.

Mon, 01/07/2013 - 04:50 | Link to Comment Seer
Seer's picture

Your comments present a BIG point for introspection...

I've opted to NOT engage in any of the "markets" because I have no control.  I cannot delude myself into thinking that I'm some sophisticated trader.: yeah, in the past I was able to to make "gains," but in retrospect it was because there was so much sloshing around, that so much growth was ramping up, that it was hard to NOT make "gains."  Today, however, with growth being pretty much flat/dead, there's no easy "gains."  I see many so-called "sophisticated" traders complaining about not realizing (sufficient) "gains" because of the market being rigged.  Well... things have always been rigged.  What's different is that the rigging is ramping up because the very system is now seen/known to be on the verge of collapse because there is no longer any means for growth.

I think that when you see it as such they you realize that calling bears and bulls is a bit silly, and that, yes, one is better off actually doing the hard work of preparing for the work ahead post collapse- no longer can anyone hope to cash in in order to obtain a cushion on which to land on.  Maybe easy for me to say given that I took gains from the real estate bubble (personal home only) and have invested them in Ag land rather than in the markets: it's nearly impossible to get "rich" in Ag;  I'm not one to allow greed to get the best of me, so I accepted that I didn't lose my shirt and am getting on with focusing on the only true Fundamentals: Food, Shelter and Water.

Sun, 01/06/2013 - 17:54 | Link to Comment Pareto
Pareto's picture

yup.  Vix to zero before 80.

Sun, 01/06/2013 - 17:54 | Link to Comment Pareto
Pareto's picture

yup.  Vix to zero before 80.

Sun, 01/06/2013 - 18:18 | Link to Comment yogibear
yogibear's picture

Zimbabwe economics is Bernanke, Evans, Dudley and Yellen's plan. Keep increasing the debt limit and print.

The stock market goes up just like Zimbabwe and everyone becomes millionaires.

The Fed banksters know they cannot stop monetizing/print. Who else would buy the US debt?

Rates would rise and their game blows up. More FMOC bluffing about cutting the debt buying. It can't.

Only thing the Federal Reserve worries about is when the US dollar crashes and they can no longer abuse it when it looses the reserve currency status.

 

 

 

Mon, 01/07/2013 - 05:03 | Link to Comment Seer
Seer's picture

"Only thing the Federal Reserve worries about is when the US dollar crashes and they can no longer abuse it when it looses the reserve currency status."

Based on my understanding of history (and observations during my lifetime) the Fed is really only piloting an vehicle that's on auto-pilot.  Does history not show that things happen any other way than through the debasement of currencies?

Fine, we can all jump up and down and scream that they're debasing the currency, but shouldn't we really start being more serious as to the question of "why?"  Stating that they're doing it because they can, or that they like doing so, does ourselves a big disservice.  TPTB want things to be steady and predictable.  Again, history clearly demonstrates that things are anything BUT steady and predictable when currencies collapse.  I can therefore NOT prescribe to the notion of this being the desired path: I instead believe that they are just trying to poke at the controls in hope of buying time of impact.

It has been my argument that our failings all stem from our inability to question the very premise of that which we operate by: the necessity for perpetual growth (on a finite planet).  We have come to the point where we are practicing collective self-deception in order to keep jacking up the all-important score-board- GDP/Growth numbers; we're at the stadium cheering for more points while the stadium is on fire.  At some point we've got to get to the realization that we've got to get out of the stadium, and we've then got to figure out what life is/will be like outside of the stadium- that play-book is empty, blank pages for each of to write.

Sun, 01/06/2013 - 17:20 | Link to Comment fonzannoon
fonzannoon's picture

someone on here said argentin's stock market went up like 300% prior to their default on no volume. that means the spx still has 295% upside this year. 

Sun, 01/06/2013 - 17:22 | Link to Comment busted by the b...
busted by the bailout's picture

"You know, Paul, Reagan proved that deficits don't matter." -- Dick Cheney

 

Besides, they are going to fix that in February, or so the story goes. 

 

Continued job creation and low interest rates are more important to the economy in 2013 than the deficit, imo.

