Fitch has negative outlook for Αμερική

THUNK! The other shoe drops…

Fitch had kept the USA Debt Rating at AAA while S&P dropped it a notch. Now even Fitch is getting a clue…

Yes, I’m deliberately quoting the NPR article link for the delicious irony of it…

Fitch Keeps AAA U.S. Credit Rating But Dims Outlook

by The Associated Press
November 28, 2011

Fitch says it will keep its rating for long-term U.S. debt at the top AAA level, despite a congressional panel’s failure to agree on long-term deficit cuts. But it is lowering its outlook to negative.

The rating agency says it has less confidence in the federal government’s ability to take the necessary steps to rein in the deficit.

We are well on our way to becoming “Greece West”, and even the ratings agencies (who left Fanny and Freddie as highly rated along with the banks until it was obvious to everyone they were trash, and who rated that ‘SIV Sausage’ from the mandated-by-law-signed-by-Clinton mortgages-for-everybody-even-if-they-can’t-pay-them-back CRA as AAA) yes, even THOSE agencies are starting to warn that maybe Αμερική has a bit of a spending problem…

Guess you can only see so many $Trillion Debt Years before you start to notice…

Oh, my bad, it’s $1.4 Trillion debt increase per year…

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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29 Responses to Fitch has negative outlook for Αμερική

  1. Mark says:

    I think some other analysts have this more right. They say that states like California are “the new Greece.” It’s more accurate to say that America is more like the EU in this situation, with different states effectively bailing out other states, as “wealth is redistributed.”

  2. E.M.Smith says:


    You are correct about the facts as of now. That is why I said ‘we are on our way” rather than “already there”. At present, California IS “Greece West”, but the whole of the USA is “on our way” there…

    But as a metaphor “Greece” has become a useful way to point to any country that is headed to debt ruin. So as metaphor rather than present fact, it is appropriate.

    In any case, it’s the debt direction that matters, and that’s pretty dismal.

  3. H.R. says:

    We’re broke. The next election will show how many people want to fix the problem and how many are dependent on government and would be willing to ride the train to the end of the line.

  4. E.M.Smith says:

    @H.R.: “OW!” What a metaphor!…

    If I had any decent drawing skills, I’d make a cartoon of a steam locomotive headed for a ‘debt bridge out’ (with Chinese translation on it ;-) and a large yawning chasm labeled “Entitlements and Wars”… A crowd of folks in comfortable government uniforms and suits with “titles” on them like VP, Senator, Car Lobby; all discussing how comfortable the train is and urging the Engineer to keep the thing rolling as they are late for an appointment, while some folks in Farmer Overalls, Striped Engineer Hats, Cooking aprons, some kids and moms, all are headed for the caboose and muttering about idiots and asking how to decouple from the rest of the train…

    Anyone who can get it drawn up gets it posted and a credit…

    Oh, and label the engine “Government Spending”. Maybe have the ‘entitled’ folks in a section labeled “First Class” and the other “Taxpayer Coach”. Put an “end of the line” notice on that sign at the bridge out too…

  5. R. de Haan says:

    Eurozone collapse expected in day’s.

    Watch this tsunami circle the planet and hit the US in full force.

    We’re screwed beyond belief.

  6. George says:

    What I find troubling is the various news bits concerning US bailouts of Europe and the potential thereof. Europe acted irresponsibly and they are attempting desperately to avoid the consequences of that irresponsible behavior. Apparently they sense that they haven’t quite yet run out of “other people’s money” and have caught a scent of cash wafting across the Atlantic.


    I don’t want one red cent of our tax money going to Europe. They made their bed, they can sleep in it.

  7. John F. Hultquist says:

    I like the train metaphor also but one could likewise use a stinking garbage truck.

    From a WSJ report last month about Chicago:

    “In garbage, the result is a grossly inefficient system dictated by generous union contracts and Byzantine ward politics. This combination has bought labor peace and satisfied local politicians, at the cost of zigzagging truck routes that waste time, fuel and taxpayer money.”


