Debt Bomb

NMA cartoon on crash of the Dow

US credit downgraded to AA+

S&P downgraded the US credit rating today. For the first time in history.
The three main credit agencies, which also include Moody's Investor Service and Fitch, had warned that the country faced a downgrade if the government didn't sufficiently cut spending.
They didn't.

S&P said that in addition to the downgrade, it is issuing a negative outlook, meaning that there was a chance it will lower the rating further within the next two years. It said such a downgrade to AA would occur if the agency sees smaller reductions in spending than Congress and the administration have agreed to make, higher interest rates or new fiscal pressures during this period.
-Associated Press

And it was just sick the way they trotted out the woman who got shot in the head to cast the last vote on the debt bomb delay deal.

NMA budget deal impasse cartoon

Why I call the debt talks a puppet show/telenovela

A young hot shot rookie Senator once said these words on the Senate floor:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies...Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.
-Senator Barack Obama
March 20, 2006

BTW - Under President Barack Obama's watch, several trillion has been added to the national debt, several new fronts have been opened up in Cheney/Bush's infinite war by terror, the Federal government has been raiding Social Security funds, and read my lips....the rich are not paying any more taxes.

World Revolution Update

While Obama and congressional leaders were playing out their puppet show at the White House, the Bernank told Congress that gold wasn't money this week, and gold reacted by shooting through the roof.
Meanwhile, the puppet show continues...

The last of the Christian Western empires

"It's inevitable the US is going to default."

This is seriously one of the best videos I've seen in a long time.
Emergent's David Murrin breaks down the global economic situation for three ditzy talking heads. It's more hilarious than the telenovela goin down inside the beltway.

"It's very simple, its (America's) empire system, its financial system is in decline, we've seen very little growth for over a decade apart from financial engineering and leveraging, which ultimately caused the debt crisis of 2008," Murrin said.
-CNBC

Defintely must see tv.

Greece is lowest...and US is worse

Standard & Poor's downgraded Greece's credit rating by three notches today, making it the world's lowest rated country. They're apparently bullish on a Greek default.

A restructuring of Greece's debt — either with a bond swap or by extending maturities on existing bonds — looks increasingly likely to be imposed by European policymakers as a means of sharing the burden of Greece's crisis with the private sector, S&P said in a statement.

"In our view, any such transactions would likely be on terms less favorable than the debt being refinanced, which we, in turn, would view as a de facto default according to Standard & Poor's published criteria," the agency said.
-CNBC

On Wednesday, there will be a general strike, and the general assembly will vote on the "mid-term" agreement with the Troika. And the protestors, some of whom have been camped out in Syntagma square for three weeks now, are threatening to blockade the parliament if they vote away Greece's future to the bankstas. Not surprisingly, Greek officials are cleaning out the underground tunnel from the Greek parliament to Lykavitos and the sea port of Piraeus.

Seriously.
Greek politicans are actually preparing to have to scurry away from an unpopular vote through a tunnel, fearing for their lives.
The Greeks have an excellent opportunity to become the re-birthplace of democracy.
How cool is that?

Meanwhile, over in the #1 exporter of democracy, PIMCO founder and co-CIO, Bill Gross, told CNBC that the United States is actually worse off than Greece.

Much of the public focus is on the nation's public debt, which is $14.3 trillion. But that doesn't include money guaranteed for Medicare, Medicaid and Social Security, which comes close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at "nearly $100 trillion," that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won't find a solution overnight.
-CNBC

(sigh)

Which begs the question: What will it take to get the American people to surround congressional hill?

US Debt animation from NMA

Lol.

China dumps US Debt for 5th straight month

In addition to officially beginning to loot US pensions today, The US Tresaury released its Treasury International Capital (TIC) data for March 2011, and it's not the best of news.
Foreign holdings of dollar-denominated short-term U.S. securities, including U.S. Treasury bills and other custody liabilities, decreased $18.3 billion, and Foreign holdings of U.S. Treasury bills decreased $21.9 billion.