Sun, 01/06/2013 - 19:35 | Link to Comment Ookspay
Ookspay's picture

The Fed has proven that it is incapable of achieving the dual mandate of low inflation and high employment. They never should have been given that responsibility by our spineless and inept politicians. This slow motion train wreck was all too predictable.

Sun, 01/06/2013 - 22:22 | Link to Comment SeattleBruce
SeattleBruce's picture

"Job creation" - oh is that what 'they're' doing? Not all jobs are created equally!

Mon, 01/07/2013 - 05:20 | Link to Comment Seer
Seer's picture

"Continued job creation and low interest rates are more important to the economy in 2013 than the deficit, imo."

PHYSICAL resources are more important that all of this.  If you have them then you have the ability to produce.  And with the ability to produce you have "jobs."  Interest rates, as we here know, should really be self-correcting; right now they have no basis with which to self-correct (due to all the interference).

While "jobs" will continue to be "created," THE issue is that they will not out-pace "job" losses.  The algos will continue to slosh capital back and forth, but because they won't be able to conjure up a growth in the extraction of physical resources there will be no growth in which to have any net increases in the number of "jobs."  And, I believe that we're actually slipping under merely being flat- contractionary; this will unleash my "economies of scale in reverse" scenario, which, I'm afraid, doesn't bode well for "job" creation.

Thinking more along the "stadium" analogy (I posted above), I think that what is happening is that we're ignoring that "opponents" -deficits- are racking up a higher score than the "home team's" GDP/Growth score.  And, like I said, while the trends of the score are most definitely of concern, I think that the fact that the stadium is on fire tends to trump this.  So, yes, if viewing things through the lens of this analogy, I suppose that "deficits don't matter."

Sun, 01/06/2013 - 17:22 | Link to Comment Chartist
Chartist's picture

I don't care about rationale, individual stock charts look decidedly bullish (precious metal stocks notwithstanding).

Sun, 01/06/2013 - 19:48 | Link to Comment Ookspay
Ookspay's picture

Dontcha think the stock market is just a Fed blown bubble? They're making bubbles out of kevlar these days but eventually they will pop, soon.

Sun, 01/06/2013 - 17:23 | Link to Comment Banksters
Banksters's picture

Anyone holding us treasuries as the fed buys them is a dolt.    

Sun, 01/06/2013 - 18:00 | Link to Comment CH1
CH1's picture

Anyone holding us treasuries as the fed buys them is a dolt.

Yes, but they are dolts with pats on the back and broad respect. Those things are FAR more important than truth to most people.

Reality has been suspeded until further notice.

Sun, 01/06/2013 - 18:05 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Indeed.  Perhaps he meant to say "Anyone buying treasuries, then selling them to the Fed and not turning the profit into some physical asset is a dolt."

Last time I looked, Bill Gross has several damn fine spreads at Deer Valley and in Corona Del Mar.

Sun, 01/06/2013 - 19:51 | Link to Comment Ookspay
Ookspay's picture

+1

Truer words have never been typed.

 

Sun, 01/06/2013 - 17:26 | Link to Comment bankonzhongguo
bankonzhongguo's picture

The pronouncement today by the BIS - Basel Committee on "liquid assets" for bank capital requirements shall include corporate bonds, stocks and of course the ever reliable mortgage back securities will not doubt make it even more difficult for the central banksters from ever leaving the markets.

Under emerging international regime, there will never be any real price discovery on the "New Cash."

 

 

Mon, 01/07/2013 - 05:27 | Link to Comment Seer
Seer's picture

Swallowing poison can never be expected to turn out well...

Like I've been saying for quite some time now, I think that the Fed is going to swallow like a black hole and then implode.  Govt is then going to disclose this tightly held secret when they inform the world that: "The Federal Reserve is an independent organization, separate from the US govt."  And with that will come the proclamation that the US govt will NOT bail out the Federal Reserve.  Debt problem resolved!

Sun, 01/06/2013 - 17:34 | Link to Comment AgAu_man
AgAu_man's picture

Are we to understand that, with the exception of Canada and Germany, NATO's/GATO's or G8's/GS8's global ambitions are being outpaced by MMT problems?

