What happened to all of the doom and gloom economic threads?

[rosco rathbone]

If only the robots bought what they made and took out mortgages.

Extra credit reading:

Lights In The Tunnel

 

[trysail]

Thought this was kinda meta-interesting, since it deals with the intersection of politics (irrational) and reality (rational) as regards investing.

Why Politics and Investing Don't Mix

Investing ( if done properly ) is 90+% mathematics.

If you don't understand that fact, you will end up as a contributor to the financial health and well-being of those that do.

"In the short run, the stock market is a voting machine. In the long run, it's a weighing machine."

-Benjamin Graham​

Spend 99% of your time calculating "intrinsic value." Virtually everything else is noise.

 

[koalabear]

Extra credit reading:

Lights In The Tunnel

I wonder if that comes with a free cookbook?

 

[rosco rathbone]

I wonder if that comes with a free cookbook?

It's about the future of the economy once every task can be automated.

Pretty interesting stuff.

 

[mercury14]

The Dow is marching toward 13k now. What happened to the flurry of conservatives saying that anti-business president Obama was going to cripple Wall Street?

 

[jeninflorida]

The Dow is marching toward 13k now. What happened to the flurry of conservatives saying that anti-business president Obama was going to cripple Wall Street?

we american's are over it...***** goes on as we watch obama set on destorying america

the good news, obama can't do what he wants now! his power has been cut

 

[trysail]

The Dow is marching toward 13k now. What happened to the flurry of conservatives saying that anti-business president Obama was going to cripple Wall Street?

"In the short run, the stock market is a voting machine. In the long run, it's a weighing machine."

-Benjamin Graham

( As frequently quoted by Warren Edward Buffett )

 

[trysail]

Coming soon..., to a store near you!

http://noir.bloomberg.com/apps/chart?h=152&w=240&range=1y&type=gp_line&cfg=BQuote.xml&ticks=SPGSAG%3AINDhttp://noir.bloomberg.com/apps/chart?h=152&w=240&range=1y&type=gp_line&cfg=BQuote.xml&ticks=FAOFOODI%3AIND
​

SPGSAG:IND S&P GSCI Agric Indx Spot
http://noir.bloomberg.com/apps/quote?ticker=SPGSAG:IND

FAOFOODI:IND FAO Food Price Index
http://noir.bloomberg.com/apps/quote?ticker=FAOFOODI:IND

FAO Food Price Index are constant trade weighted average of 55 agricultural commodity prices quoted internationally, obtained from secondary sources. Laspeyres Price 2002-2004=100

__________________


http://noir.bloomberg.com/apps/news?pid=20601110&sid=aeDp9DjABJQM


Corn, Soybean, Wheat Prices Surge as U.S. Cuts Supply Outlook
By Jeff Wilson and Whitney McFerron

Jan. 12 (Bloomberg) -- Corn and soybeans jumped to the highest prices since July 2008 and wheat surged after the government cut its forecasts of U.S. inventories, signaling tighter food supplies as demand increases and adverse weather reduces harvests.

Production of corn in the U.S., the world’s largest grain exporter, dropped 4.9 percent last year and will leave supply before the 2011 harvest at the lowest in 15 years, the U.S. Department of Agriculture said. The USDA also cut its estimate of the soybean crop by 1.4 percent and said domestic wheat inventories will be 16 percent less than a year earlier.

Corn, used mostly as livestock feed, has surged more than 60 percent in the past year, while soybeans and wheat advanced 45 percent. Wholesale world food prices tracked by the United Nations surged 25 percent last year to a record, fueled partly by rallies in grains and oilseeds. Exports of U.S. crops are headed to the highest ever, boosting farm income and profit for agriculture companies including Cargill Inc. and Deere & Co.

“There’s no room for error anymore” on farms around the world, said Dan Basse, the president of AgResouce Co., a commodity consultant in Chicago. “With any weather issues, we’re going to make new all-time highs in corn and soybeans, and to a lesser degree, wheat futures.”

Drought ruined wheat fields in Russia last year and too much rain diminished supplies of the grain from Canada. Adverse weather led to a drop in 2010 corn production in the U.S. and a smaller harvest of soybeans than expected, government data show.

Planting Pressure
“The pressure is acute, in terms of planting fence row to fence row, and really getting the message out to farmers that they need to be planting up their front yards,” Basse said today during a conference call with reporters and analysts.

Rising prices will increase global demand for fertilizer from Mosaic Co. and seeds from Monsanto Co. Reduced supplies of corn will increase expenses for meat companies and squeeze profit margins for makers of ethanol including Valero Energy Corp.

Corn futures for March delivery rose 23.5 cents, or 3.9 percent, to $6.305 a bushel at 10:14 a.m. on the Chicago Board of Trade. The price advanced as much as the exchange limit of 30 cents to $6.37, the highest since July 2008.