The key trend in US paper holdings continues to be China, whose total US debt holdings dropped for the 5th consecutive month in a row at $1144.9 billion, and the largest one month decline since November 2010.
-Zero Hedge

Getting blown while the world burns

As US Debt races towards the national debt ceiling (ETA = tomorrow) that was raised just last year, word out of New York is that IMF head Dominique Strauss-Kahn was arrested on board a Paris-bound flight for forcing a Times Square hotel employee to give him - yup, you guessed it, head.
Talk about theatre of the absurd.
The alleged incident took place at the upscale Sofitel hotel on West 44th Street near Times Square.

The trouble began at around 1 p.m. yesterday when a 32-year-old housekeeper entered Strauss-Kahn's $3,000-a-night suite at the luxury Sofitel on West 44th Street -- apparently unaware he was still inside.
The married Strauss-Kahn was in the bathroom, and emerged naked, chased her down a hallway and pulled her into a bedroom, where "he jumps her," a source said.
"She pulled away from him and he dragged her down a hallway into the bathroom where he engaged in a criminal sexual act, according to her account to detectives," Browne said. "He tried to lock her into the hotel room."
Soon afterward, Strauss-Kahn got dressed and headed off to JFK for a flight to Paris.
When he was approached on the plane by Port Authority cops, he said, "What is this about?" sources said. He was taken off the aircraft without handcuffs.
Two law-enforcement sources said Strauss-Kahn was trying to flee authorities. Police said he left his cellphone and other personal items in the room.
"It looked like he got out of there in a hurry," Browne said.
Strauss-Kahn, who had a meeting planned for today with German Chancellor Angela Merkel in Berlin, has an arrangement with Air France that allows him to get on any flight and sit in first class, the sources said. He was traveling alone.
-NY Post

I guess it shouldn't be any surprise. Not only does Strauss-Kahn have a history of sexual deviance AND corruption, but the IMF has been raping developing nations for decades. The only thing that's truly newsworthy about the story is where it happened. This really speaks to the world banking cabal's opinion of the United States. Or is it the other way around? Is this like that scene in Godfather II where the corrupt Senator wakes up next to a dead hooker? Hmmm.
When you're the hooker, or in this case, the housekeeper, does it matter which rich rapist is ultimately guilty?

We are in an ongoing global economic depression. The signs are everywhere, even as they are lost on economic leaders that put private banks and short-term speculative capital before citizens and long-term working capital. Central banks use other people’s future money in the form of debt to do this. No central bank holds, and thus enables, more national debt than the Federal Reserve.
I hate to keep repeating this, but until someone of some ability to do anything gets it, I’m going to keep going. Last week, Fed chairman, Ben Bernanke, co-enabler with Treasury Secretary, Tim Geithner (among others) of our ballooning debt and mis-prioritized economic policy, urged Congress for another debt cap increase, or else. The guy holds about $2.5 trillion of debt on his books, being used for – nothing helpful to the general economy. A simple transfer would solve the debt cap problem in a nanosecond. Going a step further, a simple exchange of any of the $1.5 trillion of excess bank reserves receiving interest from the Fed, would do the same. Instead of defaulting on, how about retiring, some debt? Thinking outside the box.
All around the world, the bodies and countries with the most power keep screwing people (some like IMF head, Dominique Strauss-Kahn, literally) and entire nations, while supporting their banking systems.
-Nomi Prins

The End Game for Credit Card Nation

Now if American households are being put into debt rehab, why is the national debt increasing? Much of the spending is happening for the top 1 percent of our country that are largely vested in the too big to fail institutions. The working and middle class is being slowly dismantled while money flows to the top to protect the profits of the very few banks that control most of the assets in the United States. Now that trillions of dollars have flowed to the top thanks to working and middle class taxpayers, these banks and the government are turning a blind eye to the public and shutting them out completely by taking away their plastic, kicking people out of homes, and offering a nice consolation of burger flipping jobs.

We are quickly reaching a point where if we do not get our financial house in order as a nation, the national economy might be facing something that is already being experienced by working and middle class Americans. At some point globally the scissors will come out and cut our plastic.
-My Budget 360

Mr. Rogers doesn't want US bonds in his neighborhood

So on Tuesday, veteran investment guru Jim Rogers said he planned to short US bonds...as early as that afternoon.
Well, yesterday, Rogers told an audience at a conference in Edinburgh the same thing.

"In my view that's coming to an end...the bond bulll market is coming to an end. If any of you have bonds I would urge you to go home and sell them. If any of you are bond portfolio managers I would get another job," he said.