Too bad those two (.ca and .de) aren't able and willing to help us with exports and associated GDP growth, by exporting our peace(maker) programs.

;-/

Sun, 01/06/2013 - 17:28 | Link to Comment KickIce
KickIce's picture

The problem is that we've allowed these asswipes to measure fiat vs fiat so we  only get a relative strength.  It's very much like a competition that determines what breed of dog crap smells the best.  But yes, as long as they can keep commodity prices in check, food in particular, the charade will continue.

Sun, 01/06/2013 - 17:29 | Link to Comment Manthong
Manthong's picture

C’mon now.. numerous economists and pundits indicate that the US is the least clumpy skidmark on the skivvies.

Sun, 01/06/2013 - 17:33 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Short Treasuries BITCHEZ!

 

Sun, 01/06/2013 - 18:28 | Link to Comment kill switch
kill switch's picture

Short Treasuries BITCHEZ!

 Long Treasuries= like jerking off with boxing gloves, happy ending very elusive..  In this example short hankies....

 

 

The kill switch

Sun, 01/06/2013 - 17:49 | Link to Comment Lord Of Finance
Lord Of Finance's picture

We will have a real problem when we have lift off in the rates of interest

Sun, 01/06/2013 - 18:23 | Link to Comment spinone
spinone's picture

Won't happen.  Period.  The dollar will fail before rates go up.

Sun, 01/06/2013 - 17:56 | Link to Comment xamax
xamax's picture

2016 when US debt is expected to peak at 114.19% of GDP)

WRONG
DEBT / GDP TODAY: 103%
BUDGET DEFICIT : 10%
DEBT/GDP 2016: 143 %

Watch ur step next time....

Sun, 01/06/2013 - 18:48 | Link to Comment secret_sam
secret_sam's picture

This is what happens when you don't understand percentages, kids....

Mon, 01/07/2013 - 05:30 | Link to Comment Seer
Seer's picture

"This is what happens when you don't understand the exponential function, kids...."

Fixed!

Sun, 01/06/2013 - 17:56 | Link to Comment Seasmoke
Seasmoke's picture

eventually we will be waiting for albino swans

Sun, 01/06/2013 - 20:08 | Link to Comment Vendetta
Vendetta's picture

with their wee beady red eyes, you'll know when they have arrived

Sun, 01/06/2013 - 17:58 | Link to Comment falak pema
falak pema's picture

BI reminds us of a TD/ZH prediction for FED bond interest rates for 2012 :

21 People Who Had Declared 'Rates Have Nowhere To Go But Up' - Business Insider

 

Apparently the experts were saying the same thing in Jan 2012 as they are in Jan 2013. 

Sun, 01/06/2013 - 18:02 | Link to Comment LawsofPhysics
LawsofPhysics's picture

If rates go up, all hell will break loose in the U.S., so they won't.  Even if it means killing the dollar, the Federal Reserve has been very clear on this with respect to their actions.

Sun, 01/06/2013 - 18:36 | Link to Comment falak pema
falak pema's picture

lift off : when you gotta go you gotta go; whatever the FED says, as they feed the fire with their QE enchilada sauce. Its hot and the toilet becomes Jerusalem when the market's gut goes boum bada boum. 

Sun, 01/06/2013 - 17:59 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Every central bank on earth is printing.  No problem, at least until interest rates go up - precisely why you can bet they won't, now about those very real and finite commodities....

Mon, 01/07/2013 - 05:34 | Link to Comment Seer
Seer's picture

"now about those very real and finite commodities...."

Shh!

I've been told that "technology" will take care of all of this! we'll get something like a 3-D commodities printer and all will be saved! (hm... "printer" seems to be quite the popular word these days) </sarc>

Sun, 01/06/2013 - 18:02 | Link to Comment mrdenis
mrdenis's picture

If you dig it, man, that’s crazy!

Sun, 01/06/2013 - 18:03 | Link to Comment negative rates
negative rates's picture

So they are tell in ya, that one and one and one, are still 3. 