Soybean futures for March delivery soared 60 cents, or 4.4 percent, to $14.17 a bushel in Chicago, after rising by the exchange limit of 70 cents to $14.27, a 29-month high.

Wheat futures for March delivery jumped 19 cents, or 2.5 percent, to $7.785 a bushel, after earlier gaining 4.1 percent.

more...

Inflationary pressures are building. Between running the printing press and debasing the USD ( thereby importing inflation ), Bernanke and the Fed's irresponsibility are sowing the seeds of the whirlwind.

As of 11/7/10:

http://www.npr.org/news/graphics/2010/10/gr-grain_prices-300.gif​

Hogs Extend Rally to 24-Year High on Pork Demand; Cattle Gain
By Elizabeth Campbell

Jan. 28 (Bloomberg) -- Hog futures extended a rally to the highest in at least 24 years...

...Hog futures for April settlement rose 1.6 cents, or 1.8 percent, to settle at 91.625 cents a pound at 1:06 p.m. on the Chicago Mercantile Exchange. Earlier, the commodity reached 92.3 cents, the highest for a most-active contract since at least 1986...

...The U.S. cattle herd shrank to the smallest size in 53 years as feed costs climbed and beef producers slaughtered more animals to take advantage of higher prices...

more...

http://noir.bloomberg.com/apps/news?pid=20601012&sid=aJsXTHWWC4io

________________


U.S. Cattle Herd Shrinks to Smallest in 53 Years
By Elizabeth Campbell

Jan. 28 (Bloomberg) -- The U.S. cattle herd shrank to the smallest size in 53 years as of Jan. 1, as feed costs climbed and beef producers slaughtered more animals to take advantage of higher prices...


...Cattle futures climbed 26 percent in the past year, reaching a record $1.166 a pound on Jan. 18. Still, surging prices for corn, the main ingredient in livestock feed, discouraged expansion. The grain has jumped 78 percent in the past year.

“One of our biggest concerns as we look ahead are these increasing costs and how that potentially influences the size of the U.S. livestock industry,” Robb said before the report. “The largest cost input across the livestock industry is the feedstuffs.”

The number of young, female beef cattle held for breeding fell to 5.158 million, down 5.4 percent from 5.451 million a year earlier, the USDA said...

...Steers for immediate delivery averaged $1.0431 a pound in the first four days of this week, up 25 percent from the same period a year ago, according to USDA data. Before today, wholesale beef prices rose 23 percent in the past 12 months.

“There’s just very little incentive to hold back heifers and begin to build herds,” John Nalivka, the president of meat-consultant Sterling Marketing Inc. in Vale, Oregon, said before the report. “Prices are high, and that caused a lot of beef cows to go to slaughter.”

The inventory of heifers for milk-cow replacement totaled 4.557 million on Jan. 1, up 0.7 percent from 4.526 million a year earlier, the USDA said. The average analyst estimate was for a 0.6 percent decline.

The number of calves born during 2010 was estimated at 35.685 million, down 0.7 percent from a year earlier and the fewest since 1950, according to the USDA.

more...
http://noir.bloomberg.com/apps/news?pid=20601012&sid=a2r9hrr8RmU4

http://noir.bloomberg.com/apps/chart?h=152&w=240&range=1y&type=gp_line&cfg=BQuote.xml&ticks=SPGSAG%3AINDhttp://noir.bloomberg.com/apps/chart?h=152&w=240&range=1y&type=gp_line&cfg=BQuote.xml&ticks=FAOFOODI%3AIND
​

SPGSAG:IND S&P GSCI Agric Indx Spot
http://noir.bloomberg.com/apps/quote?ticker=SPGSAG:IND

FAOFOODI:IND FAO Food Price Index
http://noir.bloomberg.com/apps/quote?ticker=FAOFOODI:IND

FAO Food Price Index are constant trade weighted average of 55 agricultural commodity prices quoted internationally, obtained from secondary sources. Laspeyres Price 2002-2004=100

FAO Food Price Index, 2006-2010
Compared to average food prices between 2002 and 2004 (valued below at
100), the global price of food has been rising in the years since
http://www.npr.org/news/graphics/2011/01/gr-foodpriceindex-300.gif
Source: Food and Agriculture Organization of the United Nations
Credit: Nelson Hsu/NPR

​

Rising Food Prices...
http://www.npr.org/2011/01/30/133331809/rising-food-prices-can-topple-governments-too
by Marilyn Geewax

...In large part, the food-price crisis reflects the simple law of supply and demand. The supply of food has been diminished by bad weather in many crucial crop-growing areas of the world. Russia, Ukraine and Argentina have had severe droughts, while Pakistan and Australia have had massive flooding.

At the same time, demand for food has been rising as people in fast-developing countries, such as India and China, have been buying more groceries.

