Thread: The strongest economy in the world

Originally Posted by sabang

A very good article by Paul Krugman....

Consider, for example, what the latest budget proposal from the Obama administration says about interest payments on federal debt; according to the projections, a decade from now they’ll have risen to 3.5 percent of G.D.P. How scary is that? It’s about the same as interest costs under the first President Bush.

I have never read a fair, balanced or good article by Krugman. He's so libbie, it's hard to tell he's supposed to be an economist. Ah, I know, I know, he won a Nobel Prize. Ya, and so did bamboy.
The point here is, even if the debt payment is 3.5%, the bladdy debt is how much higher? What's the deficit proposed on this year's budget, which is based on flimsy figures for revenues and healthcare savings and Lawd knows what else.
I read Krugman, I listen to Krugman, and I laugh.

Originally Posted by Panda

I feel for you MrG. An American with a sense of social justice and an insight into where your country is heading.

Unfortunately, I don't believe the majority of your countrymen share your views, or even have the intellectual capacity to think about such things so long as they remain mesmerized by the corporate media.

You don't believe coz you have a preconceived perception of America. I wonder if all the unwashed, uneducated and benefit-raised folks in Europe are better. Ah, but they speak a foreign language so they must be smarter.

Originally Posted by Jet Gorgon

Originally Posted by Panda

I feel for you MrG. An American with a sense of social justice and an insight into where your country is heading.

Unfortunately, I don't believe the majority of your countrymen share your views, or even have the intellectual capacity to think about such things so long as they remain mesmerized by the corporate media.

You don't believe coz you have a preconceived perception of America. I wonder if all the unwashed, uneducated and benefit-raised folks in Europe are better. Ah, but they speak a foreign language so they must be smarter.

Farking 'ell Jet that would have to be one of your most piss weak personal attacks yet. Are you feeling unwell today my dear.

Originally Posted by panama hat

Originally Posted by Panda

Originally Posted by Jet Gorgon

Originally Posted by Panda

I feel for you MrG. An American with a sense of social justice and an insight into where your country is heading.

Unfortunately, I don't believe the majority of your countrymen share your views, or even have the intellectual capacity to think about such things so long as they remain mesmerized by the corporate media.

You don't believe coz you have a preconceived perception of America. I wonder if all the unwashed, uneducated and benefit-raised folks in Europe are better. Ah, but they speak a foreign language so they must be smarter.

Farking 'ell Jet that would have to be one of your most piss weak personal attacks yet. Are you feeling unwell today my dear.

She/he will only get worse from here . . . MrG's family will be next up for slandering.



I like Fox because every bit of news is about the economy . . . well, about how Bambam-Obama-the-Muzzie-Kenyan/Indonesian is destroying it.

Every news item or report is depressing, every bit of good news is dismissed as propaganda.

It is so easy to constantly attack and swerve when hard questions are asked . . . shot and hide, shoot and hide, shoot and hide.

I believe what I see and it is all doom and gloom. The economy will never recover and Mexico will take over after China has raped the place

I believe the term you are looking for is "negative politicking". Its a sure fire winner when fed out to dumbarse voters. All you got to do is criticize the elected governments proposals with unsubstantiated rhetoric and a scared public will lap it up. It works like a beauty since the opposition ideas never get put to the test and the lies get buried in yesterdays news. Unfortunately, sometimes the opposition gets elected based on their negative policies and that doesn't help the people at all. One of the short falls in a democracy I'm afraid. Seems to happen everywhere, but nowhere more so than the USA.

An article on bankruptcy/insolvency. People can certainly disagree but what is the possibility? Just don't pay? Inflate way out of it, if possible.

Link included at top:

http://www.silverbearcafe.com/privat.../bankrupt.html


The Bankruptcy of the United States is Now Certain



It's one of those numbers that's so unbelievable you have to actually think about it for a while... Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5 trillion. Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from?

