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PIMCO: There's No Way The Market Can Absorb The Fed's Giant Balance Sheet Once It's Time To Tighten Vincent Fernando Jan. 6, 2010, 12:01 PM PIMCO's Bill Gross has become substantially bearish in his latest January commentary. There's no way private demand will step up to the plate once the Fed stops supporting the U.S. treasury market. Even year to date, they've already been avoiding treasuries like the plague as shown in Chart 2 below.[snip]

When Tobias "Bags of Money" Boyland went looking for a new career after serving 13 years in prison for armed robbery and drug dealing, he quickly found something that suited his sensibilities: He opened a collection agency. It was, in some ways, a natural move for a young man in Buffalo. Desperate for jobs, this chronically depressed Rust Belt city has become home to one of the biggest concentrations of debt collection businesses in the U.S. "Collections is the Bethlehem Steel of Buffalo," said Boyland, 44, recalling the industrial giant that once employed 20,000 people in the region. "You can...

Since October, 2009, the Federal Reserve has increasingly hyped the inflation meme by publicly touting the more than $1 trillion in excess reserves (held by banks with the Fed) which, as the theory goes, could come flying out into the economy in an HFT-New York second, in one hyperinflationary swoop. If all the world’s a stage, then Bernanke will be winning an Oscar for this performance, because the futures and currency markets are pricing in a Fed rate hike in the second half of 2010 and a robust US economy. Rather, we have postulated that this tightening theatre is mere...

Increasing terrorist threats, global warming, health care, or mounting deficits and debt. We hear the constant drumbeat from the right and left everyday. If we take the politics out of the equation, and rely on history, which of these are most likely to cause widespread chaos, and even destruction in the United States? The answers may surprise you.

In a new 2010 outlook, via Bloomberg, PIMCO's Paul A. McCulley reveals his firm's uber-cautious stance towards bonds, amid the massive borrowing underway in the UK and the US. ----- PIMCO Managing Director Paul McCulley leads the firm’s quarterly Cyclical Economic Forums, in which investment professionals from around the world gather to discuss the outlook for the global economy and financial markets over the next six to 12 months. In the following interview, Mr. McCulley discusses the results of the December Forum and its implications for PIMCO’s investment strategy in 2010. Q: PIMCO recently developed its outlook for 2010. What...

Eurozone faces 2010 debt crisis by William Ickes 1 hr 55 mins ago FRANKFURT (AFP) – The eurozone's new year heralds a debt crisis that has alarm bells ringing and markets tracking government plans to tame the growing shortfall. Officials have borrowed heavily to pull the 16-nation zone out of its first recession, and debt levels are set to smash a huge hole in the ceiling set by the European Union in its Stability and Growth Pact. Soaring budget deficits, low growth and banking sector support "are feeding into significantly higher public debt levels," the European Commission has warned. Average...

Americans could be in for a rude awakening in coming months when they discover the true scope of the massive national debt racked up by the U.S. government. In fact, the $1.6 trillion deficit expected for 2010, which is above 10% of gross domestic product (GDP), is only the beginning. Since the current economic crisis began in late 2007, the U.S. Federal Reserve has tripled the size of its balance sheet, creating enormous amounts of new money by lending to hundreds of ailing banks and buying up more than $1 trillion of questionable asset-backed securities. But that's only a small...

That's why federal spending above its revenues should be illegal, punishable by crucifixion (or perhaps something even more painful).

HARARE (AFP) – Zimbabwe is considering mortgaging its mineral wealth to offset the country's 5.4 billion dollar debt owed to multilateral donor agencies, a government report says. The ministry of finance report seen by AFP said various options were being considered for paying off the external debt, an essential step to secure new financing from lenders for 2010-2012. "A key conditionality for unlocking new financing of 7.5 billion -- 10 billion (dollars) ... evolves around the development of a Debt Relief and Arreas Clearance Strategy for the country's external debt overhang of 5.4 billion, of which 3.8 billion is in...

Kyle Bass Betting Big On A Collapse Of The Japanese Bond Market Joe Weisenthal | Dec. 31, 2009, 7:11 AM | 1,757 | 3 Tags: Investing, Hedge Funds, Debt, Japan One of the oldest, most popular bets -- that the Japanese government would collapse under the weight of its debt -- has a fresh round of adherents who believe that this time it's going to work out. Among them: Hayman Capital manager Kyle Bass, who made a fortune shorting subprime. He tells the Journal a Japanese bond market collapse is merely a matter of when, not if.