In addition, production and transportation costs have been driven up by the rising price of oil. Other factors involve currency fluctuations, food trade policies and financial speculation in commodities markets. Energy policy also plays a role, because ethanol makers are using more corn to produce fuel...

...U.S. food companies often lock in lower prices by using futures contracts, so the price of ingredients they are using today may have been set a year ago, before bad weather drove up crop prices, he says.

Still, the impact of higher grain, dairy and meat prices eventually will filter down to U.S. consumers...

more...
http://www.npr.org/2011/01/30/133331809/rising-food-prices-can-topple-governments-too

 

[Frisco_Slug_Esq]

The US is hurtling toward out-of-control inflation while the political class tries to convince the hoi polloi that inflation is not a problem. Government-generated CPI data show tame inflation. Federal Reserve Chairman Ben Bernanke claims deflation, not inflation, is the danger to the economy.

Despite government propaganda every shopper knows inflation is already a serious problem. The Financial Times presented annual price increases for various items, which included the following:

heating oil +41%
copper +59%
silver +91%
palladium +212%
corn +91%
wheat +79%
cotton +143%
These data indicate that inflation is upon us. The magnitude of these numbers suggests hyperinflation.

The effects of inflation are not limited to the US and not limited to rising prices. Spiraling food costs have been cited as a factor in political upheaval in several countries, including most recently Egypt. The US Federal Reserve, although it may be argued to be a primary driver, is not alone as a producer of inflation. As pointed out by the Daily Bell there is plenty of blame to go around:

Central banks have pumped something like US$20 to US$50 TRILLION into the world's economy to try to reinflate economies that collapsed in 2008.

The divergence between what governments want you to believe regarding inflation and what is painfully obvious grows larger with time. In the US obvious anomalies in government reports, especially unemployment and claims that an economic recovery is underway, make the reports incredible. Few citizens believe that the recession ended 19 months ago. That claim contradicts what they experience every day.

The Federal Reserve has tripled the money supply in an effort to protect the banking system and the economy. Currently, most of this money sits in the banking system as excess reserves which could be lent out, potentially at ten-fold leverage. At some point, these banks will lend these funds out. Then, via the Daily Bell, the Fed must take decisive and rapid action:

As this currency begins, finally, to circulate, price inflation must result, unless such money is quickly removed. Central bankers have continuously claimed that excess currency can be removed from the larger economy before it does its inflationary damage ...

Inflationary damage is already evident as per the numbers above. Unless the removal of these excess funds occurs in a timely fashion, the country runs the risk of hyperinflation.

Monty Pelerin
www.economicnoise.com

 

[Frisco_Slug_Esq]

We are facing a tipping point. There will soon be a crisis affecting US citizens beyond any experienced since the Great Depression. And it may happen within the year. This past week three awful developments put a dagger into the hope for a growth-led recovery, which held promise of possibly averting a debt and currency implosion crushing the American economy.

The first was a little-noticed, but tragic, series of events in the newly elected House of Representatives. The speaker, Mr. Boehner, had given the task of fashioning the majority's spending cut agenda to Representative Paul Ryan (R-Wisconsin), a rising conservative star representing the vocal wing of fiscal conservatives in the House. Promising to cut $100 billion of government spending, Mr. Boehner spoke before the elections of the urgency to produce immediately when Republicans took control.

...

The second awful development to occur last week was the employment report from the Labor Department, describing employment conditions in the U.S. economy in January, 2011. The report was packed with statistics, all pointing to anemic growth with a modest pickup in manufacturing employment. The little-noticed (not by the bond market) aspect of the report was the "benchmark" revisions, an attempt to get the total picture more accurate each year than simply adding up all the monthly change numbers. This year's benchmark revisions showed two alarming things: a decline from previously reported employment in December 2010 of nearly 500,000 jobs, and a reduction in the workforce of a similar amount.

...

The third development of the last week which received much less press than the Egyptian crisis is the "new normal" in Social Security. The CBO released a report disclosing that the net cash flow for the Social Security trust fund -- excluding interest received from the book entry bonds it holds in U.S. debt -- will be negative $56 billion in 2011, and for every year hence even more so. This is the train wreck that was supposed to happen in 2020. It is upon us now. Any limp action by conservatives to bring this program into solvency can be expected only to slow the raging river of red ink this behemoth program (along with its twin Godzilla, Medicare) spills on U.S. citizens. With no political will to fix them, these "entitlements" will obligate Americans to borrow more and more money from China--to honor promises we simply refuse to admit we can't keep.

So why do these developments argue for a crisis of Great Depression proportions? Because they speak unequivocally of our pathway to insolvency, and the potential of currency failure via hyperinflation, despite the hopes of conservatives and market participants to see a halt of such direction. Housing prices, the foundation of so much of private citizen debt loads, are destined for stagnation -- not inflation -- as the supply of homes is far greater than the demand -- 11% of the nation's homes stand empty today. When the world begins to recognize that there is no fix for America's borrowings, a fast and brutal exodus from our currency and bonds can send us a shock in mere weeks or months.

