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It's not only the energy markets that threaten the 'low inflation' data now encouraging bondholders to keep buying... THE PUBLISHED INFLATION DATA are surprisingly unsophisticated in so far as they compare current prices with a snapshot a year earlier. Just over a year ago, oil was every hedge fund manager's favorite speculation. In summer 2008 a barrel got to well over $140, before falling sharply back. You may remember the food riots of early 2008, and how they seem to have disappeared. Well, that occurred after a small dip in world grain production in 2007. Fortunately, by its end, 2008...

Norm Ornstein, one of the least conservative analysts at the conservative American Enterprise Institute criticized 2008 GOP vice presidential candidate Sarah Palin's recent Facebook Notes op-ed on the decline of the dollar and how it is tied to our increasing national debt and reliance on foreign oil. Ornstein told the Financial Times: “The dollar has always been a testosterone issue among America’s political classes,� says Norm Ornstein, a veteran analyst at the conservative American Enterprise Institute. “This time there may be a legitimate debate to be had over the dollar’s reserve status, but Sarah Palin is not qualified to participate...

Where would we be without the Fed and its printing press? There's been a lot of debate about the appetite of foreign investors of our debt -- Treasury auctions continue to be strong, even as noises emanate from overseas about wanting to dump the dollar . But here's a stark fact, via the Council on Foreign Relations: Only the Fed is buying agency debt. Foreign buyers, who once consumed it voraciously, have been net sellers so far this year.

Only in the halls of Washington, D.C. and the Obama administration, does the current fiscal policy of unprecedented borrowing and printing of money make sense. To most Americans, it's a difficult to wrap your brain around trillion dollar deficits, but they understand that spending money you don't have will eventually come back to bite you.

As we, in my opinion, march towards financial meltdown I have a few thoughts to throw out: We have been living in an economy where everyone wants their things NOW! The idea is to enjoy the “fruits of one’s labor” prior to performing the “fruits of one’s labor”. This, of course, is known as debt – and people are willing to pay usury (interest) in order to get that which they desire. Everyone in debt is a debt servant, but those that live the lifestyle of wanting things now and working for them later are what I refer to as...

Bankruptcy professionals have a grim view on the U.S. corporate recovery, despite a recent rise in stocks and an uptick in business deals. "I think it's going to be a sad holiday season," said Lynn Tilton, chief executive officer of Patriarch Partners, a private equity firm that specializes in distressed companies. Consumers will be stingy with their spending, keeping malls and resorts empty, bankruptcy professionals said at the Reuters Restructuring Summit in New York this week. Even the wealthy will steer clear of the wild, brand-conscious spending that marked the last few years. "No one is conspicuously consuming they way...

For the last few months I have been casting around looking for bullish data points as counterfactuals to my more bearish long-term outlook. I have found some, but not enough. If you recall, early this year, I stated that we are in depression, making the case for the ongoing downturn as a depression with a small ‘d.’ Nevertheless, I was quite optimistic about the ability of policymakers to engineer a fake recovery predicated on stimulus and asset price reflation and I certainly saw this as bullish for financial shares if not the broader stock market. But, I saw these events...

WASHINGTON — The federal government is engaged in a massive mortgage modification program that's on track to send billions in tax dollars to many of the very companies that judges or regulators have cited in recent years for abusive mortgage practices. The firms, called mortgage servicers, have been cited for badgering, manipulating or lying to their customers; sticking them with bogus fees, or improperly foreclosing on them. Mortgage servicers are the middlemen between homeowners and the investors that hold their mortgages, collecting homeowners' checks and disbursing payments for the mortgages, property tax and insurance. They're a necessary player for any...

