Category: Debt

U.S. National Debt: $17,610,253,000,219.65

Posted in Debt |

Greece Seen Needing Third Bailout as Bonds Insufficient

18-Jul (Bloomberg) — Greece’s return to bond markets after a four-year exile hasn’t convinced economists it can avoid a third bailout.

Six out of 10 economists in a Bloomberg News survey said Greece will need to top up the 240 billion euros ($325 billion) of loans received from Europe and the International Monetary Fund since 2010, when it lost access to bond markets. The IMF forecasts Greece will have a 12.6 billion-euro financing gap next year.

“Greece’s ability to generate sufficient funds to cover that is not sufficient,” said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London, referring to the financing shortfall. “Eventually the European partners will have to come up with something to basically bridge the funding needs that Greece has from now to the time in which it can establish a regular and sizable market access.”

[source]

Posted in Debt, European Debt Crisis |

US National Debt: $17,591,980,437,201.71

Posted in Debt |

CBO: Dark skies head for deficits?

15-Jul (Politico) — The federal budget outlook may be brightening for now, but a new government report says there are dark clouds over the horizon.

Less than a week after the White House reported this year’s deficit will be the smallest of the Obama administration, the Congressional Budget Office said that over the long term the budget shortfall will approach unprecedented levels.

In its annual analysis of the government’s long-term fiscal outlook, the nonpartisan agency said Tuesday that it expects the deficit to begin growing again in coming years, and continue growing to levels unseen since the wake of World War II.

“Deficits are projected to rise steadily and, by 2039, to push federal debt held by the public up to a percentage of GDP seen only once before in U.S. history [just after World War II],” the agency said.

[source]

PG View: This harsh reality should come as no surprise to anyone. As the debt continues to accumulate over the long-term, so too do the risks. Savvy investors will continue accumulating gold as hedge against these risks.

Posted in Debt, Economy |

Bankers warn over rising US business lending

08-Jul (Financial Times) — US lending to businesses is reaching record levels but banks are privately warning that the activity should not be seen as evidence of an economic recovery.

Much of the corporate lending is going to fund payouts to shareholders, finance acquisitions and fuel the domestic energy boom, bankers say, rather than to support companies’ organic growth.

“Loan growth doesn’t seem to be driven by the underpinning of an economic recovery in terms of new warehouses and [capital expenditure],” said one senior corporate banking executive at a large US bank. “You don’t see the foundation, the real strong demand.”

[source]

Posted in Debt |

U.S. National Debt: $17,588,757,555,596.18

Posted in Debt |

U.S. National Debt: $17,524,460,363,250.30

Posted in Debt |

In The First Quarter $250 Billion In Federal Debt Bought Negative $74 Billion In GDP

25-Jun (ZeroHedge) — As everyone knows by now, in Q1 the US economy “grew” (we use the term loosely because the correct term is shrank) by the lowest amount in Q1 since 2009. More to the point, the -2.9% collapse in GDP was the 17th worst quarterly print in US history.

…Which brings us to the topic of marginal utility of debt, extensively covered here in the past. In brief, it describes how much in “economic growth” every dollar in federal debt buys. The bad news: in Q1, US total Federal debt rose by $250 billion, to a record (duh) $17.6 trillion. This debt “bought” a negative $74 billion in GDP, which declined to $17.0 trillion. Said otherwise, this was the first quarter since the end of the recession when debt rose (by a whopping amount), and when GDP declined sequentially in nominal terms.

[source]

Posted in Debt, Economy |

US National Debt: $17,535,731,914,061.53

Posted in Debt |

National Debt: $17,569,041,604,920.91

Posted in Debt |

Debt is No Salvation

by Peter Schiff
13-Jun (24hGold) — Thus far 2014 has been a fertile year for really stupid economic ideas. But of all the half-baked doozies that have come down the pike (the perils of “lowflation,” Thomas Piketty’s claims about capitalism creating poverty, and President Obama’s “pay as you earn” solution to student debt), an idea hatched last week by CNBC’s reliably ridiculous Steve Liesman may in fact take the cake. In diagnosing the causes of the continued malaise in the U.S. economy he explained, “the problem is that consumers are not taking on enough debt.” And that “historically the U.S. economy has been built on consumer credit.” His conclusion: Consumers must be encouraged to borrow more money and spend it. Given that Liesman is CNBC’s senior economic reporter, I would hate to see the ideas the junior people come up with.