How did we end up with so much short-term debt? Like most entities that have far too much debt - whether subprime borrowers, GM, Fannie, or GE - the U.S. Treasury has tried to minimize its interest burden by borrowing for short durations and then "rolling over" the loans when they come due. As they say on Wall Street, "a rolling debt collects no moss." What they mean is, as long as you can extend the debt, you have no problem. Unfortunately, that leads folks to take on ever greater amounts of debt... at ever shorter durations... at ever lower interest rates. Sooner or later, the creditors wake up and ask themselves: What are the chances I will ever actually be repaid? And that's when the trouble starts. Interest rates go up dramatically. Funding costs soar. The party is over. Bankruptcy is next.

When governments go bankrupt it's called "a default." Currency speculators figured out how to accurately predict when a country would default. Two well-known economists - Alan Greenspan and Pablo Guidotti - published the secret formula in a 1999 academic paper. That's why the formula is called the Greenspan-Guidotti rule. The rule states: To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities. The world's largest money management firm, PIMCO, explains the rule this way: "The minimum benchmark of reserves equal to at least 100% of short-term external debt is known as the Greenspan-Guidotti rule. Greenspan-Guidotti is perhaps the single concept of reserve adequacy that has the most adherents and empirical support."

The principle behind the rule is simple. If you can't pay off all of your foreign debts in the next 12 months, you're a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured.

So how does America rank on the Greenspan-Guidotti scale? It's a guaranteed default. The U.S. holds gold, oil, and foreign currency in reserve. The U.S. has 8,133.5 metric tonnes of gold (it is the world's largest holder). That's 16,267,000 pounds. At current dollar values, it's worth around $300 billion. The U.S. strategic petroleum reserve shows a current total position of 725 million barrels. At current dollar prices, that's roughly $58 billion worth of oil. And according to the IMF, the U.S. has $136 billion in foreign currency reserves. So altogether... that's around $500 billion of reserves. Our short-term foreign debts are far bigger.

According to the U.S. Treasury, $2 trillion worth of debt will mature in the next 12 months. So looking only at short-term debt, we know the Treasury will have to finance at least $2 trillion worth of maturing debt in the next 12 months. That might not cause a crisis if we were still funding our national debt internally. But since 1985, we've been a net debtor to the world. Today, foreigners own 44% of all our debts, which means we owe foreign creditors at least $880 billion in the next 12 months - an amount far larger than our reserves.

Keep in mind, this only covers our existing debts. The Office of Management and Budget is predicting a $1.5 trillion budget deficit over the next year. That puts our total funding requirements on the order of $3.5 trillion over the next 12 months.

So... where will the money come from? Total domestic savings in the U.S. are only around $600 billion annually. Even if we all put every penny of our savings into U.S. Treasury debt, we're still going to come up nearly $3 trillion short. That's an annual funding requirement equal to roughly 40% of GDP. Where is the money going to come from? From our foreign creditors? Not according to Greenspan-Guidotti. And not according to the Indian or the Russian central bank, which have stopped buying Treasury bills and begun to buy enormous amounts of gold. The Indians bought 200 metric tonnes this month. Sources in Russia say the central bank there will double its gold reserves.

So where will the money come from? The printing press. The Federal Reserve has already monetized nearly $2 trillion worth of Treasury debt and mortgage debt. This weakens the value of the dollar and devalues our existing Treasury bonds. Sooner or later, our creditors will face a stark choice: Hold our bonds and continue to see the value diminish slowly, or try to escape to gold and see the value of their U.S. bonds plummet.

One thing they're not going to do is buy more of our debt. Which central banks will abandon the dollar next? Brazil, Korea, and Chile. These are the three largest central banks that own the least amount of gold. None own even 1% of their total reserves in gold.

I examined these issues in much greater detail in the most recent issue of my newsletter, Porter Stansberry's Investment Advisory, which we published last Friday. Coincidentally, the New York Times repeated our warnings - nearly word for word - in its paper today. (They didn't mention Greenspan-Guidotti, however... It's a real secret of international speculators.)

Originally Posted by Panda

Unfortunately, I dont believe the majority of your countrymen share your views, or even have the intellectual capacity to think about such things so long as they remain mesmerized by the corporate media.