"I think I'm moving to Montana soon, gonna raise me up a batch of dental floss." -Frank Zappa Part of the solution to the quixotic health care bill being proposed by the enlightened public servants in Washington can be found in a reflective consideration of dental floss. One of my friends, who actually did move to Montana, became a dentist back in the late '70s. Montana Bob told me, "Bloom, the best thing you can do to prevent dental disease is to regularly floss your teeth." His next statement: "But I know you won't. Nobody does. You'll eventually come to...

Unstable Equilibrium In 2010 Robert Peston 19:26 UK time, Wednesday, 30 December 2009 Prognosticating about the ensuing 12 months was like shooting fish in a barrel over the past few years. The big facts about the noughties were first that there was too much cheap money sloshing about, and then - inevitably - that there was too little. So my predictions for 2006, 2007, 2008 and 2009 were "boom, overheating, crunch and bust", respectively. Wobbly meBut for the first Hogmanay in ages, I have little confidence in what the coming year will bring for business, for savers, for investors and...

So many rants, too little time. According to today's Rasmussen report, 58% of Americans approve of waterboarding to secure information from the Christmas Day Pantie Bomber. Yet, President O's Administration refuses to waterboard. An interesting aside, two of the Pantie Bomber's Yemeni Al Quaeda collaborators were released from Guantanamo to Saudi Arabia to attend art school. Mark Stein refers to this new terrorism policy as going from waterboarding to watercoloring. Now that's progress. In the opening days of Constitutional Guardian I wrote of Davy Crockett's speech on the floor of the House during his first term. Congress was considering a...

For some reason Zero Hedge is prone to take a great deal of heat (both directly radiated and reflected) whenever we opine on the (rather obvious to us) prospect that interest rates might actually (quelle surprise) rise in this environment. Today, rather than engage in "we told you so" gloating, or endure the repetitive pleadings of commentators that this or that Treasury auction was really a success if you just look a little deeper at the figures, we'll just quote Bloomberg quoting other fixed income observers on today's auction of two years, in an article "ambiguously" titled "U.S. 2-Year Yields...

Weak GDP growth, a soaring government deficit, and lack of credible plans to correct anything has led to growing concerns that the British pound could collapse -- becoming less valuable than a euro. The U.S. dollar looks like a star in comparison given higher expected GDP growth in the U.S. and more relative credibility in the government's ability to control spending in the longer term. While the pound/euro currently sits at 1.11, the next stop could be parity. The Times: Douglas McWilliams, the chief executive of the Centre for Economics and Business Research (cebr), said that the British economy was...

"Should the debt incurred by the United States be the direct result of one administration's actions, the reimbursement of that debt shall become the sole responsibility of that administration. Should that administration be unable to reimburse such debt by the end of their tenure, the reimbursement of that debt shall be carried out though the incarceration of appropriate parties for the appropriate periods." In other words, the United States could send their president(s) to jail along with others who are ultimately responsible for the debt that they personally produce during their administration; potentially for life!

Australian households are in record levels of debt, and for the first time have surpassed American levels. Reserve bank figures show household debt - the combination of personal and mortgage debt - is equivalent to Australia's GDP. That means every adult owes an average of $74,000. Analysts warn that the financial crisis that rocked Main Street in America could well hit Australian families in 2010. Economics Professor Steve Keen at the University of Western Sydney says it is a sign that families are under financial stress. "We now have an enormous proportion of income that has to be devoted to...

Grasping bankers bring back fears of class warfare Americans will remember 2009 as the year that class warfare reared its ugly head Irwin Stelzer American Account No sense in wasting too much of this year-end report on what you already know. The financial sector is back from the brink. The largest banks have been able to raise capital and earnings sufficiently to repay their government bailout loans and have enough left over for generous bonuses. Share prices have recovered half the losses made since they peaked. Sales of existing homes are at close to a three-year high, but the sector...

As he took the oath of office before a record two million people, his approval rating over 70 per cent, Barack Obama believed he had been called on by history to remake America. He had already spoken of a new “grand bargain” with the American people. The country, he was soon to profess, was on the crest of an historic wave – one that he would help "guide". His aides believed Mr Obama was about to join the handful of truly transformative US presidents, such as Thomas Jefferson, Franklin D Roosevelt and Abraham Lincoln, men compelled to achieve momentous change...