Before I get into the historical amnesia needed to make such a statement, we first have to confront the question of causation. Just as most economists believe that falling prices cause recession, rather than the other way around, Liesman believes that economic growth is created when people tap into society’s savings in order to buy consumer goods that they could not otherwise afford. But consumption does not create growth. Increasing productive output allows for greater consumption. Something needs to be produced before it can be consumed.

But even allowing for this misunderstanding, consumer credit does little to increase consumption. All it accomplishes is to pull forward future consumption into the present (while generating a fee for the banker). This is like giving yourself a blood transfusion from your left arm to your right. Nothing is accomplished, except the possibility of spilling blood on the floor. But it’s not even that benign.

[source]

PG View: Schiff is spot-on in his assessment that excess consumer debt is a bane, rather than answer for our moribund economy. As households continue to de-lever, it becomes obvious that we’ve done nothing but borrow prosperity from the future, and payback sometimes can be…well, a bad thing.

On the other side, we’ve seen our very own central bank slash rates to 0% in an effort to disincentivizing saving. They want you to spend your hard-earned money. They want you to borrow and spend. What they are doing is insidious, so don’t give in. Save your money; and save some of it in gold.

Posted in Debt |

National Debt: $17,548,899,562,327.27

Posted in Debt |

National Debt: $17,544,581,789,209.83

Posted in Debt |

Elliott’s Paul Singer On How It All Will End: “Badly, We Guess”

29-Apr (ZeroHedge) — Some less than pleasant observations from the billionaire founder of Elliott Management, Paul Singer, extracted from his periodic letter to clients.

AMERICA’S LIABILITIES

The budget deficit for the latest fiscal year (which ended on September 30) was reported to be around $700 billion. However, this figure would be many times higher if the government’s unfunded entitlement programs were included. Even before taking into account liabilities stemming from the Affordable Care Act (ACA), which cannot even be calculated yet because so many of its assumptions are either erroneous or outright fabrications, and because many of its provisions keep getting delayed by the Administration for purposes of political advantage, the present value of the future obligations of the federal government is currently around $92 trillion. These obligations have been growing by over 10% per year since 2000, during which time nominal GDP has risen just 3.8% per year. At this rate, the federal government will owe an estimated $200 trillion on the entitlement programs by 2021 (again, excluding the effects of ACA) and $300 trillion by 2025.

These numbers are not fantasies. At present, there is no acknowledgement by a large portion of the American political establishment that this insolvency even exists. Nor have the leaders of this establishment made any concrete progress toward restoring solvency by taking up serious proposals to rein in unpayable promises. Quite the contrary: Politicians and policymakers continually tell people that such entitlement obligations will be met – a claim they must know cannot possibly be true.

…High inflation (or hyperinflation) is one way that devious or clueless policymakers attempt to deal with unpayable promises. It is devious, because without formally imposing a tax, it takes money from savers and investors and pays it to borrowers and voters. It is clueless, because the cycle of government handouts and demands for more benefits is like a game of “chase the tail” – because it dissipates the real value of promised benefits, it brings the ultimate prize no closer while destroying the value of money and dissolving societal cohesion in the process.

[source]

PG View: The government wants inflation. It needs inflation. And while the ongoing deleveraging of household balance sheets is keeping that desired inflation in check for now, the government will eventually get its wish. Buy gold now, in anticipation of them achieving their goal; particularly if you envision yourself being reliant on those entitlements at some point in the future.

Posted in Debt, Economy |

Japan posts largest-ever trade deficit

21-Apr (Financial Times) — Japan suffered its largest-ever trade deficit last fiscal year, underlining a wrenching structural shift for an economy long renowned as an export powerhouse.

The now chronic deficit has widened even during a more than year-long , limiting the impact of Shinzo Abe’s “Abenomics” stimulus policies.

Those policies have helped to weaken the yen – a once reliable way to kick-start the Japanese economy, but one whose effect today is less clear as Japan manufactures less than it once did and buys more energy and other items from abroad.

The gap between the value of Japan’s exports and that of its imports grew by more than two-thirds in the 12 months through March, to Y13.7tn ($134bn), according to government data released on Monday. It was the third consecutive fiscal year of deficits, the longest streak since comparable records began in the 1970s.

[source]

Posted in Debt |

Americans Are Starting to Miss More Mortgage Payments

11-Apr (YahooFinance) — For several quarters, lenders have been reporting low and falling delinquency rates for credit card, mortgage and auto loan borrowers, and that positive trend has opened up credit products to consumers with lower credit scores.

That may be starting to shift.

A greater share of mortgages were 30 to 59 days past due in the fourth quarter of 2013 than at the same time in 2012, and bank risk professionals expect credit card and auto loan delinquencies to follow suit.