Intellectual capacity is not the issue--Americans are no more of a regressive species than the rest of the human race. But information as provided by mass media--this is a problem. Mainstream media loves to say that if both sides are criticizing them, they must be doing something right. But it is a false logic that covers a very deft handling of the perception of fairness at the expense of the reality of fairness. They establish themselves as the legitimate arbiter of what is the truth, then use that position to thread their way through issues in ways that are less than honest and certainly don't tell the whole truth.

For instance, when Hugo Chavez spoke at the UN, a big deal was made in the press about his speech--called Bush the Devil and made other criticism. He also recommended a book that he said explained his thinking behind his beliefs. The book was by Noam Chomsky, a well known professor from MIT (I think) who very consistently tears American foreign and domestic policy apart, as well as internal American politics. He uses facts and figures, statistics, historical examples, etc. He's an academic and builds very impressive arguments, whether you agree with him or not, you have to respect his intellectual integrity.

Normally, when an author is given such prominence on the world stage, the media is all over it--summarizing his books, interviewing him in his office, giving some coverage to the person's history. People want to know, and TV builds ratings by telling them first. But not Noam Chomsky. The name evaporated into thin air. Why? He is a very pointed and effective media critic and lays bare the lies, half-truths, and myths they tell about what is going on in the world and America's role in it. IMO, that's why you never, ever saw him on TV press or talk shows with their commentators. They don't want the larger American public to know about Noam Chomsky and what he says about the media, so they don't do the usual "reporting" they would do under other circumstances. Is that fair, balanced, just reporting the facts...? I don't think so.

The media has a worthwhile function in a democracy. They are failing miserably. They will keep their corporate power and big salaries, but as they get publicaly weepy eyed about "American Democracy" on Memorial Day, they are covering the funeral of that democracy on a daily basis. Some of it is their fault.

The Truth about the Deficit- aka what the Republican noise machine doesn't want you to know. Therefore, it bears repeating -


"When President Bush took office in 2001, the federal budget had been in the black for three years, and continued surpluses were projected for a decade to come.

By the time Mr. Bush left office in early 2009, the government had run big deficits for seven straight years, and the economy was on the brink of another Great Depression. On Jan. 7, 2009 — two weeks before Mr. Obama was inaugurated — the Congressional Budget Office issued new budget estimates showing a fiscal year 2009 deficit of well over $1 trillion.

About half of today’s huge deficits can be chalked up to Bush-era profligacy: mainly cutting taxes deeply while borrowing to wage two wars and to enact the Medicare prescription drug benefit — all of which Republicans supported, virtually in lockstep.

The other half of recent deficits is due to the recession and the financial crisis.

To avoid a meltdown, the government — under President Bush and President Obama — rightly decided it had no choice but to spend hundreds of billions of dollars to bail out banks and car companies and to stimulate the economy. That prevented a very bad situation from becoming much worse, but as the recession dragged on, hundreds of billions in tax revenues have also dried up.

As for why the financial system and the economy imploded, President Bush and Congress deserve much of the blame for their devotion to debt-driven growth and blind deregulatory zeal — although on deregulation, President Clinton and his team (some of whom are back in the White House) were also complicit."

Editorial - The Truth About the Deficit - NYTimes.com


Oh dear, blaming Bush again, am I?

You are clearly a subversive, and a Communist.

I wonder, at times, why people like you trot out these facts when there is a war going on. Fekin libbie 555555


I am waiting for the first knuckledragger to come along and changes the topic or comes up with some bizarre website which claims the opposite . . .

% of GDP to national debt, the real unemployment rate, Europe, and exporting of jobs.

This article is worth reading. Good questions and answers?

Who? - is unemployed.

And what will happen with the unemployment rate in the future?

Advertise on NYTimes.com Op-Ed Columnist
The Worst of the Pain

By BOB HERBERT
Published: February 8, 2010
There is a great tendency in this country to refuse to see what is right in front of everybody’s eyes.
Skip to next paragraph Bob Herbert

Go to Columnist Page »




While there is now, finally, a great deal of talk among the politicians and in the news media about unemployment, there is still almost a willful refusal to focus on just who is suffering the most from joblessness and underemployment.

When it comes to employment, there are roughly three broad categories in the United States. The folks in the upper-income group are not suffering much, if at all, from the profound reversals in employment brought about by the Great Recession. Those in the middle have been hit hard. The job losses there have been severe and long-lasting. But for those in the lower-income groups, the scale of the employment crisis has been mind-boggling.