Unlike the Great Depression, however, we will enter such a shock in a weakened state, with few producers among us and record mountains of debt. More cataclysmic is the specter of inadequate food, as less than 4% of us farm, and those that do may cease to be as productive or may not accept devalued currency as payment, should the tipping point be crossed. Corn and wheat prices in the U.S. have nearly doubled in less than 12 months, using our rapidly evaporating currency as the medium of exchange.

The time for action has passed, which may only become apparent as the "aid" of easy money becomes seen as the harm that it is. May we all be spared the worst, but I offer no such prayers for those responsible. The harm that comes will be swifter, and more severe, than most of them thought possible.

http://www.americanthinker.com/2011/02/a_tipping_point_is_nearing.html

 

[Frisco_Slug_Esq]

Global food crises...



http://reason.com/archives/2011/02/11/is-there-a-global-food-crisis

 

[mercury14]

I can spam the ravings of partisan hacks.

Want a fucking cookie?


http://upload.wikimedia.org/wikipedia/commons/thumb/d/d5/Spam_with_cans.jpeg/800px-Spam_with_cans.jpeg

 

[Sean Renaud]

It doesn't feel like the price of an ear of corn has more than doubled. Who is absorbing these costs? I'm assuming that the numbers aren't imaginary outright.

When does this inflation have to hit by to be considered a fair part of the current prediction?

 

[Frisco_Slug_Esq]

Gas is going up.

Clothing to go up 10%...

Tortillas up in Mexico and still we spend like lunatics, only now, it's called "an investment..."

WASHINGTON (AP) — Not since World War II has the federal budget deficit made up such a big chunk of the U.S. economy. And within two or three years, economists fear the result could be sharply higher interest rates that would slow economic growth.

The budget plan President Barack Obama sent Congress on Monday foresees a record deficit of $1.65 trillion this year. That would be just under 11 percent of the $14 trillion economy — the largest proportion since 1945, when wartime spending swelled the deficit to 21.5 percent of U.S. gross domestic product.

The danger is that a persistently large gap in the budget could threaten the economy. Investors would see lending their money to the U.S. as riskier. So they'd demand higher returns to do it. Or they'd simply put their cash elsewhere. Interest rates on mortgages and other debt would rise as a result.

And if borrowing turned more expensive, people and businesses might scale back their spending. That would weaken an economy still struggling to lower unemployment, revive real estate prices and restore corporate and consumer confidence.

So far, it hasn't happened. It's still cheap for the government to borrow money and finance deficits. But economists fear the domino effect if all that changes.

"The moment when markets react negatively to our budget deficit cannot be known in advance, but we are absolutely in the danger zone," says Marvin Goodfriend, an economics professor at Carnegie Mellon University's Tepper School of Business.

http://home.myhughesnet.com/news/re...ass&action=2&lang=en&_LT=HOME_BUNWC00L2_UNEWS

But then, if I worked on the government's (TAXPAYER'S) dime, why would I worry? take GM, for example...

 

[unregistered]

 

[Frisco_Slug_Esq]

They won't whine about investments in High-Speed rail, but they still rail about Bush's "Investment" in "Democracy" even as it blooms and Dear Leader tries to take "credit" for it. I wonder where he'll spend it?

 

[unregistered]

 

[Frisco_Slug_Esq]

53 billion is a lot to send Petey into orgasm.

We could have bought him light loafers for a LOT less!

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601103&sid=aZEV5iOQjv7g


Geithner Tells Obama Debt Expense to Rise to Record
By Daniel Kruger and Liz Capo McCormick

Feb. 14 (Bloomberg) -- Barack Obama may lose the advantage of low borrowing costs as the U.S. Treasury Department says what it pays to service the national debt is poised to triple amid record budget deficits.

Interest expense will rise to 3.1 percent of gross domestic product by 2016, from 1.3 percent in 2010 with the government forecast to run cumulative deficits of more than $4 trillion through the end of 2015, according to page 23 of a 24-page presentation made to a 13-member committee of bond dealers and investors that meet quarterly with Treasury officials.

While some of the lowest borrowing costs on record have helped the economy recover from its worst financial crisis since the Great Depression, bond yields are now rising as growth resumes. Net interest expense will triple to an all-time high of $554 billion in 2015 from $185 billion in 2010, according to the Obama administration’s adjusted 2011 budget.

“It’s a slow train wreck coming and we all know it’s going to happen,” said Bret Barker, an interest-rate analyst at Los Angeles-based TCW Group Inc., which manages about $115 billion in assets. “It’s just a question of whether we want to deal with it. There are huge structural changes that have to go on with this economy.”