…In a survey by FICO of bank-risk professionals, nearly half said they expect delinquency rates on all consumer loans to rise to their highest levels since late 2011. For credit cards, 44% of respondents expected delinquencies to increase, and 35% predicted auto loan delinquencies would jump.

[source]

Posted in Debt |

US budget gap narrowed to -$37 bln in Mar, well inside expectations of -$80.0 bin, vs -$193.5 bin in Feb and -$107 bin a year ago.

Posted in Debt, Economic Data |

National Debt: $17,501,576,037,738.02

Posted in Debt |

Who holds and prints the $100trn-worth of global debt?

09-Mar (Financial Times) — The Bank for International Settlements has a fascinating section in its latest quarterly report drawing attention to the amount of debt globally, which has soared since the turn of the millennium from under $40trn to hit a whopping $100trn towards the end of 2012.

Unsurprisingly, governments have been among the busiest bond issuers, with the amount of public debt rising by 80 per cent since the start of the financial crisis in mid 2007.

[source]

Posted in Debt |

Putin Adviser Urges Dumping US Bonds In Reaction to Sanctions

04-Mar (RIA Novosti) – An adviser to Russian President Vladimir Putin said Tuesday that authorities would issue general advice to dump US government bonds in the event of Russian companies and individuals being targeted by sanctions over events in Ukraine.

Sergei Glazyev said the United States would be the first to suffer in the event of any sanctions regime.

“The Americans are threatening Russia with sanctions and pulling the EU into a trade and economic war with Russia,” Glazyev said. “Most of the sanctions against Russia will bring harm to the United States itself, because as far as trade relations with the United States go, we don’t depend on them in any way.”

Glazyev noted that Russia is a creditor to the United States.

“We hold a decent amount of treasury bonds – more than $200 billion – and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner,” he said. “We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market.”

[source]

PG View: Fear not, the Fed has a long history of stepping in to absorb excess supply when necessary. The Russian holdings of $200 bln are a mere bag-of-shells, just about three-weeks of QE at the present pace.

Posted in Currency Wars, Debt, Geopolitical Risks |

Testing times for China’s foreign exchange reserves

18-Feb (China Daily) — China’s foreign exchange reserves, the largest in the world, reached a record $3.82 trillion last year.

Since China’s reserves started accumulating more than a decade ago, the increase has been widely regarded as an encouraging and beneficial development. With China gradually becoming the “world’s factory” and posting an increasing trade surplus in the past decade, Chinese reserves ballooned. During that period, the Chinese felt positive about growing reserves. But now they are feeling increasingly nervous about the situation.

With the rolling out of the three stages of quantitative easing, the Chinese realized with great disappointment that the real value of their reserves had depreciated considerably due to the United States’ monetary policy, which is beyond the Chinese government’s control.

The US government budget limit problem last October once again highlighted the possibility of a US default, which would not only affect its creditworthiness and the cost of US government financing but also the value of China’s reserves and the confidence of the country, which is the largest investor in US government securities.

Not only would China lose due to the reduced value of its investment in US Treasury notes and related assets, but it also could be criticized for allowing the US government to maintain low interest rates and release unprecedented amounts of liquidity into the global economy.

[source]

PG View: You think their disappointed now? I fear they haven’t seen anything yet…

Posted in Central Banks, Debt, investments, Monetary Policy |

In 2013 The Fed Bought 150% More Treasurys Than All Foreigners Combined

19-Feb (ZeroHedge) — Now that we have the full history of foreign Treasury purchases in 2013, we know the following: in December 2012 total US paper held by foreigners was $5,573.8 billion; one year later it rose to $5.794.9 billion or a $221 billion increase. So how does this look in the context of QE? In the past year, courtesy of the Fed’s $1 trillion in TSY and MBS purchases, Ben Bernanke purchases some $552 billion in Treasurys, or about 150% more than all foreigners combined! Suddenly the need for MyRA is becoming all too clear…

[source]

Posted in Central Banks, Debt, Monetary Policy, QE |

Capital Flows

18-Feb (Across the Curve) — This is an analysis of the monthly Treasury report on international capital flows via Gennadiy Goldberg at TD Securities. China was a huge seller and foreigners were net sellers of agencies and corporates and equities.

Via TDSecurities:

The December TIC capital flows report showed net long-term outflows of $45.9B from US securities – the largest monthly outflow since June 2013.

…Foreign official flows showed very strong net selling in December, with China shedding an enormous $47.8B and Japan selling $3.9B. It is worth highlighting that Caribbean accounts (a proxy for hedge funds) saw no change in Treasury holdings during the month, suggesting that Treasuries were largely well-positioned to receive the December tapering announcement.