What you’re not hearing from the politicians and the talking heads is that the joblessness and underemployment in America’s low-income households rival their heights in the Great Depression of the 1930s — and in some instances are worse. The same holds true for some categories of blue-collar workers. Anyone who thinks this devastating problem is going away soon, or that the economy can be put back on track without addressing it, is deluded.


There has been talk about income inequality over the past several years, but what is happening now is catastrophic. The Center for Labor Market Studies at Northeastern University in Boston divided American households into 10 groups based on annual household income. Then it analyzed labor conditions in each
of the groups during the fourth quarter of 2009.


The highest group, with household incomes of $150,000 or more, had an unemployment rate during that quarter of 3.2 percent. The next highest, with incomes of $100,000 to 149,999, had an unemployment rate of 4 percent.



Contrast those figures with the unemployment rate of the lowest group, which had annual household incomes of $12,499 or less. The unemployment rate of that group during the fourth quarter of last year was a staggering 30.8 percent. That’s more than five points higher than the overall jobless rate at the height of the Depression.

The next lowest group, with incomes of $12,500 to $20,000, had an unemployment rate of 19.1 percent.


These are the kinds of jobless rates that push families already struggling on meager incomes into destitution. And such gruesome gaps in the condition of groups at the top and bottom of the economic ladder are unmistakable signs of impending societal instability. This is dangerous stuff. Nothing good can come of vast armies of the unemployed just sitting out there, simmering.


When the data about underemployment is factored in — meaning individuals who are working part time but would like to work full time, and those who have stopped looking but would take a job if one were available — the picture only worsens. In the lowest group, the underemployment rate was 20.6 percent, compared with just 1.6 percent in the highest group.


The people suffering the most drastic employment reversals in this recession have been those who were in the lower-income groups to begin with — the young, less well-educated workers, especially black and Hispanic high school dropouts, and certain categories of service workers, such as food preparers and building cleaners. Blue-collar workers were also hammered, especially those in the construction industry.


This is not to say that the middle class has not been hurt badly by the recession. It has been. In last year’s fourth quarter, the group with household incomes of $40,000 to $49,000 had a jobless rate of 9 percent, close to the disastrous national average. The $50,000 to $59,000 group had a 7.8 percent jobless rate, and households earning $60,000 to $75,000 had a jobless rate of 6.4 percent.
The point here is that those in the lower-income groups are in a much, much deeper hole than the general commentary on the recession would lead people to believe. And none of the policy prescriptions being offered by the administration or the leaders of either party in Congress would in any way substantially alleviate the plight of those groups.


We talk about the recession as if all of its victims were suffering equally, and all will be helped by some bland, class-and-category-neutral solution.



That is so wrong. As the Center for Labor Market Studies explained in its report: “A true labor market depression faced those in the bottom two deciles of the income distribution; a deep labor market recession prevailed among those in the middle of the distribution, and close to a full employment environment prevailed at the top.”
Those who believe this grievous economic situation will right itself of its own accord or can be corrected without bold, targeted (and, yes, expensive) government action are still reading from the Ronald Reagan (someday it will trickle down) hymnal.

Link & Entire: Op-Ed Columnist - The Worst of the Pain - NYTimes.com

An article on long-term higher base of unemployment. It's from the Atlantic , and their articles are often long.

Here's a snippet. Click link for the entire articel.

Economy March 2010 Atlantic
The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.


by Don Peck

How a New Jobless Era Will Transform America

Link & Entire: How a New Jobless Era Will Transform America - The Atlantic (March 2010)

Good links, Milkie. I would disagree with the first as I know many in the equity/investment markets who lost jobs. Sure, just one segment, but I would assume many Main St cos have cut back on folks in these upper-income brackets, too. Hey, the only food biz near Wall & Broad streets that is booming are the hot dog vendors.

The Trucking Index says a lot. Green Shoots and 5.7% GDP. What a farce.

Truckers index drives US GDP fears

By Matthew Garrahan in Los Angeles



February 10 2010



An index that measures the health of the US economy by analysing real-time diesel consumption of trucks has cast doubt on the strength of the economic recovery after recording a sharp decline in January.