Sprott Asset Management has "pulled forward" something I intended to cover in my "year end review" Ticker but since he's put it out there I think I need to cover it now: As a thought experiment, we separated all the various US Treasury owners and asked our readers whether each group could afford to increase their 2009 treasury purchases by 200%. In the end, we surmised that most groups couldn’t, and prepared our readers for the worst. Almost seven months later, however, nothing particularly bad has happened on the US debt front. There have been no failed auctions, no sovereign...

In nearly its final act of the year, the U.S. Senate on Thursday approved a $290 billion increase in the nation's borrowing limit, a move that sets up a contentious debate about the federal government's largesse early in 2010. The additional $290 billion in borrowing ability lifts the total public debt the federal government can hold to around $12.4 trillion and will allow the government to keep borrowing through February. The House passed the measure last week. The Senate vote was 60-39, and was almost exclusively along party lines. Generally a vote on raising the debt limit requires only a...

Socialism has come to mean many different things to many people, but regardless how it is defined, in the months immediately ahead it will be put to a rigorous test.  The test will be visible to everyone as countries around the globe run out of money and confront overwhelming debts that cannot be repaid as well as other wide-ranging financial promises that can no longer be met.  In short, the ideological bankruptcy of socialism will be laid bare by government insolvency.It had to come sooner or later.  The reasons are not hard to understand. The ideological bankruptcy is neatly captured...

After reading headlines such as "Congress raises debt ceiling to new record high" and "No county could afford to purchase US debt" I was prompted to do a little research to try and get an idea of how much a Trillion really is. The current US National Debt is approximately $12.1 Trillion ($12,162,000,000,000.00) and growing. (Source: National Debt Clock) How much is that? 1,000 = 1 Thousand 1,000 Thousands = 1,000,000 = 1 Million 1,000 Million = 1,000,000,000 = 1 Billion (or a thousand Million) 1,000 Billion = 1,000,000,000,000 = 1 Trillion (or a thousand Billion or a million Millions)...

This editorial page has for years criticized the dishonest budgets coming out of Sacramento. State leaders have been unwilling to do anything about California’s structural budget deficit but make it worse by pushing costly bond projects that add to long-term debt. This reckless practice is reflected in state debt service payments, which have gone up 143 percent the past decade. Treasurer Bill Lockyer and Legislative Analyst Mac Taylor both recently warned the Legislature that this debt binge will soon cause huge headaches in crafting a general fund budget, since debt service costs alone are on track to eat up more...

In nearly its final act of the year, the US Senate on Thursday approved a $290 billion increase in the nation's borrowing limit, a move that sets up a contentious debate about the federal government's largesse early in 2010. The additional $290 billion in borrowing ability lifts the total public debt the federal government can hold to around $12.4 trillion and will allow the government to keep borrowing through February. The House passed the measure last week. The Senate vote was 60-39, and was almost exclusively along party lines. Generally a vote on raising the debt limit requires only a...

The Senate on Thursday cleared a $290 billion debt-limit increase, giving the federal government two more months of borrowing authority.

HSBC Group Chair Stephen Green recently sat down with German magazine Der Spiegel and talked about the future of the world's economy, the moral responsibility of bankers, and his Christain faith (he's an Anglican minister). It's one of the more honest accounts we've read of the crisis from the perspective of a banking chief. Among other things, he calls the period leading up to the crash -- characterized by huge profits through the sale of overly complex instruments -- 'disgraceful'. Der Spiegel: SPIEGEL: Is the crisis already over? Green: In the financial sector the worst is behind us. But the...

If governments continue to pile on more and more debt, when will they reach the tipping point? The Greeks appear to be close to the tipping point, and it is only a matter of time before other European countries, and eventually even the United States, begin their fiscal death spiral. The Greek government's unwillingness to make the hard choices necessary to put its fiscal house in order in the past few weeks has caused investors to demand a 2.5 percent premium on its government-issued Eurobonds over those issued by the German government. First, a little background. Eurozone governments have a...

The United States Economy has become like those sub-prime mortgages that almost brought down the banking system last year. We have borrowed more than we can afford but as long as interest rates stay low, we will be able to make payments. Once rates go up, the federal government will have to "default on its homes." Even the NY Times is predicting economic problems for America: ... With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this...

Yes, Virginia, there is a Santa Claus. But he only comes for kids -- not for governments that have bragged, borrowed and spent their way into bankruptcy. Two Thousand Ten is going to belong to the Grinch. For spendthrift governments around the world, the new year's going to bring massive defaults. The new globalization may be the globalization of a second wave of financial crises. The world economy is not convalescing. It's just been pumped full of unaffordable medicines. Borrowing madly, countries as diverse as Greece and Dubai have been buying time, not fiscal health.

