Market alarm as US fails to control biggest debt in history

The Telegraph ^ | 12/11/2010 | Liam Halligan

[bruinbirdman]

US Treasuries last week suffered their biggest two-day sell-off since the collapse of Lehman Brothers in September 2008. The borrowing costs of the government of the world’s largest economy have now risen by a quarter over the past four weeks.

Such a sharp rise in US benchmark market interest rates matters a lot – and it matters way beyond America. The US government is now servicing $13.8 trillion (£8.7 trilion) in declared liabilities – making it, by a long way, the world’s largest debtor. Around $414bn of US taxpayers’ money went on sovereign interest payments last year – around 4.5 times the budget of America’s Department of Education.

Debt service costs have reached such astronomical levels even though, over the past year and more, yields have been kept historically and artificially low by “quantitative easing (QE)” – in other words, Federal Reserve Chairman Ben Bernanke’s virtual printing press. Now borrowing costs are 28pc higher than a month ago, with the 10-year Treasury yield reaching 3.33pc last week, an already eye-watering debt service burden can only go up.

Few on this side of the Atlantic should feel smug. The eurozone’s ongoing sovereign debt debacle has pushed up Germany’s borrowing costs by 27pc over the last month – to 3.03pc. The market has judged that if Europe’s Teutonic powerhouse wants the single currency to survive, it will ultimately need to raise wads of cash to absorb the mess caused by other member states’ fiscal incontinence.

While the UK isn’t ensnared in monetary union, gilt yields have also spiralled 18pc since the start of November – to 3.55pc. British Government debt is officially £1.05 trillion. We are fast approaching a debt-to-GDP ratio of 100pc, compared to 30pc just a decade ago. If you add off-balance-sheet liabilities to Government estimates, including

[bruinbirdman]

"The Obama Administration Energy/EPA political commissar Carol "ex-Director of Socialists International" Browner continues a moratorium on new oil wells offshore, has the EPA restricting CO2 emissions and putting a much tighter restriction on ozone, has OSHA putting much tougher requirements on industrial noise levels, and many more regulations that will cost business a lot of money and make them less competitive internationally. "

That commie chick sure keeps a low profile while pushing her/Osama's anti-capitalist political agenda.

yitbos

[Drago]

Since the Libs mantra is always "tax the rich!", "tax the rich!" and I am getting extremely tired of the "wage envy"...I did a little math.  According to the government there are 2,372,000 households earning more than $250,000.00 per year.  That group's mean income is $426,000.00 per household. So if we were to tax them 100% of their income (Ha!), that would raise a total of $1,010,472,000,000.00 (a little over $1.01 trillion).  The yearly federal deficit for 2009 was $1.42 trillion, for 2010 it was $1.29 trillion, and we are on track for a $1.21 trillion deficit this fiscal year!!!!  Is my math wrong?  Even if I am off by 50%, we are still up a river without a paddle!

http://www.census.gov/hhes/www/cpstables/032010/hhinc/new06_000.htm

http://seattletimes.nwsource.com/html/businesstechnology/2013650100_apusbudgetdeficitglance.html

 

[Tunehead54]

Tell me three currencies you trust. My power company won’t take gold shavings.

[Drago]

This article seems to be fairly well thought out, and they are recommending the Swiss Franc.  I am just starting to look into getting some foreign currency in addition to silver/gold...please post if you find something better or as good.  Even Canadian dollars would probably fair better than U.S. $!

 

http://www.independentlivingnews.com/pdf/Final_days_of_dollar.pdf?AID=2334

[DuncanWaring]

Ping.

[agere_contra]

Keep some ready fiat money on hand to handle your utility bills.

But if you are not invested in previous metals or hard assets when the dollar devalues to 20% of its current value sometime in 2011, you will be wiped out.

[Visceral]

Thanks for the link.

[RC one]

I have a fair amount of gold and silver so I would probablydo well in such a scenario; however, there's more to think about than that. We owe so much money to foreign countries right now that if we went to a gold standard, we would quickly find our gold reserves gone. What's worse, even if we did go to a gold standard, nobody else would so we would quickly find ourselves holding a currency backed by gold that we don't have while the rest of the world continues to play with fiat currency AND while China takes possession of all of our gold. It's better to continue with fiat currency until it crashes so hard that it can't be repaired. the key, IMHO, will be managing that crash such that the rest of the world is in the car with us at the time of the big crash if you get my meaning. It's also important to look at what we have turned those worthless scraps of paper into over the years, the most powerful war machine ever assembled on earth. We should keep that in mind as we call out for a gold standard and as we look into our crystal balls at the future coming at us.

[Praxeologue]

U.S. borrowing costs have risen 28 basis points over the past month, not “28pc” as the academically challenged “journalist” stated. The same applies to his comment about German debt service. This reflects poorly on The Telegraph.

[cgbg]

No one will do “well” during a major economic crash—because we take for granted the wide variety of goods and services easily available to us.

You won’t starve with your PMs, but you won’t be a very happy camper either.

Stock up on necessities—because in a crash you never know which ones won’t be available or will become very expensive.

And—rule #1—keep a very low profile.

[The Working Man]

“But if you are not invested in previous metals or hard assets when the dollar devalues to 20% of its current value sometime in 2011, you will be wiped out.”

---

If you are going the precious metals route you might want to check up on some of the reports that are indicating that the actual stocks of precious metals to paper certificates don’t match.

In fact there are other reports that some people who do have the precious metals and are keeping them at a bank are having to resort to legal threats to get their own assets released back to them by those institutions.

[calex59]

We owe so much money to foreign countries right now that if we went to a gold standard, we would quickly find our gold reserves gone.

The trick there is to pay off the loans with printed dollars just before going on the gold standard, there after to stay away from borrowing from other countries. One of the stupidest things we have ever done.

[The Comedian]

"Unexpected" ping.

"Economic Holocaust" ping.

Increasing volume ping list watching the slow motion Economic Holocaust.

FReepmail me if you want on or off
The Comedian's "Economic Holocaust" ping list...

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[B4Ranch]

There’s a gold miner less than ten miles from my home. It’s owned by foreigners.

[B4Ranch]

He knows it but doesn’t recognize that fact.

[B4Ranch]

“Unexpected” by whom? The ignorant perhaps or did you have someone special selected for that honor?

[Just mythoughts]

bttt

[blam]

"Tell me three currencies you trust."

* Australian Dollar

* Canadian Dollar

* Swiss Franc

[paladin1_dcs]

Have you never noticed how every report on the economy by the MSM lately resorts to the “unexpected” meme? As you pointed out, only the ignorant are not expecting the markets to implode now, yet the MSM continues to act like economics is some kind of mystical art where anything could happen.

[B4Ranch]

To them economics is some kind of mystical art.