    “The city’s budget shortfall increased to $654.8 million in fiscal 2011 from $94.8 million in fiscal 2007, . . . ”

    May require a subscription. (?)

    Anyway, California and Chicago and many other governments share the fact that they are broke ($) and broken (we need a symbol!).

  8. E.M.Smith says:

    The Financial Times has this gimmick where you get to see the title of the article (and get to it through the Google link) but anyone who gets the address you cut / paste gets a ‘sign up or else’ nag and tossed into the newest article (not the one you linked) when you decline to sign up. That, of course, only increases the motivation for the original to be ‘copied in whole’ so as to side step their rude behaviour (thus being a self defeating behaviour on their part… Sigh. Stupidity really does know no bounds. If they would just ‘nag then go to original article’ then links would feed traffic instead of inducing copy / past of the whole article to get past their rude ‘bait and switch’ gimmick).

    The Article:

    The eurozone really has only days to avoid collapse

    By Wolfgang Münchau

    In virtually all the debates about the eurozone I have been engaged in, someone usually makes the point that it is only when things get bad enough, the politicians finally act – eurobond, debt monetisation, quantitative easing, whatever. I am not so sure. The argument ignores the problem of acute collective action.

    Last week, the crisis reached a new qualitative stage. With the spectacular flop of the German bond auction and the alarming rise in short-term rates in Spain and Italy, the government bond market across the eurozone has ceased to function.

    The banking sector, too, is broken. Important parts of the eurozone economy are cut off from credit. The eurozone is now subject to a run by global investors, and a quiet bank run among its citizens.

    This massive erosion of trust has also destroyed the main plank of the rescue strategy. The European Financial Stability Facility derives its firepower from the guarantees of its shareholders. As the crisis has spread to France, Belgium, the Netherlands and Austria, the EFSF itself is affected by the contagious spread of the disease. Unless something very drastic happens, the eurozone could break up very soon.

    Technically, one can solve the problem even now, but the options are becoming more limited. The eurozone needs to take three decisions very shortly, with very little potential for the usual fudges.

    First, the European Central Bank must agree a backstop of some kind, either an unlimited guarantee of a maximum bond spread, a backstop to the EFSF, in addition to dramatic measures to increase short-term liquidity for the banking sector. That would take care of the immediate bankruptcy threat.

    The second measure is a firm timetable for a eurozone bond. The European Commission calls it a “stability bond”, surely a candidate for euphemism of the year. There are several proposals on the table. It does not matter what you call it. What matters is that it will be a joint-and-several liability of credible size. The insanity of cross-border national guarantees must come to an end. They are not a solution to the crisis. Those guarantees are now the main crisis propagator.

    The third decision is a fiscal union. This would involve a partial loss of national sovereignty, and the creation of a credible institutional framework to deal with fiscal policy, and hopefully wider economic policy issues as well. The eurozone needs a treasury, properly staffed, not ad hoc co-ordination by the European Council over coffee and desert.

    I am hearing that there are exploratory talks about a compromise package comprising those three elements. If the European summit could reach a deal on December 9, its next scheduled meeting, the eurozone will survive. If not, it risks a violent collapse. Even then, there is still a risk of a long recession, possibly a depression. So even if the European Council was able to agree on such an improbably ambitious agenda, its leaders would have to continue to outdo themselves for months and years to come.

    How likely is such a grand deal? With each week that passes, the political and financial cost of crisis resolution becomes higher. Even last week, Angela Merkel was still ruling out eurobonds. She was furious when the European Commission produced its owns proposals last week. She had planned to separate the discussion about the crisis from that of the future architecture of the eurozone. The economic advice she has received throughout the crisis has been appalling.