WASHINGTON (Reuters) - The U.S. Senate on Tuesday set a Christmas Eve vote on final congressional approval of a bill to provide a two-month increase in the federal debt limit. The measure, passed last week by the House of Representatives, would increase the debt limit, now at $12.1 trillion, by $290 billion. Senate Democrats may approve the measure largely by themselves because most, if not all, Republicans are expected to vote against it, Republican aides said. Democrats control the Senate, 60-40.

The next generation has a message for Obama!

If you are under 30, you really need to read this column and pass it on to your friends. Your elected officials are dooming you to a new sort of bondage, a form of 21st Century slavery, if you will. First, some background. On October 16, 1854, Abraham Lincoln, then a former one-term Congressman, gave a three hour speech in Peoria, Illinois in which he decried the extension of slavery into the territories. The Republican Party was barely three months old. Lincoln warned that slavery was a “monstrous injustice” based on the raw principle of “self-interest” at odds with the...

In the panic following the insolvencies of Fannie Mae, Freddie Mac and Lehman Brothers in September 2008, the American taxpayer was stampeded into bailing out Wall Street by acquiescing to Washington's $700 billion Troubled Asset Relief Program (TARP) in order to prevent the collapse of our financial system. American International Group Inc. was at the center of the storm with its $1.5 trillion book of credit default swaps (CDS). Inexplicably, after passage, TARP was directed at banks rather than troubled assets - almost like a bait-and-switch plan. Now, a little more than a year later, TARP inspector Neil M. Barofsky...

Go ahead folks - tell me how we can simply ignore this. How we can pretend that the outstanding debt does not have to come back down to reasonable levels. That these levels are "reasonable" - and that these rates of growth are "reasonable." This is the "magic of compounding" writ large - and in a fashion that is going to inflict severe pain on our population - and the longer we wait to deal with it, the worse it will be. Bernanke, who was at The Fed during Greenspan's time there, should have used his "education" - his claimed...

Uncle Obama has gotten ahold of your credit card. And he's amassing charges on it that - you - not he - are liable for. You can call the fraud line, you can call the police, you can call any politician or government agency, and they will all tell you the same thing. Shut up and pay up.   Since misery loves company, you might feel better knowing that you're not the only one being extorted. Uncle Obama and his buddies have the credit and debit cards of every man woman and child in America. And they're charging up a...

One mistake could cost Trina Lee her Christmas. Things have been tight for the Arizona-based nursing assistant since she got laid off two years ago and suffered some medical problems that have kept her from working full-time. [...] Earlier this month, she was feeling temporarily flush because she has prepaid most of her bills and figured the rest of her December income from child support and a part-time job could be spent on Christmas gifts. So she splurged on a $65 meal with her mom and brother, knowing that it was possible that this one meal could overdraft her checking...

Small Business Tax & ToilSmall business owners, like myself, pay twice as much in Social Security and Medicare Taxes as regular employees. Yet when we ask for a payroll tax cut on our own pay, what we get from the government is a crackdown on regional banks to give us more loans. Aside from the fact that 140 of these banks have failed since January 16, 2009 (here), what Obama's Cluelessian economists fail to understand is that wealth is not created through amassing debt.If Obama wants to run the Federal Government based on the myth that wealth is created through...

The rich rules over the poor, And the borrower is the slave of the lender. (Proverbs 22:7 ESV)In the Old Testament book of Proverbs, King Solomon details the differences in thought, word, and deed between a wise man and a fool. In addressing the foolishness associated with borrowing money, he makes clear the relationship between debt and servitude: No man can truly be free when he is bound by financial indebtedness to another. It's clear, however, that the danger of debt is something a majority of the American people — including members of Congress and our President — have yet...

Obama Shatters Spending Record for First-Year Presidents FOXNews.com The federal government spent $3.5 trillion during President Obama's first year in office. This far exceeds the spending for any other first-year president.... http://www.foxnews.com/politics/2009/11/24/obama-shatters-spending-record-year-presidents/

There Is No Way Out Of This Box....Friday, December 18. 2009 Posted by Karl Denninger in Macro Economics at 18:31... that does not involve serious pain. Go ahead folks - tell me how we can simply ignore this. How we can pretend that the outstanding debt does not have to come back down to reasonable levels. That these levels are "reasonable" - and that these rates of growth are "reasonable." This is the "magic of compounding" writ large - and in a fashion that is going to inflict severe pain on our population - and the longer we wait to...