Addressing one bond portfolio manager among conference delegates, Rogers said: "If I were you I would think about becoming a farmer. You buy land and learn how to farm."

"In my view it’s going to be a spectacular way to make money," he said, adding: "This is where the great fortunes are going to be made in the future."
-CNBC

He went on to say that he is still into the US dollar, but was strongly considering selling:

"I would expect to see some serious problems in the foreseeable future….By 2011, 2012, 2013, 2013, I don’t know when, we’re going to have an economic slowdown again," he said. "This time it’s going to be a real disaster because the US cannot quadruple its debt again. Dr Bernanke cannot print staggering amounts of money again."

"How much more can they print without a serious collapse of the US dollar?" he said.
-CNBC

Boehner looking for trillions more in cuts

We’re fucked.

Remember GM? Remember how they were deeply in debt and losing money but people kept lending them more money and the government kept giving them money and everything was going to be OK until, finally, it wasn’t? Our whole country is kind of like GM now except there is no cosmic entity that is going to come down from above and bail us out since our ADMITTED debt burden is already 25% of the entire planet’s GDP.
-Phil’s Stock World

Why are we fucked?
Because what’s good for Wall Street isn’t necessarily what’s good for the American people.

40 months into the downturn that has given us the worst number of job losses since the Great Depression, we are nowhere near a recovery. This is terrible, this is unprecedented, this is – great for business!
Bill McBride of Calcuclated Risk, reminds us that Wall Street’s "dirty little secret" is that Wall Street and corporate America like the unemployment rate to be a little high. Higher unemployment keeps wage growth down, and helps with margins and earnings – and higher unemployment also keeps the Fed funds flowing freely. Corporations like to see SOME job growth, so people have enough confidence to spend (and they can have a few more customers) but they don’t care if that job growth is in the US or China
-Phil’s Stock World

And things are getting interesting in Washington.

While DC may continue playing its debt ceiling soap opera, crunch time for the Treasury is approaching as the first of three auctions is on deck: the first one for $32 billion in 3 Year Notes. The total raised will be $72 billion without any offsets from maturities. Elsewhere, the Treasury will catch a $16 billion break after it settles $100 billion in Bill maturities offset by $84 billion in new issuance, yet still the net total of $56 billion in new debt seems to be a slight problem since as of Friday, there was just $23 billion in total capacity under the debt ceiling. Granted, the Treasury has already announced it is commencing the tapering off of other debt programs such as the State and Local Government (SLGs) which however will have at most $5-10 billion in favorable impact per month. It is also cutting its debt issuance forecast in half, likely due to an expectation of maturing old Bills without rolling these, a feat which will consume all if not more of the $108.9 billion in total cash available at the Treasury.
-Zero Hedge

Enter John Boehner.

“Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase. And the cuts should be greater than the accompanying increase in debt authority the president is given. We should be talking about cuts of trillions, not just billions.”
-Speaker of the House, John Boehner

This calls for a George Washington quote.

Are we going go back from koolaid drinkers of false hope to mindless terrorized sheep? Or are we going to stand up as brave, independent, thinking people and demand real change?
-George Washington

The Debt Bomb

On Monday, as Legislators returned from recess and the mainstream media pummeled us with images of flag-waving Americans celebrating the latest extrajudicial assassinations, US Treasury Secretary Timothy Geithner sent a letter to Congress regarding the debt limit, which will be reached on or near May 16. He detailed the extraordinary measures that the Treasury Dept. will begin implementing this week in advance of that deadline, and also threatened an even bigger financial crisis if he (and his banker bosses) doesn’t get his way.

As I have written previously, default by the United States on its obligations would have a catastrophic economic impact that would be felt by every American. A broad range of government payments would have to be stopped, limited or delayed, including military salaries, Social Security and Medicare payments, interest on debt, unemployment benefits and tax refunds. A default on the Nation’s legal obligations would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans. Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover.
-Timothy F. Geithner

It is true that we have a major debt problem in this country, but it isn’t because the government is providing necessary services to the American taxpayer, or even because of public employee unions either. The real problem is the bankstas, who have never ever met a debt they didn’t like.