    Her own very public opposition to eurobonds has now become a real obstacle to a deal. I cannot quite see how the German chancellor is going to extricate herself from these self-inflicted constraints. If she had been more circumspect, she could have travelled to the summit with the proposal of the German Council of Economic Advisers, who produced a clever, albeit limited and not yet fully worked-out-plan. They are a proposing a “debt redemption” bond – another candidate for this year’s top euphemism award. The idea is to have a strictly temporary eurobond, which member states would pay off over an agreed time period. At least this proposal would be in line with the more restrictive interpretation of German constitutional law.

    Ms Merkel’s hostility to eurobonds certainly resonates with the public. Newspapers expressed outrage at the commission’s proposal. I thought both the proposal itself and its timing were rather clever. The Commission managed to change the nature of the debate. Ms Merkel can get her fiscal union, but in return she will now have to accept a eurobond. If both can be agreed, the problem is solved. It is the first intelligent official proposal I have seen in the entire crisis.

    I have yet to be convinced that the European Council is capable of reaching such a substantive agreement given its past record. Of course, it will agree on something and sell it as a comprehensive package. It always does. But the half-life of these fake packages has been getting shorter. After the last summit, the financial markets’ enthusiasm over the ludicrous idea of a leveraged EFSF evaporated after less than 48 hours.

    Italy’s disastrous bond auction on Friday tells us time is running out. The eurozone has 10 days at most.

  9. E.M.Smith says:

    OK, now that I’ve been able to read the FT article…

    I find it is good at stating the problem, and absolutely lousy at suggesting solutions.

    The idea it presents is, at core, “If we rename ‘German Guarantee’ as any of { EFSF, Integration, Euro Bond, …} then it will be a good thing.”

    The reality is that it does not matter how much good money is sent to Greece, Italy, Spain It will all be spent and wasted. There will be no “solution” until the folks spending money they do not have run out of money and stop spending, then learn to live inside their means. NOTHING else will ‘fix it’. Germans know this. Germans are not dumb, and can see through the game of ‘Pick A German Pocket’ even if the name is changed from German Loan to German Guarantee to EFSF to Integration to Eurozone Bond, to Stability Bond to… All that blending Germany into the mix will do is drive up German Bond prices too as they are seen as “Greece by proxy”. THAT is why the Germans had a bad bond auction…

    It all comes down to “Germany Pays, Greece Plays”. The net effect will be to drive German Bonds into the ditch along with Greece and Italy as all the German money gets spent too. That doesn’t fix anything.

    This is the end game of all socialisms. They work until they ‘run out of other people’s money to spend’ and all that is happening now is an ever widening circle of pockets being picked. Changing the name will do nothing.

    Oh, and per the USA loaning the money: Um, will we be borrowing that from the Chinese or from the Europeans …. News Flash: WE need to come up with an ADDITIONAL $1.4 Trillion or so THIS YEAR and at the Federal level only. (States, like California, need untold further $Billions too… then there are the city and county unfunded pensions and welfare to fund at even more $Billions…) So the idea that the USA will somehow find a spare $Trillion or so laying around is just nuts on the face of it.

    Who HAS the money? China (who have their own long list of ‘issues’ and are not fools enough to loan it to the PIIGS anyway) and Saudi (who is presently dealing with this little Arab Spring issue and likely not interested in a whole lot of added risk right now). Frankly, I suspect that directly or via holding companies most of European debt and equity are likely held by OPEC money anyway, so maybe one could get the House of Saud to pay for Greek pensions and Italian welfare… but I suspect they would want some deeds and immigration rights in exchange.

    You can only take in a few dozens of $Billions of dollars and Euros per day every day for decades before you must have bought up most of the world already. It’s really pretty simple math… So I’d say that Europe can either admit it is broke and live a life in keeping with its production; or it can go prostitute itself to the House of Saud and see what “services” they would like for their money.

    “Stabilizing” the European banks or financial systems via ever more byzantine layers of renaming and obfuscation of ‘who pays and who plays’ is just not going to work and will end pretty soon. I have some reasonable faith that the German Folk will not tolerate much more nonsense.