The amount of marketable U.S. government debt outstanding has risen to $8.96 trillion from $5.8 trillion at the end of 2008, according to the Treasury Department. Debt-service costs will climb to 82 percent of the $757 billion shortfall projected for 2016 from about 12 percent in last year’s deficit, according to the budget projections.

Budget Proposal
That compares with 69 percent for Portugal, whose bonds have plummeted on speculation it may need to be bailed out by the European Union and International Monetary Fund.

Forecasts of higher interest expenses raises the pressure on Obama to plan for trimming the deficit. The President, who has called for a five-year freeze on discretionary spending other than national security, is scheduled to release his proposed fiscal 2012 budget today as his administration and Congress negotiate boosting the $14.3 trillion debt ceiling.

“If government debt and deficits were actually to grow at the pace envisioned, the economic and financial effects would be severe,” Federal Reserve Chairman Ben S. Bernanke told the House Budget Committee Feb. 9. “Sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long-run effects on U.S. output, incomes, and standards of living.”

Yield Forecasts
Treasuries lost 2.67 percent last quarter, even after reinvested interest, and are down 1.54 percent this year, Bank of America Merrill Lynch index data show. Yields rose last week to an average of 2.19 percent for all maturities from 2010’s low of 1.30 percent on Nov. 4.

The yield on benchmark 10-year Treasury note will climb to 4.25 by the end of the second quarter of 2012, from 3.63 percent last week, according to the median estimate of 51 economists and strategists surveyed by Bloomberg News. The rate was 3.64 percent at 7:50 a.m. today in New York. The economy will grow 3.2 percent in 2011, the fastest pace since 2004, according to another poll.

“People are starting to come to the conclusion that you’ve got a self-sustaining recovery going on here,” said Thomas Girard who helps manage $133 billion in fixed income at New York Life Investment Management in New York. “When interest rates start to go back up because of the normal business cycle, debt service costs have the potential to just skyrocket. Every day that we don’t address this in a meaningful way it gets more and more dangerous.”

‘Kind of Disruption’
While yields on the benchmark 10-year note are up, they remain below the average of 4.14 percent over the past decade as Europe’s debt crisis bolsters investor demand for safer assets, Bank of America Merrill Lynch index data show.

“The market is still giving the U.S. government the benefit of the doubt,” said Eric Pellicciaro, New York-based head of global rates investments at BlackRock Inc., which manages about $3.56 trillion in assets. “What we’re concerned with is whether the budget will only be corrected after the market has tested them. Will we need some kind of disruption within the bond market before they’ll actually do anything.”

Still, U.S. spending on debt service accounts for 1.7 percent of its GDP compared with 2.5 percent for Germany, 2.6 percent for the United Kingdom and a median of 1.2 percent for AAA rated sovereign issuers, according to a study by Standard & Poor’s published Dec. 24. Among AA rated nations, China’s ratio is 0.4 percent, while Japan’s is 2.9 percent, and for BBB rated countries, Mexico devotes 1.7 percent of its output to debt service and Brazil 5.2 percent, the report shows.

Auction Demand
Demand for Treasuries remains close to record levels at government debt auctions. Investors bid $3.04 for each dollar of bonds sold in the government’s $178 billion of auctions last month, the most since September, according to data compiled by Bloomberg. Indirect bidders, a group that includes foreign central banks, bought a record 71 percent, or $17 billion of the $24 billion in 10-year notes offered on Feb. 9.

Foreign holdings of Treasuries have increased 18 percent to $4.35 trillion through November. China, the largest overseas holder, has increased its stake by 0.1 percent to $895.6 billion, and Japan, the second largest, boosted its by 14.6 percent to $877.2 billion.

‘Killing Itself’
“China cannot dump Treasuries without killing itself,” said Michael Cheah, who oversees $2 billion in bonds at SunAmerica Asset Management in Jersey City, New Jersey. “They’re holding Treasuries as a means to an end,” said Cheah, who worked at the Singapore Monetary Authority from 1982 through 1999, and now teaches finance classes at New York University and at Chinese universities. “It’s part of what’s needed to promote exports.”

At least some of the increase in interest expense is related to an effort by the Treasury to extend the average maturity of its debt when rates are relatively low by selling more long-term bonds, which have higher yields than short-term notes. The average life of the U.S. debt is 59 months, up from 49.4 months in March 2009. That was the lowest since 1984.

The U.S. produced four budget surpluses from 1998 through 2001, the first since 1969, as the expanding economy, declining rates and a boom in stock prices combined to swell tax receipts.

Tax cuts in 2001 and 2003, the strain of the Sept. 11 terror attacks, the cost of funding wars in Afghanistan and Iraq, the collapse in home prices and the subsequent recession and financial crisis has led to the three largest deficits in dollar terms on record, totaling $3.17 trillion the past three years.