Hitting the debt ceiling isn’t about spending gone haywire because the Social Security and Medicaid buckets are too small for the people that rely on these programs; it’s about the big-ticket items– like recently, bailouts.
-Nomi Prins

Oh yeah, and government departments that randomly lose several trillion dollars don't help either.
I'm not sure that increasing the debt limit is the main reason why the Osama drama trump card was played, but it is certainly the bigger issue confronting us, especially now that the boogeyman is dead.
So to make sure we're absolutely clear here, we're being asked to take on even more debt by the people who needed to be saved from their own stupid debt in the first place, and obviously, we're going to need to ask them to finance that increased debt for us. That's exactly why they are trying to scare us into raising the debt ceiling. Again.
Make sense?

The end of "The Age of America"

It appears that many of you are interested in this whole subject of Chinese investment in US treasuries, so I thought I'd throw you another post-easter, sugar-free bone

The International Monetary Fund has just dropped a bombshell, and nobody noticed.
For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China.
And it’s a lot closer than you may think.
According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.
Put that in your calendar.
It provides a painful context for the budget wrangling taking place in Washington, D.C., right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.
According to the IMF forecast, whomever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.
-MarketWatch

In case you don't believe what you just read, try this on for size: China is mulling cutting their US Holdings by TWO THIRDS from $3 tillion down to $1 trillion. In case you aren't quick in the mathematics department, that's $2 trillion in US Debt that China is looking to divest itself from.

BEIJING, April 23 (Xinhua) -- China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.
The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.
China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

For those of you keeping score of such things, yes, $2 trillion is about how much the Fed recently printed up out of thin air.

So why is the Fed carpet-bombing the global economy? To protect the domestic economy? That makes no sense, for the Fed's policies are pushing oil up to the point where there is no way to keep the U.S. economy from tipping into recession. It isn't acting on behalf of the domestic economy, of course; it's acting on behalf of domestic banking and Wall Street.
The Fed is busily destroying the village, suposedly to save it--only it's the global village. But the Fed isn't the only player with a stake in its game, and the other players, notably China, are tipping their hand that they will have to act, and soon, to protect their own domestic economies from the Fed's destructive policies.
-Charles Hugh Smith

China dumping US Treasury Securities

In February, the largest holder of US debt dumped $600 million worth of US Treasuries, continuing a now 4 month streak of reductions in US bond holdings.
China still owns about $1.15 trillion in US debt, and the dumping was only a small fraction, but considering that US debt-holders have been abandoning the dollar for four straight months, the move should be viewed with concern.

"We hope that the U.S. government will take practical measures under a responsible policy to protect the interests of investors," China's foreign ministry spokesman Hong Lei said in a statement on the ministry's website, adding that China has noted the S&P warning.
-The Hill

Yeah, good luck with that China.

Clearly, they know better though. Earlier this week, China announced that it needs to return to "reasonable" foreign currency reserve levels.

In politician speak, this is a clear, “we are sick of the US Dollar and will be taking steps to lower our holdings.” Remember, the US Dollar is China’s largest single holding. And China has already begun dumping Treasuries (US Debt).
This comes on the heels of China deciding (along with Russia) to trade in their own currencies, NOT the US Dollar. Not to mention the numerous warnings Chinese politicians have been issuing to the US over the last 24 months.
In simple terms, China is done playing nice and is now actively moving out of US Dollar denominated assets. This is the beginning of the US Dollar’s end as world reserve currency.
The dimwits in Washington don’t understand this because their advisors are all Wall Street stooges who don’t think debt or deficits matter. After all, why would they? Their entire business model is now based on endless cheap debt from the US Fed. So it’s only logically (in their minds) that the US as a sovereign state engage in the same strategies.
-Phoenix Capital Research

Japan is the second-largest holder of US Debt at $890 billion, and they upped their ownership in February by $4.4 billion.
Obviously though, with Japan in need of its own liquidity for reconstruction, the earthquake-damaged nation might also be looking to continue the trend of dumping US Debt despite public announcements that they still have faith in the dollar.

Biden falls asleep during Obama speech

Today, President Obama promised to slash $4 trillion from the Federal Deficit over the next twelve years. Big news, huh?
Tell that to Vice-President Joe Biden, who couldn't stay awake while his boss was talking about something that is without a doubt the biggest issue confronting the US government.


Economics is indeed boring to most people, but I would like to think that Obama is a slightly better speaker than Ben Stein.