    FWIW, on “Fast Money” on CNBC tonight the ‘trade’ suggested by one trader was “SHORT the Euro against just about anything”. He actually used US$ and some other as ‘crosses’ but said it didn’t really matter which you used. ( I think it was Canadian as the ‘other’, but Aussie or Pound ought to work too). They are figuring that if it’s a further German Bailout, the place goes down the tubes financially, and if it’s not a bailout, it’s a breakup and the Euro falls during the breakup only rising after it’s the new “FrancMark” (my term for a post Euro euro of France, Germany and the IttyBitties…)

    There is a counter argument that the need to suck mondo cash into the Euro Zone to try to fix things will result in a lot of ‘demand’ for the Euro by European banks driving it up briefly in a spike. I don’t buy that idea. I think that very rapidly more than enough Euros will be sold by folks moving into other currencies and metals…

    Basically, given a choice of a German Whip on their collective financial arses and being sent to bed with no supper; or ‘party on with new funny money’, I think the Italians and Greeks will just declare “force majeure” ( or perhaps “force des habbit” ;-) on their Euro debt, relabel it all “New Lira” or “New Drachma” and proceed to inflate it away as they always have. Germany will try to prevent this, but not at the cost of their financial stability and the German People will not do it at the cost of their money savings.

    I see no real way to reconcile those two opposite world views.

    Perhaps a final New Rome of the Euro Zone, but even then I’m pretty sure that folks, even in Socialized Europe, are not ready for a New Caesar and especially not one named Kaiser Angela…

    I think I need to lay in a large supply of “Movie Beverages and snacks”, this show has more acts than a Vaudeville Show… and more juggling and magicians too…

  10. H.R. says:

    “A trillion here, a trillion there, and pretty soon you’re talking real money.”

    Dirksen saw it coming years ago.

  11. Pascvaks says:

    I think Obama might get a big Damn named after him one day, or a vacume cleaner.

    I really don’t know why you keep saying we need to borrow money from the Chinese. Seems to me the Fed just needs to print, print, print, print, print, print, print, print, print,…. print. From what I hear they plan on building a few new printing facilities. One back-channel proposal making the rounds is to use the Old Pentagon Building when Obama closes DOD until Berneke can hire a Chinese Firm to come in and design and sculpt another one four times the size.

    Remember, when people need bread they don’t want cake.

    I actually think that if Obama had half the brains Hoover did we’d be OK until the Election. As it is, we don’t stand a chance. And don’t worry about the Chinese, they’re not going anywhere with all that worthless green paper.

    Thought I saw a little coal burner potbelly stove at Lowes or Home Depot, better get over there. This winter’s suppose to be a real heller. And some Ammo, can’t have too much ammo.

    (It’s just getting harder and harder to be sarcastic, what is happening;-)?

  12. Jason Calley says:

    @ Pascvaks (It’s just getting harder and harder to be sarcastic, what is happening;-)?

    True! I am reminded of a quote from (I think) Lilly Tomlin: “No matter how cynical I get, I still can’t keep up!”

    I find it very interesting that we see so little of Iceland in the news. Most people have even forgotten that Iceland faced a huge debt crisis just a couple of years ago. Like so many countries, their large banks had gone on a spree, and when the bubble burst, the Icelandic government demanded that the people of the nation bail out the banks. “Our country faces absolute existential ruin if we don’t assume the bank’s debts!” Sound familiar? The people said “NO!”, then let the banks go bankrupt, got rid of their politicians and rewrote their constitution. After only a couple of years, their economy is stable and their (surviving) banks are fiscally prudent. It is true that their economy is smaller than before, but the temporary — and imaginary — prosperity they had previously was only the result of vast fiat funds.

    Iceland did the right thing; but they are only a quarter million souls. I suspect that they are also a population which has a more entrenched pragmatism than most. Living on a volcanic chunk in the middle of the North Atlantic encourages pragmatism. Could Greece do the same? I doubt it. Can we?