‘Demonstrates Confidence’
The U.S. needs to manage its spending decisions “in a way that demonstrates confidence to investors so we can bring down our long-term fiscal deficits, because if we don’t do that, it’s going to hurt future growth,” Treasury Secretary Timothy F. Geithner said in Washington on Feb. 9.

The Treasury Borrowing Advisory Committee, which includes representatives from firms ranging from Goldman Sachs Group Inc. to Soros Fund Management LLC, expressed concern in the Feb. 1 report that the U.S. is exposing itself to the risk that demand erodes unless it cultivates more domestic demand.

“A more diversified debt holder base would prepare the Treasury for a potential decline in foreign participation,” the report said.

Foreign investors held 49.7 percent of the $8.75 trillion of public Treasury debt outstanding as of November, down from as high as 55.7 percent in April 2008 after the collapse of Bear Stearns Cos., according to Treasury data.

Potential Demand
The committee projects there may be $2.4 trillion in latent demand for Treasuries from banks, insurance companies and pension funds as well as individual investors. New securities with maturities as long as 100 years, as well as callable Treasuries or bonds whose principal is linked to the growth of the economy might entice potential lenders, the report said.

“They are opening up a can of worms with the idea of all these other instruments,” said Tom di Galoma, head of U.S. rates trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “They should try to keep the Treasury issuance as simple as possible. The more issuance you have in particular issue, the more people will trade them -- whether it be domestic or foreign investors.”

White House Budget Director Jacob Lew said the Obama administration’s 2012 budget would save $1.1 trillion over the next 10 years by cutting programs to rein in a deficit that may reach a record $1.5 trillion this year.

‘Roll-Over Risk’
“We have to start living within our means,” Lew said yesterday on CNN’s “State of the Union” program.

Still, about $4.5 trillion, or 63 percent of the $7.2 trillion in public Treasury coupon debt, needs to be refinanced by 2016. That gives the government a narrowing window as growing interest expense will curtail its ability to spend.

“There is roll-over risk,” said James Caron, head of U.S. interest-rate strategy at Morgan Stanley in New York, one of 20 primary dealers that trade with the Fed. “It’s a vicious cycle.”

 

[richard_daily]

When found wrong, always leave it to the wingnuts to attempt to change the narrative of the conversation.


It's about the stock market,

wait, no, it's about the deficit.

wait, no, it's about cattle herds...

 

[trysail]

When found wrong, always leave it to the wingnuts to attempt to change the narrative of the conversation.


It's about the stock market,

wait, no, it's about the deficit.

wait, no, it's about cattle herds...

Au contraire. It's your boy Geithner who's the bearer of bad news and your boy mercury14 who's attempting to equate the stock market with economic well-being.

The pigeons are coming home to roost and it isn't going to be pretty.

http://noir.bloomberg.com/apps/news?pid=20601103&sid=aZEV5iOQjv7g


Geithner Tells Obama Debt Expense to Rise to Record
By Daniel Kruger and Liz Capo McCormick

Feb. 14 (Bloomberg) -- Barack Obama may lose the advantage of low borrowing costs as the U.S. Treasury Department says what it pays to service the national debt is poised to triple amid record budget deficits.

Interest expense will rise to 3.1 percent of gross domestic product by 2016, from 1.3 percent in 2010 with the government forecast to run cumulative deficits of more than $4 trillion through the end of 2015, according to page 23 of a 24-page presentation made to a 13-member committee of bond dealers and investors that meet quarterly with Treasury officials.

While some of the lowest borrowing costs on record have helped the economy recover from its worst financial crisis since the Great Depression, bond yields are now rising as growth resumes. Net interest expense will triple to an all-time high of $554 billion in 2015 from $185 billion in 2010, according to the Obama administration’s adjusted 2011 budget.

“It’s a slow train wreck coming and we all know it’s going to happen,” said Bret Barker, an interest-rate analyst at Los Angeles-based TCW Group Inc., which manages about $115 billion in assets. “It’s just a question of whether we want to deal with it. There are huge structural changes that have to go on with this economy.”

The amount of marketable U.S. government debt outstanding has risen to $8.96 trillion from $5.8 trillion at the end of 2008, according to the Treasury Department. Debt-service costs will climb to 82 percent of the $757 billion shortfall projected for 2016 from about 12 percent in last year’s deficit, according to the budget projections.

Budget Proposal
That compares with 69 percent for Portugal, whose bonds have plummeted on speculation it may need to be bailed out by the European Union and International Monetary Fund.

Forecasts of higher interest expenses raises the pressure on Obama to plan for trimming the deficit. The President, who has called for a five-year freeze on discretionary spending other than national security, is scheduled to release his proposed fiscal 2012 budget today as his administration and Congress negotiate boosting the $14.3 trillion debt ceiling.