Tiger Management Chairman Julian Robertson says that if China and Japan stop buying our debt, inflation could hit 20 percent. "It's almost Armageddon if the Japanese and Chinese don't buy,” Robertson told CNBC. "I don't know where we could get the money. I think we've let ourselves get in a terrible situation." Robertson’s 2008 picks, which included Visa, Baidu, Apple, and Google, handily beat the market. His worst performing choices went up 40 percent, the best more than doubled. Robertson says his firm still owns many of last year’s picks, but says he’s “not as berserk over owning stocks as...

It does not take a rocket scientist to work out that we live in a very different world to our grandparents and great grandparents when in their day, a firm handshake or a word were binding contracts. In that world, most people never made a transaction without having money to cover the purchase. They preferred to live without, rather than go into enormous debt. Not so long ago, young children could walk down their street without adult supervision and be safe and people could keep their cars’ motors running while they popped into their local stores to pay their bills....

This time will never be different Review by Martin Wolf Published: September 28 2009 03:18 | Last updated: September 28 2009 03:18 This Time Is Different: Eight Centuries of Financial Folly By Carmen Reinhart and Kenneth Rogoff Princeton, $35; £19.95 The four most dangerous words in finance are “this time is different”. Thanks to this masterpiece by Carmen Reinhart of the university of Maryland and Kenneth Rogoff of Harvard, no one can doubt this again. As the authors note, “If there is one common theme to the vast range of crises we consider in this book, it is that excessive...

The Empire State Building in New York City recently had a light display commemorating the 60th anniversary Communist Chinese revolution. This may be a sign of things to come in the rest of America. As the US budget and trade deficits continue to free-fall, our financial system becomes increasingly dependent upon the good will of our creditors - one of the most important being the People's Republic of China. The Chinese are aware that their huge investment in America is vulnerable to 1) America's ability to repay, and 2) dollar inflation. China has and continues to search for currency alternatives...

Robert Reich: This Is No Time To Worry About Government Debt Joe Weisenthal|Oct. 2, 2009, 7:09 AM | 350 |12 Echoing fellow traveler Paul Krugman, former Clinton cabinet official Robert Reich is banging the drum on spending: Let me say this as clearly and forcefully as I can: The federal government should be spending even more than it already is on roads and bridges and schools and parks and everything else we need. It should make up for cutbacks at the state level, and then some. This is the only way to put Americans back to work. We did it...

Happy New Year! But leave the hats and horns in the closet. There's nothing to celebrate. Today marks the start of the 2010 federal fiscal year. The only thing good about it is that FY'09 is finally over. It was the fiscal year in which the U.S. suffered the worst economic downturn since the Great Depression and government numbers reflected that. It was as if a fiscal tsunami struck and flooded the nation with red ink. By the time the final numbers are in for the fiscal year just ended, the federal deficit will have hit an all-time high in...

"The transcending value seen in the Dollar has lost its foundation..." A SHORT SERIES of secret memos, published and dissected at ZeroHedge, provide the "smoking gun" of gold-market manipulation. Apparently. And given this little slew of dusty archive-digging - throwing up three documents from 1968 to 1975, each one declassified within thirty years - then "If over 40 years ago the Fed and the members of the gold 'Pool' were openly intervening in the gold market, one can only imagine what the situation is now..." Go on, just imagine. Because imagination is what you'll need if you're going to nail...

I can't think of a better way to describe the last 2 years than as times of great uncertainty. Not only did we have two near catastrophic banking failures worldwide, but we also have the ever present Iran Israel nuclear contention. The USD held reasonably well during this period, although it's weaker. In any case, gold has held up amazingly well over the period of the last two years too, in fact is at highs. What else is except US T bonds? Pimco's Bill Gross just said the longer term of the US T yield curve is flattening and that...

Investors are celebrating an incipient “recovery,” but the interventions that were responsible for it are sowing the seeds of a more violent contraction down the road. The problem, quite simply, is debt. We’ve accumulated record amounts, yet many economists tell us we need more. Leading the charge is Paul Krugman. He exhorts us to borrow our way back to prosperity, but he doesn’t acknowledge that his brand of Keynesian economics ignores the consequences of debt. If you look at a chart of America’s total debt burden, he’s leading us over a cliff. The problem begins with the flawed way Krugman...