[source]

Posted in Debt, investments |

Household Borrowing Rises Most in Six Years in NY Fed Report

18-Feb (Bloomberg) — Consumer debt in the U.S. rose last quarter by the most in more than six years as Americans borrowed to buy homes and cars and to pay for education, according to a report by the Federal Reserve Bank of New York.

Household debt increased 2.1 percent, or $241 billion, to $11.52 trillion, the biggest gain since the third quarter of 2007, the report showed. The level of debt last quarter was $180 billion higher than a year earlier.

“After a long period of deleveraging, households are borrowing again,” Wilbert van der Klaauw, senior vice president and economist at the New York Fed, said in a statement.

[source]

Posted in Debt |

After GOP filibuster bid, Senate votes to suspend Treasury’s borrowing limit

12-Feb (Washington Post) — After a dramatic vote, the Senate cleared the critical 60-vote threshold Wednesday that allowed for passage of legislation to suspend the Treasury’s borrowing limit.

The cliffhanger vote was scheduled for 15 minutes, but it lasted an hour. It ended when Senate Minority Leader Mitch McConnell (R-Ky.) and his leadership team voted to end a potential GOP filibuster, casting votes that left them exposed to attacks from conservative opponents.

After the filibuster threat was choked off, the Senate approved the debt ceiling legislation on a party-line vote, 55 to 43, sending it on to President Obama for his signature, ensuring that the Treasury will not default on more than $17 trillion in federal debt.

[source]

PG View: Allowing our Representatives in Washington to borrow and spend for the next year without the check of a debt ceiling is like turning the keys to the candy store over to the children.

Posted in Budget/Debt Ceiling Crisis, Debt |

Treasury auctioned a record $84 bln of 3- & 6-month bills today, along with $50 bin of 72-day cash management bills.

Posted in Debt |

Clock running on debt ceiling

10-Feb (Politico) — It’s getting close to crunch time.

There have been conversations between Speaker John Boehner’s office and the White House on lifting the debt limit, but no negotiations over a package, according to sources familiar with the talks.

Time is running short for Congress to raise the nation’s borrowing limit — the Treasury Department says it will run out of spending authority by Feb. 27. Congress recesses this week on Wednesday, then takes a week off and comes back Feb. 25 — just two days ahead of the deadline.

[source]

Posted in Budget/Debt Ceiling Crisis, Debt |

Ratings Agency S&P Downgrades Turkey Rating Outlook to Negative From Stable

07-Feb (MoneyNews) — Standard & Poor’s cut its outlook on Turkey’s ratings to negative from stable on Friday, saying that it saw risks of a hard economic landing and that the country’s policy environment was becoming less predictable.

A corruption investigation shaking Prime Minister Tayyip Erdogan’s government along with sharp falls in the lira currency and rising inflation have raised concerns about political and economic stability in the run-up to elections this year.

“Turkey appears to have suffered an unanticipated erosion of institutional checks and balances and governance standards,” Standard & Poor’s said in a statement, citing in particular concerns about the independence of the central bank.

[source]

Posted in Central Banks, Debt |

Moody’s downgrades Puerto Rico GO debt rating two notches to ‘junk’ status

07-Feb (Reuters, via CNBC) — Moody’s Investors Service downgraded Puerto Rico’s general obligation debt rating to junk status on Friday, days after S&P made the same move on the island commonwealth’s debt.

“The problems that confront the commonwealth are many years in the making, and include years of deficit financing, pension underfunding, and budgetary imbalance, along with seven years of economic recession,” Moody’s said, adding that the island’s challenges meant it no longer merited an investment-grade rating.

Moody’s on Friday cut Puerto Rico’s credit rating to junk status, citing concerns about the fiscally challenged U.S. territory’s weak growth and ability to access capital markets.

[source]

Posted in Debt |

Treasury pulls back as U.S. hits debt limit again

07-Feb (USAToday) – The Treasury Department stopped issuing securities to state and local governments at noon Friday, instituting the first of what will likely be several steps to stay under the debt limit enacted by Congress.

Under the budget deal passed by Congress last November, the debt limit was temporarily suspended — but only through Friday. Beginning Saturday, the debt limit will be reset to its current level, about $17.2 trillion.

Congress has voted to raise the debt ceiling three times since 2011. But it’s missed the deadline each time, forcing the Treasury Department to use what it calls “extraordinary measures” to avoid hitting the debt ceiling.

[source]

Posted in Debt |