“If government debt and deficits were actually to grow at the pace envisioned, the economic and financial effects would be severe,” Federal Reserve Chairman Ben S. Bernanke told the House Budget Committee Feb. 9. “Sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long-run effects on U.S. output, incomes, and standards of living.”

Yield Forecasts
Treasuries lost 2.67 percent last quarter, even after reinvested interest, and are down 1.54 percent this year, Bank of America Merrill Lynch index data show. Yields rose last week to an average of 2.19 percent for all maturities from 2010’s low of 1.30 percent on Nov. 4.

The yield on benchmark 10-year Treasury note will climb to 4.25 by the end of the second quarter of 2012, from 3.63 percent last week, according to the median estimate of 51 economists and strategists surveyed by Bloomberg News. The rate was 3.64 percent at 7:50 a.m. today in New York. The economy will grow 3.2 percent in 2011, the fastest pace since 2004, according to another poll.

“People are starting to come to the conclusion that you’ve got a self-sustaining recovery going on here,” said Thomas Girard who helps manage $133 billion in fixed income at New York Life Investment Management in New York. “When interest rates start to go back up because of the normal business cycle, debt service costs have the potential to just skyrocket. Every day that we don’t address this in a meaningful way it gets more and more dangerous.”

‘Kind of Disruption’
While yields on the benchmark 10-year note are up, they remain below the average of 4.14 percent over the past decade as Europe’s debt crisis bolsters investor demand for safer assets, Bank of America Merrill Lynch index data show.

“The market is still giving the U.S. government the benefit of the doubt,” said Eric Pellicciaro, New York-based head of global rates investments at BlackRock Inc., which manages about $3.56 trillion in assets. “What we’re concerned with is whether the budget will only be corrected after the market has tested them. Will we need some kind of disruption within the bond market before they’ll actually do anything.”

Still, U.S. spending on debt service accounts for 1.7 percent of its GDP compared with 2.5 percent for Germany, 2.6 percent for the United Kingdom and a median of 1.2 percent for AAA rated sovereign issuers, according to a study by Standard & Poor’s published Dec. 24. Among AA rated nations, China’s ratio is 0.4 percent, while Japan’s is 2.9 percent, and for BBB rated countries, Mexico devotes 1.7 percent of its output to debt service and Brazil 5.2 percent, the report shows.

Auction Demand
Demand for Treasuries remains close to record levels at government debt auctions. Investors bid $3.04 for each dollar of bonds sold in the government’s $178 billion of auctions last month, the most since September, according to data compiled by Bloomberg. Indirect bidders, a group that includes foreign central banks, bought a record 71 percent, or $17 billion of the $24 billion in 10-year notes offered on Feb. 9.

Foreign holdings of Treasuries have increased 18 percent to $4.35 trillion through November. China, the largest overseas holder, has increased its stake by 0.1 percent to $895.6 billion, and Japan, the second largest, boosted its by 14.6 percent to $877.2 billion.

‘Killing Itself’
“China cannot dump Treasuries without killing itself,” said Michael Cheah, who oversees $2 billion in bonds at SunAmerica Asset Management in Jersey City, New Jersey. “They’re holding Treasuries as a means to an end,” said Cheah, who worked at the Singapore Monetary Authority from 1982 through 1999, and now teaches finance classes at New York University and at Chinese universities. “It’s part of what’s needed to promote exports.”

At least some of the increase in interest expense is related to an effort by the Treasury to extend the average maturity of its debt when rates are relatively low by selling more long-term bonds, which have higher yields than short-term notes. The average life of the U.S. debt is 59 months, up from 49.4 months in March 2009. That was the lowest since 1984.

The U.S. produced four budget surpluses from 1998 through 2001, the first since 1969, as the expanding economy, declining rates and a boom in stock prices combined to swell tax receipts.

Tax cuts in 2001 and 2003, the strain of the Sept. 11 terror attacks, the cost of funding wars in Afghanistan and Iraq, the collapse in home prices and the subsequent recession and financial crisis has led to the three largest deficits in dollar terms on record, totaling $3.17 trillion the past three years.

‘Demonstrates Confidence’
The U.S. needs to manage its spending decisions “in a way that demonstrates confidence to investors so we can bring down our long-term fiscal deficits, because if we don’t do that, it’s going to hurt future growth,” Treasury Secretary Timothy F. Geithner said in Washington on Feb. 9.

The Treasury Borrowing Advisory Committee, which includes representatives from firms ranging from Goldman Sachs Group Inc. to Soros Fund Management LLC, expressed concern in the Feb. 1 report that the U.S. is exposing itself to the risk that demand erodes unless it cultivates more domestic demand.

“A more diversified debt holder base would prepare the Treasury for a potential decline in foreign participation,” the report said.