Sprinkled among all the official talk about efforts to end the current recession, you'll hear assurances, notably from Federal Reserve Chairman Ben Bernanke, that when the economy does revive, it won't be allowed to blast off into runaway inflation. The Fed, we're being promised, will prevent such a launch by reabsorbing the hundreds of billions of dollars of excess liquidity it recently created to halt the credit crisis. Delivering on those assurances won't be easy. There is no reliable, real-time guide to how much cash the economy needs, so deciding when to drain excess reserves from the banking system (by...

* Indexes sink after unexpected fall in Chicago PMI * Private payrolls cut more than expected: ADP * Dow, S&P Nasdaq down 1.2 pct each * For up-to-the-minute market news, click [STXNEWS/US] (Updates to open; adds Chicago PMI data) By Angela Moon NEW YORK, Sept 30 (Reuters) - U.S. stocks fell sharply on Wednesday as an unexpected fall in business activity in the U.S. Midwest sparked worries about the pace of economic recovery. Wall Street gave up initial gains after the Institute for Supply Management-Chicago's business barometer fell to 46.1 in September, a reading that indicates a contraction in the...

Arthur Laffer, the primary architect of Reagan’s debt bomb that we are currently trying to defuse, has now executed a complete 180° turn from his monetary policies that gutted the Midwest industrial base in the 1980s. In a WSJ article on September 22, 2009, he claims the problems of the Great Depression are not caused primarily by tight monetary policy but rather tariffs and taxes. While he gets the facts he mentions right, he ignores the timing of taxes and deficits, tariffs and balance of trade. He’s right that talk of tariffs may have been the trigger that started the...

"A mere $400bn went missing in the UK debt-savings boom of 2000-2008. Not to worry..." SEEMS WE'RE NOT the only ones trying to figure out this week where the last decade's record consumer borrowing went. "Where did all the debt go?" asked Bank of England economist Spencer Dale in a speech this Thursday in Exeter. Sadly for US and British households, however, let alone savers and investors, he had fewer answers than even we do here at BullionVault. "Household debt as a proportion of income increased from 100% to 165% in the 10 years to 2007," Dale noted of the...

NEW YORK (MarketWatch) -- China's sovereign-wealth fund, China Investment Corp., has committed to invest about $1 billion with Los Angeles-based Oaktree Capital Management LP, according to a media report Saturday. Oaktree is expected to invest CIC's money in distressed debt and other fixed-income assets, The Wall Street Journal reported in its online edition, citing unnamed sources. The firm, which oversees more than $60 billion in assets, makes investments ranging from the debt of battered casino operators to entire companies. Oaktree was among the nine big asset-management firms chosen by the Treasury Department as fund managers for the Public-Private Investment Partnership,...

Rampant Debt Monetization Means U.S. Financial System Is Doomed Sep 27, 2009 - 05:25 AM By: Bob_Chapman Nearly half the nation's 25 biggest retail chains expect to hire fewer holiday workers this season than they did last year, another sign that retailers aren't counting on recession-strained shoppers to relax the tight grip on their pocketbooks this year. About 40% of stores surveyed across a broad swath of retailing, including consumer-electronic chain Best Buy Inc., teen-retailer American Eagle Outfitters Inc., and luxury-goods seller Saks Inc., told the Hay Group, a human resources consulting firm, that they expect to hire between 5%...

US debt contracts for first time in decades GARETH COSTA, The West Australian September 26, 2009, 4:08 pm A number like $US122 billion ($140 billion) appears insignificant when related to the trillion dollar problems in the US economy, but when it represents the first contraction of gross US debt in decades the implication for global recovery is daunting. Total US debt, that includes bond debt issued for the bailout packages, fell in the second quarter of this year after continuing to expand right through the global financial crisis, according to data released by the US Federal Reserve Board. US federal,...