  13. E.M.Smith says:


    (Sort of) Sorry, but the distinction between “currency” and “money” is a built in function for me (from about age 8 when Dad explained it while teaching me how to spot real silver coins vs counterfeit by ‘ringing’ them on the counter of the restaurant…) I have trouble trying to even think of saying “money” to describe currency…

    Yes, we can print all the currency we want, but it isn’t money then as it has lost the “store of value” function of money if we print a bunch and cause inflation… In order to have money to give to Europe, we need to borrow a ‘store of value’ from someone who has some. (The Greeks and Italians and Spaniards are, after all, interested in consuming some Real Value like food, booze, clothes, and not just printed paper…)

    So for us to help bail out Europe, we would need some money of our own; and all we can print is cigarette lighters… ;-)

    See, the basic problem is that if we print some paper and give it to Europe to ‘bail them out’, then they try to give it to China to buy goods with ‘real value’ like shoes and waffle irons, then the Chinese will want to get some real value in return and need to find someone who will take dollars… and if we’re printing like crazy, that will be rapidly approaching the empty set (see Greece and Italy for existence proofs where they are trying to float bonds as a kind of national currency to get Euros and folks are not interested… and German hyperinflation post W.W.II) in which case our ‘help’ would not have helped… No, we would need to borrow something of real value (like Swiss Francs) from China and give THOSE to Europe… or better yet, gold and silver…

    Remember: Currency is a medium of exchange. Money is a medium of exchange AND a store of value. Anyone trying to tell you otherwise is indulging in some kind of deception or is unfamiliar with classical economic definitions…

  14. P.G. Sharrow says:

    That Socialist, “shinny thing”, must be thoroughly be discredited, so no one wants to do it again. Seems that total collapse is the only way or liberal historians will rewrite cause and effect again as they did for FDR.
    Hyper inflation will make the existing debt manageable and postpone the day of reckoning as well as making savings worthless. Those on fixed incomes and government retirements will have the value of their income cut. One of the austerities proposed is to cut the “cost of living” increases.

    The Federal Reserve is computer creating trillions to prop up the world banks. Hyper inflation can be the only result. Time to hide your valuables as the politicians will try to steal them as FDR did last time when he confiscated American’s gold and gave them paper that was then made worth less then the gold. The working poor was then made to pay an employment tax, SSI, to fill the Federal coffers depleted by the government spending boom. LBJ refunded Social Security with a major SSI tax increase in the 1960s but that has lost it’s net contribution to the Federal coffers and my generation of retirees will break the bank. A 30% to 50% reduction in the real cost of retirees is needed to save society from financial collapse. Glad I didn’t plan on real retirement and don’t have cash savings. pg

  15. Pascvaks says:

    Sorry EM, I tend to get real stupid when I talk about the Global Economy; I still have no frickin (my daughter taught me that one, said it wasn’t what I thought, and was going to swat her for, but meant “kind’a sort’a bad, but not really as bad as what I thought she said”) idea what is holding up the Global Economy. To me, we’re already at the worthless currency and money phase and we’re watching things come apart like damnbusters. We have an IOU system that’s a farse, pure idiots in charge, and it’s like watching a bunch of zombies walking around mindlessly destroying everything they touch. I’m about to concede that the only thing holding up this World of Cards we live in is about to vaporize before all our disbelieving eyes and if you don’t know how metabolize dirt you’re not going to make it to spring planting. The thing I always found uncomfortable about the Three Stooges was how stupid they were, I find it difficult to watch stupid people.

    Fitch knows things are worse than they have publically stated. The Secretary of the Treasury knows, as does Merkell and France and London. The fat cats and big boys are taking care of each other and the rest of us are going to pay for it. This is the point that is just before the BIG collapse, just before the integrity of the entire system is called into question, just before people find they’ve lost everything, this is Hiroshiema just before the blast, and the Fat Cats and Politicians are playing grab ass with each other. This is the point where Obama has just said, in a 3- year speech to the American People: “Have a piece of Cake!”