Sun, 01/06/2013 - 18:08 | Link to Comment tom a taxpayer
tom a taxpayer's picture

"This might sound bizarre during the weekend following Friday, when the VIX index collapsed 39.1% - more than in any other trading day in its history". The VIX collapsed 39% for the week, not the day.

Mon, 01/07/2013 - 05:36 | Link to Comment Seer
Seer's picture

I feel MUCH better now! </sarc>

Sun, 01/06/2013 - 18:12 | Link to Comment TWSceptic
TWSceptic's picture

Okay people, move along, there's nothing to see here.

Sun, 01/06/2013 - 18:14 | Link to Comment ShrNfr
ShrNfr's picture

I will note that the present value of future obligations of the US government are 14 times the GDP of the US. Greece's obligations are only 12 times Greece's GDP. Yes, there is a problem. Of course, we are only adding to our obligations at around 75% of the GDP per year. I mean, what could go wrong???

Sun, 01/06/2013 - 18:41 | Link to Comment secret_sam
secret_sam's picture

"Future obligations" is a less meaningful concept when one party to the contract can rewrite it unilaterally at any time.

Sun, 01/06/2013 - 19:21 | Link to Comment Totentänzerlied
Totentänzerlied's picture

Call me crazy, but that doesn't sound like a contract at all.

Sun, 01/06/2013 - 20:45 | Link to Comment secret_sam
secret_sam's picture

You're not crazy, hence the problem with pretending there's such a thing as a "net present value" of aforementioned future obligations....

(On second thought, I don't know you're not crazy--for all I know, you're crazy as a LOON.  But that's not important right now...)

Mon, 01/07/2013 - 05:44 | Link to Comment Seer
Seer's picture

"hence the problem with pretending there's such a thing as a "net present value" of aforementioned future obligations...."

BINGO!

It's all about "forecasting."  If weather forecasters operated like this then as the weather actually did occur the weather forecaster would be telling us that the current weather was sunny when in fact it was pouring down rain.  Obviously they'd have zero credibility if they did so...  But, here we are in a down-pour being told that it's sunny, trying to fly with only a VFR rating...

Sun, 01/06/2013 - 18:17 | Link to Comment spinone
spinone's picture

Oh yeah?  Compare our military spending to our peers.  Then fuck off.

Sun, 01/06/2013 - 18:27 | Link to Comment ShrNfr
ShrNfr's picture

Peanuts in the greater scope of things. Let us just assume that it is a trillion in round numbers. We are piling on 11 trillion a year in obligations.

Mon, 01/07/2013 - 05:47 | Link to Comment Seer
Seer's picture

And as much as I detest the empire's militarism, this spending is somewhat offset by reduced resource costs (oil), for the time being... (but eventually the bulk of the resources will be directed to the empire's military itself).

Sun, 01/06/2013 - 18:39 | Link to Comment negative rates
negative rates's picture

You know me, i'm the law, i'll do anything for money!

Sun, 01/06/2013 - 23:55 | Link to Comment Vendetta
Vendetta's picture

what could possibly go wrong with the mayor's suggestion  /snark

Mon, 01/07/2013 - 05:50 | Link to Comment Seer
Seer's picture

Nuggets for Narcs!

We'll know it's a trap when we see them roll out the "Gold for Guns" program...

Sun, 01/06/2013 - 18:57 | Link to Comment Jake88
Jake88's picture

Oh yeah. Those charts ought to crash the US markets this week. Grey Swan???? One of ZH dumbest posts yet

Sun, 01/06/2013 - 19:24 | Link to Comment earleflorida
earleflorida's picture

"We've Got a Problem?" 

Bush #43 and Obama combined have made balancing the budget an impossible task... Why?