My understanding is that WW2 debt was close to our current level of GNP/debt. What were the mechanisms of paying it down? Did the destruction of Axis countries industrial base create a captive market for the US? How was lend Lease and the Marshall plan paid off? Any insights would be appreciated, thanks.

Editor's Note: After many long years of working to shed light on the ultra-secretive Federal Reserve, Ron Paul's "Audit the Fed" bill is finally getting a hearing on Friday, 09-25-09. In that spirit, we present to you this speech he made in 2007 on the dangers of Federal Reserve policy, and the institution itself... please read, comment, and share.

In one of today’s richest ironies, America’s fiscal health — such as it is — hinges on the generosity of the Chinese Communist party. Annoying Beijing’s mandarins could prompt them to skip our Treasury auctions. If China stops lending the Treasury money to underwrite Uncle Sam’s spendaholism, the Federal Reserve will need to print even more dollars to nudge the day of reckoning back over the horizon. The Chinese have urged Washington to stop spending and printing so much money, lest inflation turn China’s $800.5 billion in Treasuries into a giant misfortune cookie. Chinese officials have grown increasingly vocal —...

Unlike the "legitimate bull markets" of many foreign markets, Peter Schiff believes the U.S. is merely experiencing a "rally in a bear market," and is lagging the rest of the world "for a reason." The worst is not over, according to Euro Pacific Capital's Schiff, who predicts the Dow will fall another 90% from current levels when measured against gold. A longtime dollar bear and gold bull, he foresees gold hitting $5000 per ounce "in the next couple of years," and predicts the Dow and gold will trade on a one-to-one ratio vs. the current level of around 9.7-to-1. Schiff...

ISLAMABAD — It's 8 o'clock on a Sunday night in the Pakistani capital, but collection cowboy Sharoon Hermoon is living on U.S. time. Headset in place, feet on his desk, he aims his speed dialer at a debtor in Fort Worth. "Hello, ma'am, how ya doin' today?" he says in a convincing American accent. "My name is James Harold, and you owe us $11,000." There's a deer-in-the-headlights moment at the other end, a deep breath, a torrent of excuses. "I don't know what you're talking about," she says. "It's someone else. My husband's identity was stolen." After several minutes of...

This misunderstanding indicates that Bernanke is unlikely to recognize the problematic nature of stopping the deleveraging process that has seen TOTLL, total loans and leases by the commercial banks, fall from $7.2 trillion to $6.8 trillion in the three months from June through August. The third is point is the explanation for Bernanke's focus on the banks rather than the consumer or even the private and commercial mortgage holders. ...While those who understand that the problem is too much debt, not too little money, will rightly be skeptical of both Bernanke's historical diagnosis and current prescriptions, this does explain some...

Every time I write about the need to raise revenues to pay for federal spending, some nitwit always demands to know why we don't just cut spending. That is not a viable option to deal with our fiscal problem. The first point that people need to understand is that we live in a democracy. We don't have a dictator who can just wave his hand and abolish government programs. We have a president who may propose spending cuts, but before they take effect he must get agreement from both the House of Representatives and Senate, both of which may be...

WASHINGTON -- Foreign demand for long-term U.S. financial assets fell in July from a month earlier, according to a report that the Treasury Department released Wednesday. China, Japan and the U.K. increased their holdings, but other countries such as Russia, Luxembourg, Switzerland and Ireland scaled back, as did a group of oil exporters. Meanwhile, the report shows that foreign investors shunned U.S. corporate and agency bonds and pared back purchases of Treasury bonds and notes. Overall, net foreign sales of long-maturity U.S. securities totaled $7.4 billion in July, following purchases of $70.7 billion the month before. Still, Brown Brothers Harriman...