The Pulse of Commerce Index was created by Ceridian, which processes electronic card transactions, and the UCLA Anderson School of Management. It receives data every time a commercial driver fills up a truck with diesel, generating a picture of manufacturing and retail traffic.

Link: FT.com / Registration / Product Selection Page

Interview with Marc Fabar on February 14, 2010. Worth a listen. There is no political solution.

Well, are you?

US debt is written in $USs, and USA can print as much of that paper stuff as they need to in order to pay off creditors. So long as investors keep buying $USs, and so long as creditors keep lending to USA, the tradable value of the $US will stay relatitively high. This kills USA competitive trade balance as it makes exports expensive and imports cheap. A bit of a vicious cycle, but one that has allowed the people of USA to live above their means for the past several decades.

Greece has many differences than the US, but there are some similarities. If interested, click the link to read this article.

The Future Is GreekTake a good look at the Greek financial crisis. America could soon face something very similar.

By Anne ApplebaumPosted Tuesday, Feb. 16, 2010, at 8:12 PM ETProtesters in Athens, GreeceI have seen America's future, and it is Greece.

Entire: Take a good look at the Greek financial crisis. America could soon face something very similar. - By Anne Applebaum - Slate Magazine

How many of these "experts, professionals, pundits, shills," and people in positions of power were wrong? A lot.

Green shoots on the way?

Most are aware of this, but this quick 5 minute series of quotes from 1929 and today, are worth a brief browse.

Originally Posted by Milkman

Greece has many differences than the US, but there are some similarities. If interested, click the link to read this article.

The Future Is GreekTake a good look at the Greek financial crisis. America could soon face something very similar.

By Anne ApplebaumPosted Tuesday, Feb. 16, 2010, at 8:12 PM ETProtesters in Athens, GreeceI have seen America's future, and it is Greece.

Entire: Take a good look at the Greek financial crisis. America could soon face something very similar. - By Anne Applebaum - Slate Magazine

I dont believe there is any serious comparison between Greek debt and US debt apart from the fact that they both owe a lot of money as a proportion of GDP. But then again, so do a lot of other developed countries.

The big difference between USA and Greece is that their debt isn't written in an own domestic currency that they can use to inflate their way out of debt at somebody elses expense. And of course thats because they are but a small cog in the EU and world community.
USA on the other hand is by far the biggest financial player in the world and their currency has been the worlds main trading medium since it completely replaced gold in 1971 when USA was all but broke after the Vietnam war and couldn't meet its international trading debts in gold.

The $US hegemony has been very good to the people of USA allowing them to live above their means via an overly inflated currency value for the past several decades now. But it has also meant that the wealthy consumer nation has been consuming more and more of manufactured goods imported from overseas than those produced domestically while their export competitiveness has faded away due to the strong $US.

Over the past decade in particular, the US government has continued to milk this unique financial position as the custodian of the worlds trading currency by going deeper and deeper into international debt at the expense of US export trade.

So long as USA controls the supply of the worlds default trading currency and the worlds main reserve (perceived) wealth, continues it will distort the real value of the things that the world needs to progress and survive. By real things I mean raw materials such as iron ore, oil and coal, food such as rice, wheat and corn etc... The list of things that people need to live and prosper goes on. The $US is just a representation of the value of these real things at the moment, and a representation that is far out of whack to the USAs advantage (which is not surprising since they control the supply of the worlds premium trading currency).

So long as the rest of the world keeps sending their stuff of real value to the great US consumer market in exchange for their $USs, and buying up $US debt as a means of wealth storage this insane trade will continue. But of course its got to get to a point where the only thing the USA has to trade for real goods is debt to be paid back in $US paper money. I think we are at about that point right now.

Not that I dont think USA isn't a productive country that couldn't compete on the world market, especially at the high tec end of the trade spectrum. Its just that with the overinflated value of the $US due to the $US hegemony, the general manufacturing base in USA has become uncompetitive. Exports = expensive and imports = very cheap. And naturally those who unknowingly sold off their jobs through cheaper imports at WalMart probably thought it was pretty good at the time until they found themselves unemployed. Its not just USA that this shift in low tec trade is happening, but it has hit the USA hardest due to a number of factors including relatitively low wages to start with and lack of government safety net.