Remembering Paul Volcker's `*'Virtues'*, as Carter's 'Main-Man'... his daring-- and his triumph!!!  {a lesson from history's recent [30+yrs.] past... yet so, omnipresent?} 

http://www.bancroft.berkeley.edu/ROHO/projects/debt/volckerfedreserve.html   [note: just link to search box address--redirect]

http://www.bancroft.berkeley.edu/ROHO/projects/debt/1987grammrudmanholli...

http://en.wikipedia.org/wiki/Gramm-Rudman-Hollings_Balanced_Budget_Act     [note:  sequestration and the supreme court below]        http://en.wikipedia.org/wiki/Bowsher_v._Synar

U.S. Gov't Spending 'GDP v.  GPD *[Gross Public Debt] Statistical Chart Comp's-- referencing: 1975 [$1.6Tn./ $542bn.], 1979 [$1.6Tn./$541bn ], 1982 [$2.5Tn./$830Bb, 1987 [$3.2Tn./ $1.1Tn.], 1990 [$4.7Tn./ $2.3Tn.], 1997 [$5.8Tn./$3.2Tn.], 2002 [$8.3Tr./ $5.3Tr.], 2007 [$10.6Tn./ $6.2Tn.], 2010 [$14.5Tn./ $8.9Tn.], and 2012 [$15.6Tn./ $16.4Tn.]

Note2: Please realize that we are lost in space at this very moment... where the x-axis, y-axis, and z-axis are lost in a irrational radii of a reversed time'd osmosis? Just plug in the particular year and verify the quantum mechanics histrionic of [objective/ subjective feudalism?] time travel...     http://www.usgovernmentspending.com/year1975_0.html

thankyou tyler

Ps. eyes giving out ... sorry for getting old

Sun, 01/06/2013 - 19:57 | Link to Comment HellFish
HellFish's picture

I'll pass on any references to Berkeley.edu.

Mon, 01/07/2013 - 05:51 | Link to Comment Seer
Seer's picture

Kill the messenger...

Mon, 01/07/2013 - 05:58 | Link to Comment Seer
Seer's picture

The moment of undeniable impossibility came in 1971 when the US fell off the gold standard (defaulted) and it peaked in oil production (shift from trade surplus to trade deficit was then inevitable).

During the 1990s the smoke and mirrors of forming bubbles clouded the fiscal deficits.  The recorded numbers are window dressing, a facade, and that no actions since 1971 have done anything to alter the inevitable outcome (other than to affect the timing a bit).

There's no fooling the exponential function!

Sun, 01/06/2013 - 19:15 | Link to Comment Never One Roach
Never One Roach's picture
Two Chinese women die from H1N1 flu in Beijing: state media

 

BEIJING (Reuters) - Two Chinese women have died from the H1N1 flu strain in Beijing in the past 10 days, Chinese state media said on Sunday, the first reported deaths from the virus in China's capital since 2010.

 

http://health.yahoo.net/news/s/nm/two-chinese-women-die-from-h1n1-flu-in...

Mon, 01/07/2013 - 06:01 | Link to Comment Seer
Seer's picture

Meanwhile several die throughout the world via US drones...

Anyway, expect this to provide a reason for increasing the trade-war tensions.

Sun, 01/06/2013 - 20:22 | Link to Comment loveyajimbo
loveyajimbo's picture

Bush Jr was an amateur deficit maniac and an asshole.  Obama is a professional in both areas.

Mon, 01/07/2013 - 00:00 | Link to Comment Vendetta
Vendetta's picture

+1000

Mon, 01/07/2013 - 00:20 | Link to Comment SmoothCoolSmoke
SmoothCoolSmoke's picture

Some facts:

% increase in National Debt:

Dubya - 87%

Obama - 47%

Times debt ceing raised:

Dubya 9

Obama 1 (2 coming up)

And then there is St. Ronnie Reagan:

ND - 190%

DC - 18 times.

Obama may be a debt asshole.....but he can't hold a candle to the hero/god of conservatism - Reagan.

 

 

Mon, 01/07/2013 - 12:31 | Link to Comment AT
AT's picture

You are comparing a 4 year Obama term to an 8 year Bush term. Moron. Also percentages rise faster from a smaller base. Moron again.

Mon, 01/07/2013 - 06:05 | Link to Comment Seer
Seer's picture

Name-calling aside, I tend to believe that Bush's role was to deal with oil/energy (mission accomplished), not finances (which TPTB had slated for the next administration).

Mon, 01/07/2013 - 03:03 | Link to Comment rufusbird
rufusbird's picture

Humpty dollar sat on a wall. Humpty dollar had a great fall. All the Fed's vices and all the Feds spin, couldn't put the dollar together again.