See this link for detailed tables in PDF format - Z.1 balance sheet data for 2nd Quarter 2009

China, Russia, et al. are talking about shifting their monetary reserves out of U.S. dollars. Gold has hit $1000 per ounce, even though wholesale and retail prices exhibit a deflationary bias. The United Nations has called for a new world currency to replace the dollar. What’s going on? All of these phenomena are early death throes of Federal Reserve notes. I balk at saying “the U.S. dollar,” because a “dollar” is still defined in law as a certain quantity of silver or gold, whereas the U.S. currency that now circulates here and around the globe consists of nothing more than...

Freepers I have a question that I can't seem to hear any "talking head" of any political persuasion ask: First, are we monetizing the debt in large amounts? Second, if the answer is yes, then where is the money going and why do we have no inflation? We do not have rapidly growing production and employment, so we cannot have an equality of "dollars and goods." Therefore if we have "too many goods chasing too few dollars," where is the (what should be dramatic) price increases? Further, some of the info I've seen says that Americans are NOT taking on...

Treasury says it will wind down emergency program Treasury says it will start winding down emergency rescue program to buy time for debt ceiling By Martin Crutsinger, AP Economics Writer On Wednesday September 16, 2009, 8:19 am EDT WASHINGTON (AP) -- The Treasury Department said Wednesday it will begin winding down one of the emergency programs created at the height of the financial crisis to give the government more time before it hits the national debt limit.

Bank of America Corp and Citigroup Inc customers defaulted on their credit card debts in August at the highest rates since the onset of the recession, a sign that the banks' consumer lending woes are far from over.

The latest story to hit the headlines in this regard is the matter of U.B.S. I’m sure all of you have read the details there, so I won’t describe the entire story. The pertinent point is that the U.S. Taxman asked for confirmation of the names of 52,000 account holders and has received 4,500 only. Why? The Swiss government relies on its banking services for a considerable percentage of the nation’s income. For three hundred years they have provided a home for foreign owned assets and monies. The have, still firmly in place, Bank Secrecy Laws that ensure that nobody...

As of a few moments ago Bloomberg broke a story suggesting that the US government would be selling off its stake in Citigroup stock. As much as I'm for the US Government and Taxpayer getting away from any of our illegitimate TARP children, Bloomberg's story is just off. here is no such thing as a profit on the sale of this stock when, as a nation, we are into Citi Bank for much more than what was placed into Citi Stock. Specifically, from Bloomberg's article and confirmed via Pro Publica there will be at least $25 billion in warrants left...

The annals of Sino-American relations have seen more than a few celebrity-diplomats: Henry Kissinger, a young Richard Holbrooke, and, of course, the current secretary of state. But, unless the record has been lost to history, none has ascended to this rarefied plane of geopolitics while running the Office of Management and Budget. And yet, there was budget director Peter Orszag rushing to a lunch with Chinese bureaucrats on a Monday in late July. To his surprise, when Orszag arrived at the site of the annual U.S.-China Strategic and Economic Dialogue (S&ED), the Chinese didn't dwell on the Wall Street meltdown...

Reporting from Islamabad, Pakistan - It's 8 o'clock on a Sunday night in the Pakistani capital, but collection cowboy Sharoon Hermoon is living on U.S. time. Headset in place, feet on his desk, he aims his speed dialer at a debtor in Fort Worth, Texas. "Hello, ma'am, how ya doin' today?" he says in a convincing American accent. "My name is James Harold and you owe us $11,000." There's a deer-in-the-headlights moment at the other end, then a deep breath, then a torrent of excuses. "I don't know what you're talking about," she says. "It's someone else. My husband's identity...

Credit scores have been getting a lot of attention lately, as lenders tighten credit standards and contend with new legislation that has, among other things, reined in how credit-card issuers can raise rates. Meanwhile, several firms, preying on our insecurities, are pushing credit scores and credit-score-tracking services for a monthly fee. For all the attention they generate, though, credit scores are largely misunderstood. For instance, your precise score matters only when you're in need of new debt, like a home, auto or education loan or a new credit card, which should be a fairly rare occurrence. You don't have just...