    When the full faith and confidence of the people evaporates, there just ain’t nothing left.

  16. John F. Hultquist says:

    The US Govt. has to keep borrowing costs low or its budget mess inflates like the cosmos at its beginning. Folks write about printing but that is last century thinking – dollars need no longer be green or any other color. We used to think of atoms as things. Now there are virtual particles. Same with dollars! As Pascvaks indicates, I have no fricking idea what is holding up the economy – virtual turtles all the way down, maybe.

  17. Jason Calley says:

    @ John F. Hulquist “Folks write about printing but that is last century thinking – dollars need no longer be green or any other color.”

    Very true…and to misquote some science fiction movie alien, one who is warning the Earth of disaster, “Someday, you humans shall make a “1” so large and a “0” so massive that you will destroy the planetary banking system! Bwa ha ha ha ha!”

    Actually, the great bulk of the dollars are digital these days. More surprisingly, at least to most folk, even if the Federal Reserve stopped increasing the monetary supply, the growth would still continue. Why? Because fractional reserve banking inflates the money supply just like printing does. The money creation process lets all the major players — and, uh, no, that would not include us — get wealthy from the system. Banks loan money that they do not have, and immediately begin to receive interest on it. All of that new money begins to circulate just as if it came straight from the Central bank. The purpose of the central bank is fourfold. First, it serves as a backstop source of funds to prevent contagious bank runs. Second (and this is related but not quite the same as the first) it is a source for extra funds if an individual bank finds itself temporarily low on cash to satisfy withdrawals. Third — and this is the hook that catches the government — by stabilizing the fiat currency system, it allows governments to extract wealth from citizens without the obvious pain of standard, visible taxation. Because of this, politicians can reward friends, punish enemies and wage wars with near abandon. Warfare and welfare are the two arms of the modern state and the central bank’s control and manipulation of the monetary supply (its amount and interest rates) are the legs which support it. Fourthly, and obviously, the central bank is an enormous source of control and profit for the banks which run it.

    Pretty impressive for a business based on people’s faith in ones and zeros.

  18. TIM CLARK says:

    @ pascvaks
    The fat cats and big boys are taking care of each other and the rest of us are going to pay for it.

    So, how are they taking care of each other? How can I get involved in that?

  19. Pascvaks says:


    Tim, not knowing anything about you and what qualifications you may have, there probably just isn’t enough time for you to do much now. But, if you have a nice long scar on your face, the body of The Hulk, the mind of a snake, and the stomach to do various “enforcement” jobs for the Fed and not complain, I understand there is probably an SES position available that will require some national and international travel, and on a frequent basis, these days. It would be a plus if you spoke French and German, Chinese, Japanese, Farsi, Arabic, Hebrew, Irish, Greek, Italian, and understood Scotish English. You do have a hat and raincoat, right? Sky’s the limit for someone who knows how to blend into the crowd and down a couple or four bottles of Russian Vodka without getting groggy and sleepy. Call this number and ask for ‘Snake’ 1800 555 1212. Good luck.

    PS: Snake’s last name is SARCOFF, he’s half Russian, but understands English if you talk slow.

  20. Pascvaks says:

    @Tim Clark
    (-; I’m sorry, I couldn’t resist. I sure hope you have a GREAT sense of humor ;-)

  21. Tim Clark says:

    I have a great sense of humor, and a thick skin, but I was being serious. I’m caught in a serious choice of investing my money in either inflation/deflation oriented products and I’m sitting on my hands. But we are discussing this on an apparent dead thread and I’m going to post on the fitch thread.

  22. Tim Clark says:

    opps, I thought I was on the sequestration thread. having computer issues.

  23. Pascvaks says:

    Tim I’m one of the last people you want to talk to about money, I’ve sat on my hands so long they and my ass are gone. EM is the guru. Good luck.