Still, thats the micro view as people lose their jobs and become destitute. The macro veiw is that the $US world trade hegemony is still up and running and does appear to have some breath left in it yet until people realize that the $US paper money may not be actually be worth as much in real goods and services as they thought. When that time comes,-- and it must if world trade and the world economy is ever to get back in balance, we will see a redistribution of wealth around the world. Countries with lots of $USs as wealth reserves will find themselves somewhat poorer. Countries that relied on exporting into the US consumer society will find their markets reduced . China may well float its currency to attract investment and increase the purchasing power of its citizens in order to stimulate domestic consumption. Basically, the rich are going to get poorer and the poor are going to get richer, --- provided they can produce things that people actually need to live as opposed to just paper money.

And thats not bad news at all for the working class of USA who have been loosing their jobs due to an inflated exchange rate.

^ Thanks for the info, Sab. It helps piece things together.

It's possible that inflation may be more apparent. A report on the PPI

Jobless Claims, Inflation Jump as Economy Wobble


Thursday, 18 Feb 2010


By: Reuters



The number of U.S. workers filing new applications for unemployment insurance unexpectedly surged last week, while producer prices increased sharply in January, raising potential hurdles for the economic recovery.


.....Another report from the department showed prices paid at the farm and factory gate rose a faster than expected 1.4 percent from December after a 0.4 percent gain in December, as higher gasoline prices and unusually cold temperatures helped boost energy costs.

"When you have PPI moving up and still no progress in the jobs situation, that doesn't bode well for continued improvement in equity prices," said Alan Lancz, president at Alan B. Lancz & Associates in Toledo, Ohio.

Link & Entire: News Headlines

Here's a piece on Brooksly Born, Greenspan, Rubin, and Stiglitz. Very interesting. Cannot be imbedded, so click the link if you want to watch it. Start off in the 80s up to now.

And how people that warned of cheap money and bubbles, were shut-down, and pushed aside.

FRONTLINE: the warning: watch the full program online | PBS

Insightful points, and then an interview with the founder or Reaganomics, Paul Craig Roberts.

The article below depicts a worst case scenerio that could decimate the wealth of developed countries currently living above their means on debt.

Plan for the worst and hope for the best.

1. "Société Générale tells clients how to prepare for potential 'global collapse'

Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.



By Ambrose Evans-Pritchard
Published: 6:12PM GMT 18 Nov 2009
Comments 224 | Comment on this article

Explosion of debt: Japan's public debt could reach as much as 270pc of GDP in the next two years. A bullet train is pictured speeding past Mount Fuji in Fuji city, west of Tokyo Photo: Reuters


In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.
Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

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"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.
Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.
Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.
(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).
The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.
Inflating debt away might be seen by some governments as a lesser of evils.
If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.
The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.
SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.
Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.
SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.
Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said. "

http://www.telegraph.co.uk/finance/e...-collapse.html

Here is the unemployment video updated to February, 2010. It takes less than 60 seconds to watch.

multimediafinal

"The worst is yet to come....." This is what elected politicians (governors) are saying.

Bad economies in states to worsen: governors

WASHINGTON
Sat Feb 20, 2010 1:57pm EST










Protesters hold a sign during a rally against government cutbacks for social services in Aurora, Illinois, June 18, 2009.
Credit: Reuters/John Gress




WASHINGTON (Reuters) - The already gloomy conditions of states' economies are set to worsen, according to preliminary survey findings from the National Governors Association released on Saturday.
Barack Obama
"The situation is fairly poor for a lot of states around the country. In fact, most states," Vermont Governor Jim Douglas, who is chairman of the association, said at a press conference at its annual meeting.


"What we're finding out from a fiscal standpoint is that the worst is yet to come," Douglas said.


In a survey conducted last week of 45 of the 50 states, the group found that states have $18.8 billion of budget gaps yet to be closed in fiscal 2010. This comes after they have already imposed measures to eliminate budget imbalances totaling $87 billion in the fiscal year, which for most started last summer.
In the budgets they are drafting for fiscal 2011, states foresee shortfalls of $53.6 billion and for fiscal 2012 $61.6 billion.