Reporting from Chicago - Alicia Torres must raise $94,000 in order to take a vow of poverty. Drawn to the Roman Catholic sisterhood while she was a student at Loyola University here, Torres faces the same barrier as many others considering such a religious life: college debt. Today, Torres and a group of friends will run Chicago's Half Marathon -- 13.1 miles along the lakefront -- in hopes of receiving enough pledges to pay off $94,000 in student loans. "You can't live a vow of poverty with a bunch of debt," said Torres, a 2007 graduate. "If God wants you...

For the first time since the great depression (and possibly even then), US wage earners suffered through A Decade With No Income Gains. The typical American household made less money last year than the typical household made a full decade ago. To me, that’s the big news from the Census Bureau’s annual report on income, poverty and health insurance, which was released this morning. Median household fell to $50,303 last year, from $52,163 in 2007. In 1998, median income was $51,295. All these numbers are adjusted for inflation. In the four decades that the Census Bureau has been tracking household...

A new paper from the New America Foundation urges that US to adopt a policy of moderate inflation in order to allevieate the massive public and private debt burden. Authored by Chris Hayes, the Washington DC editor of the Nation, the paper argues that too much debt will have a deadening effect on the economy, as people are consigned to “debtor serfdom” and the government cannot afford to provide basic services because of the cost of making its debt payments. “The surest way to avoid such a fate is to jettison a central, indeed the central axiom of post-1970s neoliberal global...

The thing about the bully pulpit is that Presidents can make the most fantastic claims and it takes days to sort the reality from the myths. So as a public service, let's try to navigate the, er, remarkable Medicare discussion that President Obama delivered on Wednesday. It isn't easy. Mr. Obama began by depicting a crisis in the entitlement state, noting that "our health-care system is placing an unsustainable burden on taxpayers," especially Medicare. Unless we find a way to cauterize this fiscal hemorrhage, "we will eventually be spending more on Medicare than every other government program combined. Put simply,...

I have a dilemma for all the financially wise Freepers out there. I have recently come into enough money to pay off debt ($60K) accumulated to fix up a house I tried to flip and failed due to the reversal in housing market. My question is: Is it wise to pay off debt when it appears inflation is around the corner? Would it be better to invest in commodities, as the dollar looks set to nose dive? I keep reading that one should pay off debt first, but I'm not sure if that's the right move. Any thoughts/advice is much...

The national debt may reach 181% of GDP in 2035 and 716% of GDP in 2080. The latest budget projections show the national debt rising from $5.8 trillion last year to $7.6 trillion this year and $14.3 trillion in 2019. According to the Congressional Budget Office (CBO), the debt will rise from 40.8% of the gross domestic product in 2008 to 53.8% in 2009 and 67.8% in 2019. This raises the question of how much debt is too much. At what point are the economic consequences in terms of inflation, higher interest rates, slow growth or a collapsing dollar so...

As gold tries to break and hold $1000 it brings up the larger question of how long the USD has to last. At the very least, after the markets digest the debate over deflation which is USD bullish, the question becomes: how long can the USD hold together before it falls in value drastically. Big drumbeat out there I am sure that you know about China vigorously complaining about the abuse of the USD, most loudly complaining about the Fed's quantitative easing (buying any and all bad assets from banks and putting them on their balance sheet - called monetization,...

As gold tries to break and hold $1000 it brings up the larger question of how long the USD has to last. At the very least, after the markets digest the debate over deflation which is USD bullish, the question becomes: how long can the USD hold together before it falls in value drastically. Big drumbeat out there I am sure that you know about China vigorously complaining about the abuse of the USD, most loudly complaining about the Fed's quantitative easing (buying any and all bad assets from banks and putting them on their balance sheet - called monetization,...