Foreign investors held 49.7 percent of the $8.75 trillion of public Treasury debt outstanding as of November, down from as high as 55.7 percent in April 2008 after the collapse of Bear Stearns Cos., according to Treasury data.

Potential Demand
The committee projects there may be $2.4 trillion in latent demand for Treasuries from banks, insurance companies and pension funds as well as individual investors. New securities with maturities as long as 100 years, as well as callable Treasuries or bonds whose principal is linked to the growth of the economy might entice potential lenders, the report said.

“They are opening up a can of worms with the idea of all these other instruments,” said Tom di Galoma, head of U.S. rates trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “They should try to keep the Treasury issuance as simple as possible. The more issuance you have in particular issue, the more people will trade them -- whether it be domestic or foreign investors.”

White House Budget Director Jacob Lew said the Obama administration’s 2012 budget would save $1.1 trillion over the next 10 years by cutting programs to rein in a deficit that may reach a record $1.5 trillion this year.

‘Roll-Over Risk’
“We have to start living within our means,” Lew said yesterday on CNN’s “State of the Union” program.

Still, about $4.5 trillion, or 63 percent of the $7.2 trillion in public Treasury coupon debt, needs to be refinanced by 2016. That gives the government a narrowing window as growing interest expense will curtail its ability to spend.

“There is roll-over risk,” said James Caron, head of U.S. interest-rate strategy at Morgan Stanley in New York, one of 20 primary dealers that trade with the Fed. “It’s a vicious cycle.”

 

[richard_daily]

Au contraire. It's your boy Geithner who's the bearer of bad news and your boy mercury14 who's attempting to equate the stock market with economic well-being.

The pigeons are coming home to roost and it isn't going to be pretty.

You are a little bit out of touch with reality.

Just a little bit.

 

[trysail]

You are a little bit out of touch with reality.

Just a little bit.

... and you're a fuckin' idiot with the delightful habit of proving it in writing every day— which is extremely fortunate 'cause it saves me the trouble of having to provide examples of dimbulbs; you do the job exceedingly well all by yourself. Whenever I need to provide an example of an economic illiterate, all I do is point to you and laugh.


In the areas of magical thinking and belief in perpetual motion machines and free lunches, you have few peers.


Somebody oughta be payin' you for providing such fantastic comic relief for such a large audience. You are wasting your talent here.



Meanwhile, the world votes with its feet:

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=30392&category_id=0&recession_bars=Off&width=1000&height=600&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=false&fo=ve&id=DEXSZUS,DEXCAUS,DEXUSEU&transformation=lin,lin,lin&scale=Left,Left,Left&range=Max,Max,Max&cosd=1971-01-04,1971-01-04,1999-01-04&coed=2011-02-11,2011-02-11,2011-02-11&line_color=%230000FF,%23FF0000,%23006600&link_values=,,&mark_type=NONE,NONE,NONE&mw=4,4,4&line_style=Solid,Solid,Solid&lw=1,1,1&vintage_date=2011-02-15,2011-02-15,2011-02-15&revision_date=2011-02-15,2011-02-15,2011-02-15&mma=0,0,0&nd=,,&ost=,,&oet=,,&fml=a,a,1%2Fa&fq=Daily,Daily,Daily&fam=avg,avg,avg&fgst=lin,lin,lin​

 

[richard_daily]

blahblahblahblah

You're boring.

 

[Frisco_Slug_Esq]

Newly elected Republicans seek $100 billion in immediate cuts but struggle to get to this level. Smaller numbers elicit calumny from Democrats and the media. Democrat Majority Leader Harry Reid reacted this way to the potential cuts:

"In many cases, these proposals may mean taking workers off the assembly line or taking teachers out of the classroom or police off our streets," Senator Harry Reid, the Nevada Democrat and majority leader, said.

Characteristically, Reid touches the political hot buttons in an attempt to scare people. While Reid is correct that low-level cuts will be harmful, it is for an entirely different reason than he suggests. Small cuts ensure a government default, civil unrest and economic collapse.

Head-in-the-sand politics must end. Feigned ignorance and cowardice will not serve politicians well. Reality is on the way and they are apt to be run over by it. For politicians like Majority Leader Reid, the remainder of this article may be detrimental to your health. Do not proceed without a cardiac care unit on standby.

Fiscal Conditions

John Mauldin, in his recent newsletter, argues that public spending in welfare states has reached a turning point:

Clearly, we are looking at a watershed event in public spending in the United States, United Kingdom, and Europe. Because of the Great Financial Crisis, the usual benefit of a sharp rebound in cyclical tax receipts will not happen. It will take much longer to achieve any economic growth that could fill the public coffers.

Welfare states are faced with life-or-death problems that may not be soluble. To understand the gravity of the situation, two studies are useful.

http://www.americanthinker.com/2011/02/faking_our_way_to_sovereign_ba.html