  24. E.M.Smith says:

    @P.G. Sharrow: We’ve been through the ‘discrediting’ process a few times now. EVERY one of them has been incredibly destructive. I’d still like to find a way to avoid that via application of intelligence and historical experience. Yeah, I’m shopping in the “Fantasy & Science Fiction” section…

    FWIW, I’m still sitting in cash right now (but largely just waiting for the “short bonds” flag to go up). The Fed is doing a decent job of gaming things so that the USD is not in massive inflation just yet. But when it goes, watch out!

    At that time, “short bonds / long ‘stuff'” is most likely to be the best move; but timing it is critical. Watch the charts… The usual ‘dead time’ is about 3 to 6 months, but this cycle looks like it’s running more like 3 years… IFF major war breaks out, then the cash gets dumped into stuff like copper and war ‘inputs’ along with manufacturing companies (especially those making war goods); if not, then it’s stuff that holds value in times of inflation (and that is NOT bonds / dividends nor even many companies – it’s gold, diamonds, copper, fuel, land…) Many folks know that, but they ‘jumped the gun’ IMHO in the run into ‘stuff’ so we’ve already had a ‘bubble and squeak’ (not quite a bust ;-) out of them. It’s “selected issues” or cash for now. NZ Dollar, Canadian Dollar, Maybe the Aussie but they’ve been doing odd things with their taxes… NOT in the EURO. In the $USD if you are in the US with US denominated debts. Japanese Yen has been OK, but they are about to have major manufacturing issues from the yen strength, so expect it to be aggressively managed down (just like the Swiss Franc was). So unless you go wandering into ‘odd’ currencies like Kroner or Rubles, well, it’s slim pickings… which is WHY the USD is not tanking hard. Trillions from around the globe and we’re the best looking whore in the whore house that can take cash “in size”… Then patiently wait for the moment to move…

    Yes, I think it’s “near”… However, when TSHTF it’s going to be very volatile and a very rough ride. Until then, markets will dodge back and forth with each news day. BTW, I’m pretty sure food will continue to be grown and distributed. It was “bread and circuses” after all… ;-)

    @John F. Hultquist:

    BINGO! Managing the debt to keep a 2% or so cost of borrowing for the Federal Government is a critical bit. As soon as that starts to move, it’s disaster time and TBT is the play.

    IMHO, what is holding up the economy is FAITH. A hope that ‘things will improve Real Soon Now” and a willingness to hold bonds “for a while” in that expectation. As we’ve seen in Greece, Italy, Spain, and now a tiny bit in Germany starting to have some bond sales issues creeping in… as soon as that FAITH is eroded, it goes quick. It’s a brittle system prone to brittle failure…

    Right NOW folks have more faith in the $US than the Euro, so we’re not inflating as much as expected. Once that changes, “look out”… Dive into countries that ARE well run, or have already cleaned up, into ‘stuff’ like land and metals, and into short US Bonds… For now, the 80% of folks who are able to find a job are happy to still treat $ like money, it’s the 20% unemployed who are ‘having issues’. Eventually the workers can’t pay all the bills either, then it collapses. Greece is there now, Spain and Italy close enough to smell it. Germany in denial with France… The US is actually in pretty good shape in comparison…

    So I’d watch for a Euro break up first, New Middle East / Central Asia war second, and only thirdly a new US Recession. Oh, and China gets screwed…

    @Tim Clark:

    I don’t think they are being as well cared for as they think… They are getting bushel baskets of currency and cushy jobs with perks, but in a real collapse those don’t hold up. IFF they can convert them to villas and gold early enough, and ownership of companies for pennies on the dollar after the collapse, THEN they will be ‘well taken care of’. But best you can do is own property with a cheap mortgage in ‘inflating away’ currency…

    BTW, which thread you are on doesn’t matter all that much… all of them are left open ‘forever’ and topics are tending to the same general theme right now as things come to a head in Europe anyway… So the Sequestration Thread isn’t closed and the topic will be around until 2012 anyway…