Sun, 01/06/2013 - 21:27 | Link to Comment notadouche
notadouche's picture

"The practice, by Government officials of extending to men and women the privilege of raiding the public treasury in return for votes, sometimes results in election, but as night follows day, the final payoff comes;when every penny wrongfully used must be repaid with compound interest on compound interest.  If those who make the grab are not forced to repay, the burden falls on their children, and their children's children, 'even unto the third and fourth generations.'  there is no way to avoid the debt."

Napoleon Hill, "Think and Grow Rich" 1937.

The more things change the more they stay the same.  It's folly of generation after generation believing their current complaints are new.  It's the manipulation and the intellectual dishonesty of the politician to continue to plunder the treasury and economically rape the citizen in order to solve "today's problems" knowing full well that these are the same old problems that have been around for decades and raising taxes and raising debt will acheive some unrealsistic goal.  The definition of insanity is doing the same thing over and over and expecting a different result.  One thing for certain, the branches of governement and the people that inhabit the positions are definitely insanely self serving, greedy and dishonest.  

 

Mon, 01/07/2013 - 06:14 | Link to Comment Seer
Seer's picture

"It's the manipulation and the intellectual dishonesty of the politician to continue to plunder the treasury and economically rape the citizen in order to solve "today's problems" knowing full well that these are the same old problems that have been around for decades and raising taxes and raising debt will acheive some unrealsistic goal."

Still missing the mark...

It's gone on for a LOT longer, and, is FAR more unrealistic.  What you are seeing/describing are but symptoms.  The CAUSE lies in the basing of our systems on the impossible premise of perpetual growth on a finite planet.  From this premise everything takes on the very same appearance/characteristic (eventually showing up as the classic hockey-stick line).

Mon, 01/07/2013 - 10:33 | Link to Comment notadouche
notadouche's picture

Well my top quote was written in 1937 and mirrors the exact same sentiments as society is enduring in 2012.  I would say it is going on for a helluva long time.  I'm sure if I tried I could get some similar quote within a decade of the mandatory taxing of the citizen by the poltician.  

Sun, 01/06/2013 - 22:26 | Link to Comment hairball48
hairball48's picture

With respect...all those charts and words and stuff to tell us what we already knew?

The USA is in hopelessly deep shit and no way out but "default" in some form or another?

Mon, 01/07/2013 - 06:15 | Link to Comment Seer
Seer's picture

Hockey (stick) is on!

Mon, 01/07/2013 - 02:58 | Link to Comment AustriAnnie
AustriAnnie's picture

I'm trying to figure out whether this is a joke or not: http://www.youtube.com/watch?v=QWmOmt1zJ7Y&feature=youtu.be

Is this guy's youtube channel associated with The Onion?

Japan has no problems (and Kyle Bass is wrong) because the government can print yen and fund itself by printing more yen?

"You're always self-funding as long as it's in your own money"

"Japan can never run out of yen, so it can never NOT be able to pay its debt. Pure and simple!"

"In a world where the government were like a household, constrained in its ability to spend or issue money, then all of Bass' points would be absolutely correct.....but the reality is we're not on a gold standard or any type of convertibility and these ideas and this type of analysis hasn't been relevent in probably 100 years."

http://www.youtube.com/watch?v=QWmOmt1zJ7Y&feature=youtu.be

 

Mon, 01/07/2013 - 06:17 | Link to Comment Seer
Seer's picture

Are they trying to tell us something? perhaps, "printing" IS going to save us?  I mean, lots of talk of 3-D printing stuff into existence.  If we need resources we only need to PRINT them!  We're fucking saved! (I'm gonna go print some gold!)

Mon, 01/07/2013 - 09:52 | Link to Comment Element
Element's picture

Didn't Reinhart and Rogoff's "This Time Is Different" point-out that once you're over about 90% debt to GDP you're basically going to under-perform fail to reduce the debt until you crash?

http://www.usgovernmentspending.com/usgs_line.php?title=Gross%20Public%2...

I bet that graph turns out to be optimistic.

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