dagblog - Comments for "Fie on the FT"

Interesting.

Flavius — Tue, 17 May 2011 13:17:15 +0000

In reply to Something informative from

Interesting.

Something informative from

EmmaZahn — Tue, 17 May 2011 02:52:22 +0000

Something informative from WSJ via Yglesias.

Seven (7) looks especially interesting to me because that is one of the things I thought Treasury should have done Fall 2008 instead of TARP. Something very appealing to cash heavy investors looking for a safe place to park. Treasury Direct repos. Notice there is no guesstimate on how much money that might bring in. Now that is something to keep a watch on. It could be a real game changer.

Because the commentariat are

EmmaZahn — Mon, 16 May 2011 19:29:36 +0000

In reply to Right now I don't understand

Because the commentariat are convinced that what is good for Wall Street is good for the overall economy and vice versa. That has often been true but as you will see in the small print disclaimer on practically anything you ever get from an investment firm: "Past performance is no guarantee of future results."

You are hardly clueless. You are reading and thinking about this stuff. That is a good thing. Tons better than just accepting what someone else says as a final answer.

Me? I am way too jaded about the whole thing. Probably should comment less myself.

Right now I don't understand

Flavius — Mon, 16 May 2011 17:57:00 +0000

In reply to Part of me wishes the

Right now I don't understand why a failure to raise the debt ceiling is discussed by the commenteriat as being the same as, or as leading automatically to, default. But it's also true that I haven't read in something written by a heavy hitter. I'm sure that one of them will soon orate on the subject and I'll probably excerpt plus link it here.

Meanwhile it's pointless for me to comment since I'm clueless.

Part of me wishes the

EmmaZahn — Mon, 16 May 2011 15:58:34 +0000

In reply to Plus the government can never

Part of me wishes the Republicans would refuse to raise the debt ceiling and that all the dire consequences predicted would (temporarily) come to pass. And it would be only temporary because politicians do not piss than many people off and get reelected -- not if there is a functioning opposition party which is open to question at the moment.

Outside of Republican congress critters, the only people making a really big deal over the debt ceiling are bond and currency traders. It is in their interest (pun intended) to churn up some volatility from time to time. Word is that PIMCO's Bill Gross has been talking US Treasuries down and that one of his funds is net short Treasuries. Then less than an hour after debt ceiling was breached this morning, Seeking Alpha reports:

"Very underweight," sure, but Pimco never actually went short Treasurys, Bill Gross says - calling it a "misconception" that the firm bet against the government debt. Of course, it was Pimco's own report that the Total Return Fund was -3% on Treasurys that set off stories about Gross' bearishness.

The chicken games traders play with each other and the Fed. I really have no idea which way this is going to play out. There is no rational reason to panic over the breach of an arbitrary and self-imposed limit but then there never really is a rational reason to panic, is there?

This quote fseems pertinent:

At the beginning of the Clinton administration in the early 1990s, adviser James Carville was stunned at the power the bond market had over the government. If he came back, Carville said: I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.

Plus the government can never

Flavius — Mon, 16 May 2011 13:38:00 +0000

In reply to Maybe throw in some T

Plus the government can never be insolvent in its own currency

I think you're saying the same thing as Martin Wolf in last weeks column

Overindebted countries with their own currencies inflate

I'm over my head. If Congress refuses to raise the debt limit can't Obama temporarily just print dollas to make any necessary payments . Then when Congress comes to its senses offset the resulting devaluation somehow.

Just guessing, by buying dollars held overseas to offset the ones issued during Congress's interdiction on new debt. I'm not proposing that. Just asking why it wouldn't work.

Maybe throw in some T

EmmaZahn — Mon, 16 May 2011 01:49:23 +0000

In reply to Fie on the FT

Maybe throw in some T accounts for visual effect. :)

One of the few good things to come from the recent crises is that explanations of accounting and finance terms are becoming easier to find and read/understand. This can be helpful in calming fears caused by the careless though technically correct use of words like 'insolvent'

http://en.wikipedia.org/wiki/Insolvency

While the trust funds could technically become cash-flow insolvent sooner rather than later they are much further from becoming balance-sheet insolvent. Which is just another way of saying what you said. Plus the government can never be insolvent in its own currency.

Trying to respect what I

Flavius — Sun, 15 May 2011 19:05:17 +0000

In reply to Flav, can you include a link

Trying to respect what I believe is the FT's policy allowing redistribution,here is a limited extract. which contains a link.All the content to which I responded in my letter is included below and to that extent it will not be necessary to use the link..

BEGINNING OF EXTRACT

Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/11ebfdfc-7da3-11e0-b418-00144feabdc0.html#ixzz1MRnV6f8E

New fears over US entitlement plans

Concern on Medicare and Social Security

.............................................

Revised forecast on how long funds will last

By James Politi in Washington

Published: May 13 2011 22:21 | Last updated: May 13 2011 22:21

The financial health of Medicare and Social Security is deteriorating faster than expected, according to a report that will fuel the political battle over fiscal policy and the debt limit.

The trustees of the two government health and pensions schemes for elderly Americans forecast on Friday that Medicare will exhaust its funds in 2024, five years earlier than predicted, while Social Security will be insolvent in 2036, one year sooner than thought.

The new projections – largely the result of the slow economic recovery – came three days before the US was set to reach its debt ceiling of $14,300bn.

……………………………………………………………………...

At a briefing on the Medicare and Social Security reports ,Tim Geithner, Treasury secretary,.(SAID)….....“I want to again encourage Congress to move ............ so that all Americans will remain confident that the US will meet ............not just our interest payments but also our commitments to our seniors,”..........

END OF EXTRACT

Flav, can you include a link

Michael Wolraich — Sun, 15 May 2011 17:30:51 +0000

In reply to Fie on the FT

Flav, can you include a link to the FT article?