    Thanks for the vote of confidence… I’ll try to live up to it. Right now I’m just tightly hedged. SOME selected stocks. About 1/2 cash for quick deployment and making some few day trades. My debt is in $US, so holding $USD just hedges any inflation losses and gains against each other. Oh, and some energy dividend paying stuff with a touch of real estate. Like I said, hedged, long on cash, and waiting…

    So, say you have a $100,000 mortgage, holding up to $100,000 cash is a natural hedge. What inflation takes from the cash, it also takes from the mortgage… Now would be a good time to refinance that mortgage to 4% or so. Then when it heads up ( eventually to 12% or so as inflation starts to show), move the cash to TBT. That way the mortgage ‘goes away’ in real terms while the TBT is likely good for a nominal double.

    BUT, interest rates have to start moving up first… and they are not in USD. Right now a ‘short Euro’ ought to start working ‘any day now’…

  25. david says:

    E.M…” Eventually the workers can’t pay all the bills either, then it collapses.”

    This is where I see deflationary forces waging the M.O.A. wars against inflation. How long will unlimited cyber printing dollars just flow into debt and just maintaing demand, not increasing it radically?

    I suppose that such actions, markets collapsing in some areas, massive inflow from Govt intervention in other areas, eventually creates so much instability in necesssary products that systems collapse from a lack of confidence, or from the wrong assest (food) inflating, while GDP and dollars in the hands of the average bloke is decreasing.

  26. Bob Layson says:

    The recent level of output of goods and services, and consequent consumption, was not faked. Nothing in the current crisis has destroyed the world economy’s capacity to produce, as would a true disaster such as massive earthquake or a dreadful epidemic, provided that money is sound, stable and that prices are allowed and obliged to adjust to fit.

  27. E.M.Smith says:



    Minute of angle
    Move On Already
    Making of America
    Mall of America
    Museum of Art
    Method Of Action
    Mall of Asia
    Mode Of Action
    Military Operations Area
    Market Opportunity Analysis
    Minute Of Arc
    Motor Oil Additive
    Measure of Aggregation
    Minions Of Abyss
    Management Operations Audit
    Ministry Of Agriculture
    A large flightless bird
    and many more…

    But I’m just not finding one that parses right with your sentence…
    Clue please?

    While it’s generally a system prone to collapse due to instability, there is nothing to prevent it just ‘suffering on’ for a very long time at a stagflation balance point.

    Biggest issue is just that the EuroZone is the biggest trade partner of both the USA and China. The EuroZone is a ‘dead man walking’ and the Global Bankers are trying to cope with ongoing tourniquets on different body parts… But zombies don’t notice that so much…

  28. david says:

    M.O. A. LOL, thanks for the chuckel Humm, should I just say it, why not, think Saddam like,as in the “mother of all” battles.

    “While it’s generally a system prone to collapse due to instability, there is nothing to prevent it just ‘suffering on’ for a very long time at a stagflation balance point”.

    Especially if we bail out the Euro banks eh?

    It appears likely to me for all the established Govt folk to pretend and extend for as long as possible until bond fail, food riots etc,etc, but without literally dropping dollars into the common man’s pocket, and having trillions in unpayable debt, federal, state, local, pension, school loans etc, etc, decreasing wages, austerity etc, I just do not see hyberinflation.

    MOA. = large flighless bird, you made me look that up, (-;

  29. Pascvaks says:

    If history offers any guage of European character and what the future holds for all of US (and China), they’re going down fast by the bow and those of US (and China) on board are wet, frozen toast. The best we can do is stand back and watch her slide into the abyss; we’ll get wet for sure, but the undertow won’t pull US (and China) down with her.

    But, but, but,… there’s little doubt that we will have the smarts to do what we ought; greed and idiology will take US (and China) with her. Oh well, we always knew it wouldn’t last forever. To Life!

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