Rule By Outlaws, Spending Insanity, The Second Wave, Dreamliner Lessons and More! by Addison Wiggin & Ian Mathias * Treasury bends laws on maximum debt, dodges bullet with “extraordinary accounting tools” * Mind-boggling government spending rundown: $1.8 trillion approved in 24 hours * Why the second wave of the housing bust might crash ashore ahead of schedule * Byron King with lessons from the Dreamliner launch for the everyday investor * A reader asks, “Enough criticism, what would you do?” Our response, below Technically speaking, the U.S. government is now illegitimate. Not in the way most people use that word…...

Bankruptcy And Fiscal Collapse,Global Economic Crisis Tipping Point Forecast For Spring 2010 Economics / Global Debt Crisis Dec 19, 2009 - 07:04 AM By: Global_Research LEAP/E2020 believes that the global systemic crisis will experience a new tipping point from Spring 2010. Indeed, at that time, the public finances of the major Western countries are going to become unmanageable, as it will simultaneously become clear that new support measures for the economy are needed because of the failure of the various stimuli in 2009 (1), and that the size of budget deficits preclude any significant new expenditures. If this public deficit...

Harder to buy US Treasuries Created: 2009-12-18 0:13:35 Author:Zhou Xin and Jason Subler IT is getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday. The comments by Zhu Min, deputy governor of the People's Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of US government bonds. Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its US$2.3 trillion reserves are tied to their...

he buildup in government debt threatens to push interest rates higher, says Hans Blommestein, head of public debt management at the Organization for Economic Cooperation and Development. Gross borrowing needs of OECD governments will likely reach almost $16 trillion in 2009, up from an earlier estimate of about $12 trillion, he writes in the Financial Times. That would represent a post-World War II high of 8.25 percent of GDP. That by itself is not good, of course. “A looming additional challenge is the risk that, when the recovery gains traction and risk aversion falls further, yields will start to rise,”...

Moody's 'axe blow' to rating on Spanish debts The debt crisis sweeping southern Europe has deepened after US credit-rating agency Moody's downgraded €112bn (£100m) of Spanish mortgage debt and slashed the ratings of Catalunia and a raft of regions with ballooning state deficits. By Ambrose Evans-Pritchard, International Business Editor Published: 6:05AM GMT 18 Dec 2009 A deserted buiding site in Spain. The country has been hit hard by the property crash Spain's media called the move an "axe blow", fearing a domino effect through the country's debt markets. Credit default swaps measuring the risk on Spanish sovereign bonds jumped 10...

BEIJING (Reuters) - It is getting harder for governments to buy U.S. Treasuries because the United States' shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said on Thursday. The comments by Zhu Min, deputy governor of the People's Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of U.S. government bonds. Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its $2.3 trillion reserves are tied to their value, and markets always watch any such comments closely...

FYI, The NASA press release below refers to 'holiday' or 'seasons' greetings six times. No mention of Christmas, of course. [comment deleted]! In a bizarre historical turnabout, religious activity on the space station has now become almost entirely dominated by the Russians. They fly icons blessed by priests (http://www.interfax-religion.com/?act=news&div=6673) Photos: http://hochu.vkosmos.ru/wp-content/uploads/2008/11/ikona.jpeg and http://www.svet-valaama.ru/photoalbom/2006_05_icon_from_space/2006_05_icon_from_space_01.jpg Also http://www.interfax-religion.ru/img/2308.jpg I haven't seen anything remotely similar from the American side. What have I missed? For the next manned launch this Sunday, also expect Russian Orthodox priests from the newly-built church in Baykonur (news story: http://www.msnbc.msn.com/id/10729300) to bless the rocket and the crew. File photo: http://4.bp.blogspot.com/_Mp59h1-TVgE/SsKiot99hvI/AAAAAAAAAnA/1QV6t9vIfrs/s400/Best+Soyuz+Bless.jpg...

German Finance Minister Says "No Alternative But To Borrow" Economics / Global Debt Crisis Dec 17, 2009 - 03:02 PM By: Mike_Shedlock Germany, the last of the stalwarts fighting to heed the European Union’s limit of 3 percent budget deficits, is about to throw in the towel. Please consider German Budget Plan Foresees Record Borrowing. The new center-right German government agreed Wednesday on a budget that would drastically ramp up borrowing — and the deficit — next year as the country emerged from its worst economic crisis in decades. The 2010 budget for Germany, the largest European economy, is 7.3...