States' economic recoveries usually lag national recoveries because of state governments' increased spending on help for the unemployed and declines in tax payments.


All states except for one, Vermont, are required to balance their budgets, so during the recession they have drastically cut spending on basic programs, laid off workers and boosted revenue through raising taxes and fees.


The $787 billion stimulus plan the U.S. Congress passed a year ago included the largest transfer of money from the federal government to states in the nation's history. But for many states, most of its funding will run out by December.


New Jersey Governor Chris Christie, also at the press conference, said the stimulus had delayed problems but not solved them.

Link & Entire: Bad economies in states to worsen: governors | Reuters

With over 70% of the US economy dependent upon consumer spending (and also lending).......

February 23, 2010

Underemployed Report Spending 36% Less Than Employed

Gallup's new daily metric estimates that 30 million U.S. workers were underemployed in January

by Jenny Marlar

WASHINGTON, D.C. -- Gallup's daily measure of U.S. employment reveals that 19.9% of the U.S. workforce was underemployed during the month of January, translating to close to 30 million Americans who are working less than their desired capacity. Those who were underemployed reported spending 36% less than those who were employed, $48 per day versus $75 per day.

These results are based on January interviews with more than 20,000 adults in the U.S. workforce, aged 18 and older. Gallup classifies respondents as "employed" if they are employed full time or are employed part time but do not want to work full time. Gallup classifies respondents as "underemployed" if they are employed part time but want to work full time or are unemployed.

"The underemployed are less likely than the employed to say they are able to make a major purchase, such as a car or home repair, if needed."

As unemployment rates remain high, reduced spending by millions of underemployed Americans has obvious implications for economic recovery. Spending is, however, just one of many ways underemployment costs the U.S. and hurts its workforce. Gallup's employment measure also reveals further disparities between the employed and the underemployed on vital indicators such as attitudes toward money, access to healthcare, demographics, and wellbeing.
Personal Finances
Underemployment is generally associated with a less-than-desired income, and Gallup data highlight the stark contrast in spending attitudes between the employed and the underemployed. Sixty percent of employed respondents feel good about the amount of money they have to spend, while only half as many (29%) of the underemployed report feeling good. Further, the underemployed are less likely than the employed to say they are able to make a major purchase, such as a car or home repair, if needed (25% vs. 58%, respectively).

Particularly noteworthy are the differences in the groups' reported ability to afford basic necessities. Slightly more than half (56%) of underemployed respondents say they have enough money to buy the things they need, compared to 84% of employed respondents.
Additionally, respondents who are underemployed are more likely to report that they did not have enough money for food, shelter, or healthcare at some time during the past 12 months.

Healthcare
Access to preventative care and health insurance also differ between the employed and the underemployed, illustrating the strain that high underemployment can place on the healthcare system. The underemployed are less likely than the employed to have health insurance (59% vs. 87%, respectively), to have had enough money for healthcare (63% vs. 85%), to have a personal doctor (63% vs. 81%) or to have visited a dentist in the last 12 months (57% vs. 72%).

Demographics
There are several important demographic differences between the employed and the underemployed. While numerous reports have highlighted men's struggles to find employment during the current economic downturn, Gallup data indicate that underemployment levels among women (21%) are similar to those among men (19%).
Adults aged 18 to 29 are almost twice as likely (31%) to be underemployed as 30- to 49-year olds (17%) and 50- to 65-year-olds (17%) are.
Underemployment declines with increasing education levels. While nearly 4 in 10 respondents (38%) with less than a high school diploma are underemployed, the figure drops to 12% among those with a four-year college degree and further to 10% for those with education beyond college.
Among racial and ethnic groups, blacks (27%) and Hispanics (29%) are most likely to be underemployed, while non-Hispanic whites (17%) are least likely.
Taken as a whole, the employment status of certain demographic groups is bleak. Gallup's data illustrate that full employment is not available to all U.S. workers, and opportunities for employment are in short supply for American youth and minorities.

Link & Entire: Underemployed Report Spending 36% Less Than Employed